Strategy 1: Trading Bollinger Bands With Currencies
Bollinger Bands define a price channel that the market is unlikely to leave. On the weekend, this price channel creates exceptionally accurate predictions, which makes it the perfect basis for a trading strategy.
Bollinger Bands consist of three lines:
- A middle line. A 20-period moving average.
- An upper line. The moving average plus two times the standard deviation.
- A lower line. The moving average minus two times the standard deviation.
The lower line works as a support, the upper line as a resistance. The middle line can be a support or a resistance, depending on whether the market is currently trading above or below it. Generally, the market is likely to turn around when it approaches a Bollinger Band.
Bollinger Bands can be a great help at any time of the week, but they work even better on the weekend. During the week, unexpected news can change the market environment, and the many active traders can start new movements or end old ones at any time. Consequently, the trading range varies more.
These events are not inherently bad, but they make the use of Bollinger Bands more difficult. When the standard deviation changes, so will the upper and the lower Bollinger Bands. Strong upwards or downwards movements will stretch the Bollinger Bands and take their boundaries with them on the ride. Predictions made on these bands will quickly become useless.
On the weekend, the low trading volume makes the market much more uniform. The chance that a large group of traders will jump in on a movement and suddenly alter the market environment is much lower, which makes the use of Bollinger Bands easier and more accurate.
Here’s what you do with this strategy:
- Create your chart. Choose an asset, open the price chart, apply the Bollinger bands.
- Wait for the market to approach a Bollinger Band. Wait until the market moves close to one of the three lines of the Bollinger Bands.
- Predict that the market will turn around. Invest in a high/low option that predicts that the market will fail to break the Bollinger band.
This strategy is very simple. Even newcomers can immediately execute it.
Strategy 2: Trading Breakout Pullbacks With Currencies
This strategy uses a similar philosophy as the first one but adapts it to different market phenomenon – the breakout and the pullback. Breakouts occur when the market completes a price formation or breaks a resistance or a support. At these price level, many traders place orders in the same direction, which leads to quick, strong movements.
To start a sustainable movement, the breakout needs a high trading volume. When the volume is low, the breakout lacks the support of the majority of traders. There is insufficient faith in the movement, which motivates traders to invest in the opposite direction and bring the market back – this movement is called the pullback.
For example, assume that an asset is stuck in a sideways price channel. It tried to leave the channel a few time before, but every time the market approached the upper or the lower boundaries, it turned around.
On the weekend, the market attempts to break out of the formation again. This time it moves past the boundary. During the week, this event might end the formation and start a new movement. But on the weekend, the trading volume of currencies is so low that it is more likely that the market will pull back.
Generally, trustworthy breakouts are accompanied by a high volume. Movements beyond a formation’s boundaries that are accompanied by a low volume are likely false signals. On the weekend, the chance of false signals is so high that it makes sense to predict a pullback for every payout.
You can trade the pullback in a number of ways. These ways are:
- With one touch options. You win a one touch option when the market touches a predefined target price. After a breakout on the weekend, you can use the boundary of the price formation as your target price. The market is likely to pull back at least this far. Use the longest expiry that still offers you a target price within this reach, and you have a good chance of winning the trade. This strategy is slightly more risky than using high/low options, but it should get you a higher payout. We recommend it to traders that like to take a little more risk.
- With high/low options. When you find a breakout on the weekend, invest in a high/low option that predicts that the market will pull back inside the formation. Use an expiry of around 2 to 4 periods. For example, on a 10-minute chart, you would use an expiry of 20 to 40 minutes. This strategy can win you a higher percentage of your trades, but it creates a relatively low payout per winning trade. We recommend this strategy to risk-averse traders.
- With ladder options. Ladder options are a mix of one touch options and high/low options. They define a target price, and you can predict whether the market will trade above or below this price when your option expires. When you find a breakout on the weekend, you can use ladder options to predict that the market will soon trade within the boundaries of the formation again. Use an expiry between 2 and four This is the riskiest of these three strategies, but it is also the strategy that creates the highest payouts.
Each of these three strategies can work equally well. Choose the one that best suits your character.
Strategy 3: Trading Closing Gaps In Currencies
Trading Closing gaps requires a market environment that is ideal for the weekend. By trading exhaustion gaps in currencies over the weekend, you get the best kind of environment for this type of strategy throughout the entire week. Weekend gap trading on forex is a popular system.
Gaps are price jumps. From one period to the next, something strongly moved the market, which caused the price to jump from one price level to a higher or lower level while omitting the prices in between.
Gaps occur for a number of reasons. For example, they can be the result of beginning new movements or accelerating movements. But these gaps require a high trading volume. To start or accelerate movements, many traders have to support the change. Otherwise, it will quickly run out of energy. On the weekend, there are simply too few traders around for these types of gaps.
On the weekend, the big Western bankers are at home. Most day traders are out with their families, and small investors take a break. Without these major players, the start of new movements is improbable. You are more likely to see closing gaps.
Gaps close when only a few traders created them. Sometimes, a few people invest in the same direction, either by coincidence or because they all got caught up in the same indication. The market jumps up or down, and the rest of the traders are puzzled. They consider the advancement to be a mistake, believing that the new price is too high or too low, depending on the direction of the gap. These traders will immediately invest in the opposite direction, trying to profit from the mistake.
- In the case of an upwards gap, traders will sell their assets. The market will fall and close the gap.
- In the case of a downwards gap, traders will buy the The market will rise and close the gap.
When you find gaps in low-volume market environments, there is a high chance that they will close. The weekend is a low-volume trading environment, which makes it the perfect time to trade this strategy.
Knowing that a gap will close, you have everything to trade a binary option with a high payout.
- You know the price target. The market will move roughly until it reaches the price level of the first candle stick that makes up the gap. After upwards gaps, it will likely fall to the high of the first candlestick; after downwards gaps, it will likely rise to the low of the previous candlestick.
- You know the expiry. The market is likely to reach the target price within the next period. Only on extreme short periods, you should consider choosing a longer expiry.
With this information, you can trade a high/low option, but you can also invest in a one touch option, which creates a higher payout. Choose an option with a target price inside the gap and an expiry shorter than one period. If your broker offers no such option, choose a high/low option with an expiry of one period.
We recommend using this strategy with currencies or commodities. With most of the world on break, you know that the trading volume of these asset types is lower on the weekend than during the week. The Middle East stock market, on the other hand, could still experience a high volume because the traders in these countries are still at work. Therefore, the Western weekend has less of an effect on the trading volume.