How to Become Good Option Trader?

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  • ShaunRShaunR Posts: 56
    Four - Developing Your Own Trading Strategy - continued....

    Trade the Pullback

    Ok, so we know that we should only trade in the direction of the trend. In order to establish if the market is trending, we wait for the three lines to open wide. That is simple enough. But what does “trading the pullback” mean?

    It looks like this…

    image

    Price takes a break and moves back up briefly. Now let me show the best way to make a trade during a pullback…

    image

    Chris Lori (pictured above), a very successful trader, taught me this when trading Forex. It applies in exactly the same way to trading Binary Options.

    Here is a magnified image of the same Pullback situation pictured above:

    image

    You wait for price to move back up and TOUCH the purple line. It must touch the line. Provided the 3 lines are still WIDE APART while this touch is happening, you now have a VALID entry signal.

    Here is what Chris taught me…At the point where price meets the purple line, it was a GREEN candle because, at that stage, price was above the open of that candle. You want to make your PUT entry precisely when you have a fat green candle staring you in the face! Why? Simply because when you trade is filled, you want to be as close to that price point as possible, to give yourself a distinct advantage. There is a likely possibility that, due to the strong short trend (in this case), price will fall back down before the option expires, even if it still goes higher first. This approach sets you up for success.

    Most newbie traders would be too nervous to place an entry when price appears to be moving against them, but it is something to teach yourself to do. The natural approach would be to wait until price is already falling before making your PUT trade, but the problem with this is market very often pulls back after that initial drop and your trade expires OTM.

    For newbie traders looking to learn how to develop your own trading strategy, the suggestions above should get you going. If you can be patient, and wait for the best set-ups (when market is in a nice strong trend), you can achieve a 60%+ win ratio from this simple approach.

    Watch out for this:

    image

    The white line acts as an early warning mechanism, that the trend is ending, when it turns back towards the purple line. When this happens, just sit on your hands and wait for the next trend to develop properly.

    I have not covered all aspects of what may happen. Divergence is a KEY issue to consider too. Newbies - my advice to you is get stuck into this template on a 1 minute chart and watch the dance of price, and how the 3 moving averages react. You will soon get comfortable in identifying the phases of consolidation and trend. From there you will quickly spot opportunities to place trades, based on price moving back to touch the purple line while in a strong trend.

    Good luck!

    If I can assist just ask.

    Thanks
    Shaun

    My next post in the series will be back to the psychology again. Trading is 20% system and 80% psychology.
  • ShaunRShaunR Posts: 56
    One more important issue regarding the template and trading strategy I outlined in the previous post, and it is this:

    I cannot guarantee that you will be successful and make consistent profits with what I have outlined. The information provided here is for educational purposes only and it would be extremely foolish to follow my suggestions blindly and trade this with a live account.

    If you are interested in trying this strategy for yourself, do so using a DEMO account and experiment with it. Once you have tweaked it to suit yourself, and you are making DEMO profits consistently every week, for 12 weeks in a row, then and only then use the strategy on a live account. When you start trading this live I strongly suggest that you use 1% or less of your real money per trade and then take it from there.

    Good luck and please let me know if you have questions.

    Thanks
    Shaun
  • GihonGihon Posts: 27
    Thank you Shaun, seems to me you wrote really useful things here, tho am not a pro to make a proper judgment.
    Thanks again.
    Gihon
  • ShaunRShaunR Posts: 56
    Hello again newbie traders. Here is another post in the series How do you become a successful Binary Options Trader?

    I ended the previous post making a bold statement that Trading is 20% system (charts, indicators etc.) and 80% psychology. From my own experiences, I believe this to be true, and I have been thinking of an obvious way to demonstrate this to you. I have an example to share below.

    My dear mum is in her seventies and going strong! She finds technology to be a bit of a challenge (took ages for her to embrace WhatsApp, as an example, but now loves using it to keep in touch with the children and grandkids). She is also skeptical of online trading, including Binary Options.

    So, two months ago, after I started to see consistent profits, I made a bet with her. Here was our deal:

    She would open a live account and deposit $50.

    I would trade this account, on her behalf, and would aim to grow the balance by 10 times to $500, or blow the account trying. If I achieved the $500 she agreed I could teach her my approach and she would take over her account and trade. This would give her a new interest.

    If I failed, (killed the cash in the account), she would use her WhatsApp to send a big fat "I told you so" to the whole family.

    No pressure Shaun! :smiley:

    To be honest, trading my mum's account has been challenging. I have my own account to manage, and work is demanding of my time, so when I have free time I would prefer to trade my own account for obvious reasons, rather than the $1 per entry I have been doing for mum. Anyway I did commit to this deal and so I make an effort and trade on her behalf from time to time.

    Mum's trading account balance is now $200 but that's not the point.

    image

    I wanted to share my trading, of her account, from Thursday and Friday this past week, as it gives an idea of the extent psychology affects trading performance.

    I had been out of town and returned home on Wednesday late afternoon. I didn't sleep well the night before - my pillow in the hotel room was too flat, and it was a very warm night. I was anxious to trade my own account but had not traded my mum's account for a while and she was asking about it. So I decided that I would use the time to trade for her.

    I went to the computer and started trading immediately.

    Here is the trading statement from mum's account for Thursday and I share it to explain a point. For those unfamiliar with this statement format, the earliest trades appear at the bottom of the list with the most recent trades at the top:

    image

    I have divided the trades into two distinct sections. In the early stage of this session, my results are shocking! I was just throwing away money. After I made the 6th loss I stopped trading and asked what the heck was going on?

    It was obvious. I was not in the right frame of mind. I had disrespected my set up process. Usually, before I trade, I go through what I term 'a preflight check' which involves a bunch of things, some of which are:

    * Reviewing my trading journal of the previous 10 - 20 trades taken
    * Expressing sincere gratitude for all the abundance in my life
    * Reconfirm my goals for the session
    * I then clear my mind and simply watch the market for 15 minutes to get in synch with the rythmn

    When ready I take 2 or 3 'paper' trades and then hit it with a big stick.

    Have you ever watched a sports superstar go through a pre-action routine? They do certain things with their bodies, and you can see that, simultaneously, there is a movie running through their mind. This is a process to anchor themselves into a peak state of performance (Tony Robbins), in order to deliver their best, as demanded. This routine puts the athlete into the 'zone' of peak performance.

    I do my fair share of public speaking, and I have my own anchoring routine that I do before going on stage. This process gives me immediate access to my best state, regardless of whether or not I slept well the night before, have a headache etc. I deliver the best experience I possibly can for my audience each and every time.

    My preflight check routine is the same process for my trading.

    Not only had I ignored my preflight check but I also told myself that trading $1 per entry was simple and I would quickly add $5 - $10 to the account and then I could concentrate on my own account. I disrespected the trade size.

    So I shut down the trading platform, had a quick hard talk with myself, went through an abridged preflight check and started trading again.

    The results of the second session are shown above the blue horizontal line in the image above. Much better!

    I used exactly the same technical tools (charts and indicators etc.) yet my results were completely different. It all came down to my psychology.

    Here is my trading performance on my mum's account for the next day (Friday 20th Jan):

    image

    Prior to the session, I ran through my usual preflight check and my psychology was back to where it should be.

    I hope this has given you an idea of how important psychology is to the art of trading Binary Options. Treat trading with the respect that it deserves, regardless of the amount of money at risk per entry. Ultimately the process is exactly the same whether you risk $1 or $1000.

    In my next post, I'll give some advice on the importance of keeping a trading journal and what to use it for.

    Thanks
    Shaun
  • RecheelRecheel Posts: 13

    How to become good trader? With studying and trading!

    Try for both. Both of the tactics are helpful to learn effectively.
  • RaphaelTelesRaphaelTeles Posts: 1
    @ShaunR what is the expiration time you use on these charts shown? Also, your candlesticks are set for 1 min intervals?
  • ShaunRShaunR Posts: 56

    @ShaunR what is the expiration time you use on these charts shown? Also, your candlesticks are set for 1 min intervals?

    Hi RaphaelTeles

    The expiration time to use here is 60 - 120 seconds. Experiment with it to get the best expiry time for you.

    Correct - candlesticks are set at 1 min intervals.

    Thanks
    Shaun
  • BrucepowellBrucepowell Posts: 6
    Glad to see your interest in this field ShaunR and Jamesn :smile:
    Keep sharing your views and updates us with new trends. Seriously you guyzz make this topic really very interesting :smile:
  • pavelKpavelK Posts: 8
    @ShaunR Hello!

    As a three months old trader struggling to be profitable, I extremely appreciate every piece of advice you have shared with everybody here.

    I do not know if there are any more lectures coming or not (it would be awesome), but I have two questions so far.

    1.
    I use Binary.com (demo). However, when the price expires ATM, Binary.com takes it as a loss and that sux. So, my question is what is the broker you use? I can see from the picture of your trading history that the payout is as about the same as with Binary.com, but I also see that your broker doesn't take expiration ATM as a loss, and its interface looks more appealing to me than that of Binary.com. I've already tried to find out what broker it is that you use, but unsuccessfully. So if you don't mind sharing that information, I'd love to check the broker out.

    2.
    My second question is about the trading strategy which you've introduced to us. Could you share some more info if it ain't secret?? :smiley: For example, I wonder if you use some more indicators than just the three EMA's. ADX with DMI for example, to tell you the strength of the moves or AO to spot divergences? Or do you have any conditions/any warning signals under which you do not enter a trade? Also, as the price of the asset moves, all of the three EMA's obviously move with it, so as I trade, it isn't that usual for the price to actually touch the middle 8 period EMA ,but when I look again at your trading history, you enter trades quite often, and therefore, I was wondering if you don't actually enter trades even before it touches the middle EMA (e.g. price between 5 period EMA and 8 period EMA= valid entry). Because then, as the price moves with the trend, the EMA's do so too, which causes the candle (previously invalid trade entry under the 8 period EMA) to actually be a valid trade because it now touches the moved-with-a-trend-middle EMA, but it's too late to enter a trade as the price has already moved.

    I hope I make some sense :smiley:. I just want to know as much as possible about this strategy, since I like this style of trading. I think that asking somebody who uses this strategy and already knows what works and what not, can save weeks if not months of testing.

    Thank you for sharing your knowledge with us!

    God bless, I'm out.
  • ShaunRShaunR Posts: 56
    @pavelK - I have accounts with 4 binary options brokers and my favourite is IQ Option. The trading statements I have shared on this forum are from there.

    I'll spend some time tackling your second question later as you ask some very relevant things and I appreciate that.

    Thanks
    Shaun
  • ShaunRShaunR Posts: 56
    @pavelK - I have tried nearly every indicator known to mankind! :smile:

    I really like your thinking.

    ADX is too slow and unreliable.
    AO is waaaay too slow and gives false divergence signals.

    Here is an indicator that will do the following for you:

    1. Tell you when the trend is really strong
    2. Give you clear divergence signals to help you stay out of a collapsing trend
    3. Give you insight into immediate reversal entries

    So please see the screenshot below and add the indicator. Kindly confirm when you are ready to continue. I'll then add more explanation and tackle the balance of what you asked above.

    image

    Thanks
    Shaun
  • pavelKpavelK Posts: 8
    edited February 8
    @ShaunR

    Added and set. :blush:
  • paveljablonpaveljablon Posts: 102
    Good analysis Shaun are you also a signal provider? Impressive.
    Transparent Binary Options trader and former floor trader. Now giving signals to help people safely to make money at Signal Hive Please do not contact me to manage your account, I will never take anyone's money. You can see my live performance on Signal Hive and subscribe to me there.
  • ShaunRShaunR Posts: 56
    @paveljablon - thank you for your kind words. I don't provide signals :smile:
  • ShaunRShaunR Posts: 56
    @pavelK - OK good.

    Now let's build the learning of how to incorporate Woodies CCI into the template I offered here...

    Take a look at the indicator below:

    image

    The creator of this indicator uses it differently to me so please understand that this is my own interpretation.

    The Turbo CCI moves between a minimum of -160 and a maximum of +160. The Turbo is a Commodity Channel Indicator (CCI) in its own right, and because it uses 5 periods for its calculations, is fast - hence the name. This one is the early warning one - I'll explain later.

    The Trend CCI is also a CCI in its own right and uses 13 periods for plotting. Hence, it is a lot slower and represents the underlying trend. When the Trend CCI is above the zero line - market direction is long (up), when below the zero line, market has a short (down) bias.

    Ok so far?

    Now I'll explain how the Trend and Turbo CCIs can be used to help find solid entry signals...
  • pavelKpavelK Posts: 8
    @ShaunR

    easy peasy lemon squeezy (so far)
  • ShaunRShaunR Posts: 56
    Let's tackle Divergence first.

    There is a lot of information regarding the identification of divergence - normal vs hidden etc. That is outside the scope of this. For now, I have included two simple examples of normal divergence and how the Woodies Trend CCI can easily show the divergence as it occurs. See below:

    image

    Got it?

    Next, I'll explain how to use a combination of the Trend AND Turbo CCIs to pick high potential entry setups...
  • ShaunRShaunR Posts: 56
    @pavelK - hold on.... let's do this the right way... :smile:

    Before I share the next section, I would like you to apply your mind to the new template (3 MAs and Woodies CCI).

    Please tell me how you think the two CCIs can work together to provide high probability entries?

    Thanks
    Shaun
  • pavelKpavelK Posts: 8
    @ShaunR

    I'd say that you use it this way: If the 13 CCI is above the zero line, and the 5 CCI is above the 60+ line that would be the safe time to take trade signals??
    Then you just all flip it upside down for downtrend.
  • pavelKpavelK Posts: 8
    Dear anybody,

    If you are reading through this thread, you might not even know what CCI does. Honestly, I didn't even know that this indicator existed before @ShaunR showed me :smiley:.

    Anyway, if you ever encounter something you do not understand, chances are that you find the answer here: stockcharts.com/school/doku.php?id=chart_school
  • ShaunRShaunR Posts: 56
    pavelK said:

    @ShaunR

    I'd say that you use it this way: If the 13 CCI is above the zero line, and the 5 CCI is above the 60+ line that would be the safe time to take trade signals??
    Then you just all flip it upside down for downtrend.

    You are on the right track pavelK. I would like to just elaborate a little on what you have suggested, in order to give a deeper understanding.

    Please excuse me for now. It is 8.24pm and I am still at work. I need to be up at 3.45am tomorrow to get to the gym for 5 am - teaching a spin class. I'll continue with the feedback during the course of tomorrow afternoon.

    Thanks
    Shaun
  • pavelKpavelK Posts: 8
    @ShaunR

    Yeah, now that I've read something about the CCI, and actually watched how it behaves on my chart, I know that it's not the exact way to use it. The 5CCI moves way too fast with the price to actually stay above the 60+ line. (It wouldn't allow me to take any trade signals :smiley: )

    I'll come up with something else by tomorrow.

    Thanks for revealing to me this awesome indicator, can't wait to learn more tomorrow. ^^
  • pavelKpavelK Posts: 8
    @ShaunR

    Mkay... So, here it is.

    image

    The 34 SMMA I have on my chart just because I like to see the 'BIGGER PICTURE', also it provides moving support/resistance.

    Here's what I came up with:

    => 13CCI is trending below -60 line = You are good to take trade signals in a downtrend (Vice versa for an uptrend)

    Now the mysterious 5CCI . . . I have an idea, but I can't really test it as it's late here in CZ rep. and I just don't want to watch charts now anymore.

    => This idea would explain why you take more trades then I can see just by looking back in the old charts. Let's assume it is a downtrend again and the 13CCI is trending below the -60 line, and thus we can take trade signals. As the 5CCI moves above the 0 line, you place an option for PUT/FALL. However, the 5CCI cannot move above the +60 line as that would be an alert for somewhat bigger move in a price than usual.

    It's just a theory tho.
    Also, what's up with the +-160 lines? They are just overbought and oversold areas, correct? Or is there a secret to them?

    Peace.
  • ShaunRShaunR Posts: 56
    @pavelK - I like your chart and notations - very clear and easy to follow.

    OK time to reveal how this all fits together.

    The 60/-60 lines AND the 160/-160 lines ONLY relate to the Turbo CCI (5 periods).

    As mentioned previously, the Trend CCI (13 periods) provides a visual representation of trend direction or market bias. When above the zero line, the market has a bullish bias, when below zero there is a bearish bias.

    How do we use this to identify high potential entries?

    So the focus is still on the 3 moving averages, as described in the first part of this method. All three lines must be wide apart to confirm market is trending. While this is happening we still want to see price pull back. However, now that we have added Woodies CCI to the mix, we no longer need to wait for price to pull back to the purple line. Instead, we want price to pull back only to the blue line (middle line) provided that the Turbo CCI is between 60 and 160 (for PUT entries) or between -60 and -160 (for CALL entries).

    If Turbo CCI is below the 60 level for a CALL or above -60 level for a PUT, be careful because it is a warning that the underlying trend is weakening. This may or may not result in the trend collapsing, but it is advisable not to enter in this situation.

    Here is an example of what I have articulated above:

    image

    In the graphic above, we have one valid CALL and four PUT entries. The result of each entry is the candle to the right of the yellow dotted line.

    A word of warning... if the Turbo CCI hits the 160/-160 line be very wary of a significant pull back so rather stay out of the market.

    Thanks
    Shaun

  • ShaunRShaunR Posts: 56
    @pavelK - I sent you a private message. Thanks Shaun
  • pavelKpavelK Posts: 8
    edited February 9
    So, tell me if I understand it.

    When 13CCI is above the 0 line, I have an uptrend, and then I just wait for the 5CCI to move between the -60 and -160 line. Once the 5CCI touches the area -60/-160 I can place a trade.

    Also, do you bother with the colour of your histogram at all?
  • ShaunRShaunR Posts: 56
    pavelK said:

    So, tell me if I understand it.

    When 13CCI is above the 0 line, I have an uptrend, and then I just wait for the 5CCI to move between the -60 and -160 line. Once the 5CCI touches the area -60/-160 I can place a trade.

    Also, do you bother with the colour of your histogram at all?

    Hi pavelK

    Forget about the 13CCI as your main focus. Rather, concentrate on those 3 moving averages and wait for them to be wide apart, as in the last screenshot I posted (the example shows an uptrend followed by a downtrend). When the moving averages are wide apart, the 13CCI will automatically be above the zero line (for an uptrend) and below the zero line (for a down trend).

    So let's focus on a PUT entry...

    We want the moving averages to be wide apart with the purple line on top (see last 4 yellow dotted vertical lines in the screenshot above). CCI13 is happily below the zero line at this time.

    Now here is the KEY...

    5CCI must be in the region below -60 and above -160 in this situation WHEN price (current forming candle) pulls back to touch the middle (blue) moving average.

    For a CALL entry....

    We want the moving averages to be wide apart with the purple line at the bottom (see the first yellow dotted vertical line on the right in the screenshot above). CCI13 is happily above the zero line at this time.

    Now here is the KEY...

    5CCI must be in the region above +60 and below +160 in this situation WHEN price (current forming candle) pulls back to touch the middle (blue) moving average.

    Hope this clears that issue up?

    Lastly, do not be concerned about the colour of the histogram. In the way that I use it here, there is no value in colour change.

    Thanks
    Shaun
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  • hemantpremihemantpremi Posts: 3
    hi shaun i am very intersted in trading would you help me to understand singnal and tending.. i am new i just apply ema5,ema8,ema15..
  • The_Geek_MHThe_Geek_MH Posts: 351 mod

    hi shaun i am very intersted in trading would you help me to understand singnal and tending.. i am new i just apply ema5,ema8,ema15..

    ema's are good, what questions do you have?
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