Binary Options Trading strategy: 5×5 Simple System

Binary options and forex trading can be implemented using a number of basic and easy-to-understand strategies. One of them is the 5×5 a simple trading system. Available with just two indicators, this is a simple tool that uses the minimum number of charts with rules that are easy to follow, record and understand. Once you have already mastered the use of this strategy, you can also add a few more indicators without much work and confusion. For it to work, this system will work with SMA and RSI indicators which will operate on period 5.

Here’s how you can use the system

When creating a chart, you will use two indicators, the 5 SMA and 5 , with the 50 horizontal line used only in the RSA. This chart can be used when observing a currency using the daily chart. What you should look out for is the candle of the day which should cross above or below the 5 SMA. As soon as the candle closes, simply wait for the next one and watch out for its move of at least 10 pips below or above the previous day’s low or high. When it’s above 50 then that’s the time to make calls and when under the 50 line, you should consider the put options.

5x5 trading strategy

  • Consideration for the call option. Track the movement of the daily candle for a cross above the 5 SMA before closing. The next day, make sure that the candle should be at least 10 pips better than the previous day’s high with the RSI at least 50 before you can enter.
  • Consideration for the put option. In the put option, the decision line is a cross below the indicator 5 SMA before closing. The next day, make sure that the candle should be at least 10 pips or more below the previous day’s low with the RSI lower than 50 before you can enter.

To avoid huge losses, you should always put the trade in the direction of the trends. Another way to reduce the losses is to ignore the signals that do not follow the trend. If you are using support lines and resistance, you can verify if the price level will move or not.

Advantages and Disadvantages of the System

One of the problems associated with the system is the waiting time which can be a test of patience of many investors and beginning traders. Sometimes, you will need to wait up to 2 days before you can confirm that a trend is stable. It also ignores some trends, but make sure that you will trade along the trend and not against it.

Compared to other strategies, the 5 x 5 Simple System is easy to understand and can be implemented by anyone including the beginners in the field. Since you are trading with the trend, it’s easier for the investor to get good signals in the direction of the trend since the SMA is used as a trend identifying indicator. The RSI on the other hand can help investors confirm all the information required in making the trade. In short, the 5 x 5 strategy can serve as a starting template for trading, and by adding and extra indicator, it will also help you in trading binary options. In trading, it’s best to trade using the most simple systems, and the 5 x 5 strategy is a perfect fit for this.

At its most basic, investors will work with 5 RSI and the 5 SMA. But if one will add support lines and resistance, the system can be improved considerably, and can definitely help in the identification of profitable trades and avoid losses. One recommended addition is the Stochastic Oscillator which can help in easy identification of support and resistance areas. In using the system, you may need to wait for a few days to get a signal. But there are some ways on how you can use this on trades with lower expires. If a trader is trading on less than 4 hour expires, waiting for the movement of 10 pips can be stressful, so it’s best not to wait that long. What the investor can do instead is to wait for the candle to move in the direction he wants to trade, verify the S/R lines and consider the RSA is under 50 for 4 puts and the candles are positioned below 5 SMA. Finally, the investor can verify the S/R line to confirm before finalizing the trade.

We recommend you to try this trading strategy with the broker that is reliable and have a good and fast platform. One of these brokers, where you can try this is a broker IQ Option, which is now the best on the market. If you would like to know more about this company you can and make sure it’s the best option for you.