What Is The Breakout Strategy for Binary Options

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Breakout Strategy

The Breakout Strategy for Binary Options is an often-used strategy in Forex.

The basic idea of this strategy is one of the best-known economic concepts: “supply and demand”. Basically, a price can vary between two levels.

The higher and the lower level. When the value is close to the highest level, it will tend to go down, and when it reaches the lowest level, it will tend to rise.

That rule is the base of the Breakout Strategy. Sometimes that breakout is only temporary, but it is enough to make money from it.

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Check the 6 reasons why you should have account with at least 2 brokers:
  1. Each platform has its differences. If you try different platforms you may find those more suitable to your trading style.
  2. Each broker has his own payouts that keep changing during the day. If you want to open a trade and one offers 60% and the other 80%, you will choose the one with best payout, no?
  3. Sometimes the brokers close some assets, if you have just one account and you want to trade on that asset and it is closed, you will LOSE that trade, no?
  4. If there is an issue with your Broker’s platform, or they are updating it you’re not able to trade, unless you have another account with other broker.
  5. Deposits and withdraws. Brokers keep changing the deposit and withdraw methods, imagine you need cash fast and your withdraw system is closed at that moment on your broker, what do you do?
  6. Each platform has its owns indicators and trading tools, imagine you found a new stratey and it does not work on your broker because it uses an indicator that your broker does not offer.

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How to use Breakout Strategy in Binary Options

There are two ways to use Breakout Strategy in binary options:

Short duration options:

  • For time-frames of 5, 15 or 30 minutes.
  • The market has to be in a neutral trend.
  • We should use the same indicator that is used for 60 seconds.
  • The indicator works on an MT4 platform and will be made available in the training classes that I give.

Long-Duration Options:

  • For time intervals of 4 hours or 1 Day.
  • The market does not need to have a defined trend, the indicators simply need to show the asset oversold/overbought promising a breakage or retracement.
  • The basic idea of the Breakout Strategy in Binary Options is to find points that form resistances, causing a momentary breakout.
  • This breakage can be just for the price to come back to gain strength and follow the same course, or it can be a complete reversal of the trend.

I often use this strategy in Forex, especially for 4 hours and 1 Day. For those who trade with 60 seconds, in News Trading or Following the Trend , you can also use the Breakout Strategy in trades for the end of the day.

Its use is interesting as it combines perfectly with other strategies that are typically for shorter periods of time.

Take a look in the example below.

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  • In this asset (EURUSD), 7 operations were carried out, of which 5 made a profit (the green bars) and 2 lost (the red bars).
  • Each operation lasts 24 hours.
  • The robot gives the input signal at the end of the candle and we only have to put the Binary Option choosing the duration of 1 day (expiration time).
  • Since in this example we work with long periods of time, we must use several pairs, or we must combine this strategy with others. Each month, each asset allows an average of 4 or 5 operations.

Breakout Strategy Conclusion

This strategy is interesting because the percentage of trades with profit is high.

If we use long expiration times, such as 1 day (as in the example above) the percentage of possible profits goes up because the longer the expiration time of the binary option, the easier it is to predict the movement of the price of the asset.

Traders who use this strategy normally either use a greater risk, 5% of the value of the account in each trade and multiple assets at once, or use other strategies to diversify and be able to place more trades per month, thus boosting profits.

Although the operation of the two markets (binary options and Forex) is different, my opinion is that the implementation of this strategy in binary options works well, especially for 4-hour or 1-day trades.

As mentioned before, you need to be careful with the economic news and the times of the day the market is more active.

The mais idea to use this strategy is when the market is oversold or overbought, so the economic news or other volatile situations may not be suitable to use this strategy.

Don’t forget to see all the other strategies I teach on the site.

You can test this strategy here: IQ Option

Binary Options Breakout Strategy

Binary options trading is all about predictions. If you can make accurate enough predictions based on the information youre presented with, then you can make a nice profit without too much of an effort.

However, predicting the price movements isnt easy, especially on the one-minute scale you will be working with (after all, theyre called 60-second binaries for a reason) which means that you need to have a viable strategy to implement in order to improve your chances of profiting.

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Never take unnecessary risks. Even though its true that 60-second binaries require you to be quick in your decisions, that doesnt mean that youre supposed to commit to bad trades. Your strategy will determine what is a good and what is a bad trade. Weve already covered the importance of strategies and the skills you will need in order to become a good trader in another section. In this one, we will talk about the breakout strategy.

What is a breakout strategy?

In the periods of stagnation on the market, prices begin to consolidate on certain positions. These positions tend to form levels of support and resistance. When the price can fall below a certain level, then we call that level support. In quite the same manner, when the price cant go above certain levels, we call that level resistance. The levels of support and resistance are pretty obvious in charts.

When the price of an asset touches the level of support or resistance but doesnt break them, we say that the price is testing them. When the price manages to break levels of support or resistance, then we are talking about a breakout. The breakout generally needs to be confirmed in the long run because sometimes there are “fake-outs” but in general a breakout in either direction signals the forming of a new trend.

Traders who use the breakout strategy wait for a breakout to occur and enter a position early in the new trend. Once the new trend is formed, the former level of support or resistance (depending on where the price broke out) becomes the opposite of what it used to be (which we call a reversal). For example, if the price broke the resistance levels in an upward direction, then the previous resistance level becomes the support level for the new trend. If the price broke downwards, then the previous support level becomes the resistance level for the new trend.

In order to use this strategy, the trader has to carefully follow the charts and price fluctuations in order to spot the breakout. Once he see the support or resistance being broken, he is ready to enter a position. The problem with this strategy in the 60-second binaries real m is that it cannot be confirmed right away. Usually the confirmation that we have a breakout in normal trading comes from the price closing higher than the level of resistance or lower than the level of support. Nonetheless, the strategy can be used because we dont really need to confirm it in the long run.

We need it to be there for the next minute. Once the price breaks in either direction, it will immediately try to return to the level before it was broken but will probably be rejected. We still need to wait for a bit to see how persevering the price is. If it doesnt get back to the previous levels in two attempts, this is where its a good idea to enter the trade. If the price broke upwards, then you place a call bet and if it went downwards, you place a put bet. The fact that it didnt get back to previous levels indicates that breakout is persistent enough. Keep in mind, though, that there is still a chance that the price returns to the original boundaries in the third attempt. This is the risk of the strategy because of its short-term nature.

A few tips

Many brokers today give you the opportunity to observe past trends in order to make up your mind of how you want to invest. There are also tons of independent tools, apps and sites online. All you have to do is find them. It would be a good idea to learn how to read candlestick chats because theyre widely used.

Money management is important. You should risk more than 5% of your capital on a single trade. Follow this rule and you will significantly cut your losses. Also, before you actually start trading your own money, try out every new strategy using the demo. This way you wont risk your own money and in the same time you will find out how well you know the strategy, in reality.

Breakout Trades

Binary Options Breakout Trades Using Pivot Points

Binary options trading success is based on making the right calls on price direction. If a trader can correctly predict where price will go, then it is very likely he will make a trade that will be in the money.

One of the ways this can be achieved is by being able to predict price breakouts. This leads us to ask the question: what really is price action, and what determines the behaviour of price action at any given point in time?

The concept of price action is simply a depiction of the activity of traders in a particular market. Traders are in the market to make money. If they see something that will present itself as a market opportunity, they will put their money in the market to make the trade. At this time, we will see prices moving in one direction or in the opposite direction. If traders see nothing to convince them of an opportunity, they will sit on the fence and do nothing. At this time, the price action will hardly go anywhere except just trend sideways.

Fortunately, the binary options market helps us to trade the price action, whatever that may be. Unlike in forex trading or other markets where you need the market to be in motion to make money, you can actually make money in the binary options market even if the prices of the underlying asset stay still.

In today’s lesson, we will explain a scenario that occurs when the market is in motion; the breakout. Breakouts occur after periods of price inactivity. They occur when traders get a hint of an impending market event that will affect the value of an underlying asset, so they take position in order to make money from such movements. One way of determining this is to look at the behaviour of the price action at the key levels of support and resistance.

Before we get an upward break, prices may have tested the resistance level multiple times, with the points of retracement getting progressively higher. This indicates buying pressure. When we see this, this is a signal that prices will breakout upwards.

The reverse is also the case for downward breakouts. Support levels will be tested repeatedly with points of retracement getting progressively lower, signifying selling pressure.

At other times, the buying or selling pressure may already be in such forceful effect, that the price action just rams through the key levels. Look at the chart below:

The pivot points show the support and resistance levels. We can see that R1 has been tested several times, and prices do not get back to where they started for the day at S1 before going back up. This indicates buying pressure which eventually breached R1. Price then tested R2 several times, but retracements never get back to the central pivot (marked purple) which was the previous retracement point. This shows increased buying pressure and we see this manifest as a bullish candle that eventually breached R2 all the way to R3.

If I was to trade this on the binary options market, I will do this in three ways.

Trade 1

I would trade the In/Out binary options trade, betting that the trade would end outside the S1 – R1 range, with a one week expiry.

Trade 2

I would also trade the Rise/Fall variety, betting that the price of the EUR/USD will rise above the R1 point, setting a 72-hour expiry.

Trade 3

I would trade the Touch/No Touch trade, betting that prices would touch a point somewhere between R1 and R2, for a one week expiry.

The lesson here is that pivot points are an indispensable tool for binary options trading and if you can use them to watch price action at key levels of support and resistance, you will make good trade calls most of the time.

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    2nd place! Good choice!

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