When I dive into reversal trading, I'm focusing on a solid risk-to-reward ratio that beats just going with the trend. Trust me, the potential gains are better, giving me a nice buffer for any bumps I might hit along the way. Sure, it’s got a bit more risk, but those tasty rewards make reversal trading a cool way to pull in some cash.
Now, in the world of binary options trading, I've got to figure out the price movement of an asset to really score big. But let’s be honest—guessing price changes is like playing a game of chance. The market's super volatile, and those price trend reversals will keep you alert.
In binary options trading, I look out for two main patterns: the continuation pattern and the reversal pattern. I’ve got to craft a solid trading strategy if I want to keep making profits. I need to get familiar with what a trend reversal pattern is all about and refresh my knowledge on the different types out there. There are some great indicators available in the comprehensive Pocket Option trading platform for diverse strategies. Let’s break down the Reversal strategy using CCI and Bollinger Bands.
How to set up my trading terminal
This reversal strategy can work on any timeframe, but in the fast-paced world of electronic contracts, shorter time intervals can be more rewarding. I’m all about that M5 timeframe vibe along with some classic Japanese candles. For my trades, I usually stick to high-volatility currency pairs or big-name cryptocurrencies. I keep the indicators set to their default parameters in the Pocket Option terminal.
I’m bringing the CCI into my toolkit because it’s one of the best indicators for spotting potential trend shifts ahead of time. The Commodity Channel Index (CCI) measures the current price against the historical average. When the CCI is above zero, we’re sitting pretty above the historical average, but if it drops below zero, we’re lagging behind.
When the CCI line crosses outside the -100 and 100 zones, it’s a clear sign of a crowded market. If the CCI creeps up towards 200 and beyond, I can sense an upward trend reversal coming. On the flip side, if it slides below -200, I get ready for a downward trend shift.
Those Bollinger Bands are my safety net, showing me market volatility. They help signal that perfect moment to jump in on a reversal by watching for the price snapping back to the Bands after drifting away for a bit.
How to trade with the Reversal Strategy
Let’s talk about two scenarios: call and put.
For the CALL option, I hit the button when the CCI dips below -200 (even better if it’s closer to -300), and the candle makes its way back into the Bollinger range after slicing through the lower edge.
On the other hand, I jump into a PUT contract when the CCI has shot up above 200 and the price drifts back into the BB range from the top.
In my playbook, I usually aim for an expiration time of 15 minutes. But if I’m feeling adventurous with a different timeframe, I’ll set the contract duration to cover the formation of three candles—for instance, for H1, that would be 3 hours.
That’s the scoop on the Reversal strategy. Now it’s time to adjust the setup and kick off some profits with this trading system.
