Sounds like unachievable goal? Holy grail of trading? Well, it’s hard to master strategy that would really make entry to trade accurate and minimize risk at the same time. In this article we will write about trading strategy that that if executed well will do just that: accurate entry with minimal risk. This modern trading strategy is an amazing combination of simplicity and efficiency. Anyone who does not even have special knowledge in area of financial markets, will be able to master it and apply it with great success.
Accurate Entry With Minimal Risk – Introduction
This trading method is based on the technical indicators MACD and Parabolic SAR. These complex names hide two colored lines (MACD) and blue dots (Parabolic SAR). You don’t need to search for those tools online, they will be immediately available in your Olymp Trade trading platform. Using these indicators we will generate trading signals based on which we will commence our trades. Now, third piece of the puzzle comes into play and that is Martingale trading system. That one is here to act as an insurance against losses.
Accurate Entry With Minimal Risk – Martingale System
Martingale system is something most of you have probably heard of. It’s very basic, simple system. But when it “teams up” with MACD and Parabolic SAR it is a potent trading strategy. Martingale works this way:
- Invest any given amount in your first trade
- If first trade was successful repeat trade with same amount, if first trade wasn’t successful open a new trade with double amount
- If second trade was success, open new trade with the same amount from step 1. On the other hand if it failed then open new trade in which you need to invest amount that is double the amount invested in second trade. Keep on repeating until you get positive result
This short explanation immediately shows all the good and bad sides of this system. Good side is, that by increasing invested amount you are covering losses from previous trade(s). Bad side is, that too big number of failed trades will quickly deplete your account’s balance. That’s why we need to use Martingale system alongside other trading strategies that will increase chances of success and thus help us avoid having to make too many trades to win.
In the case of our strategy, the decision to open a deal will be confirmed by two technical indicators at once. This means that even if one or two trades in the chosen direction will be unprofitable, the following will bring profit with probability close to 100%. We propose to find out why this strategy is so effective, and from what elements it consists by continuing to read this article.
Accurate Entry With Minimal Risk – Parabolic SAR Indicator
One of the indicators that give the signal to start trading on the “Good Martin” is Parabolic SAR. You can read more about this indicator in our Parabolic SAR article. To get Parabolic SAR on your trading chart you need to open the module technical analysis on the Olymp Trade platform, then select it from the list of indicators and it will immediately appear on the chart in the form of large blue dots.
As you can see, in general, Parabolic completely repeats the direction of movement of the price in the chart. If the price rises, the points are located under the candles, and if it drops, dots are located above them.
Once you understand how this indicator works you can determine the right moment when it is most profitable to open a new trade. For example, if price crosses Parabolic points from top to bottom, this means that the trend will unfold and you can open trade “down”. Conversely, when price crosses Parabolic points upwards, it means that the future price will be higher than current one: open trade “up”.
Accurate Entry With Minimal Risk – MACD Indicator
The other indicator important for this trading strategy is MACD indicator. Like with Parabolic SAR indicator, you can set it up to show on your trading chart by clicking on Technical Analysis module on the Olymp Trade platform.
In order for MACD to work correctly, you need to configure it. We enter the following data is in the form:
Once you turn on the MACD indicator, you can notice that it consists of two lines on the chart: blue and orange, as well as bars – histograms. If the blue line is bent from top to bottom and crosses the orange, this signals that the trend is reversing and the price will go down. This signal alone is enough to buy binary option “down”. Just the opposite needs to be done if the blue line crosses the orange line below, this indicates that the price will go up, so you need to buy binary options “up”.
Accurate Entry With Minimal Risk – Getting Ready To Make A Deal
Like pretty much every time you trade, while using this strategy, you need to set the time interval on the chart. It’s necessary that the candle shows a price change every 5 minutes.
Now everything is ready. You just need to follow the price fluctuations and wait for the right moment to open a trade. The right moment to buy binary option “up” is when one Parabolic dot appears under the Japanese candle and blue and orange MACD line cross each other below the histogram line at the same time.
The right moment to buy binary option “down” is when one Parabolic dot appears above the Japanese candle and at the same time the blue and orange MACD lines cross each other above the histogram line.
When one of this two combinations occur, you just need to open a trade in the appropriate direction for a period of 5 minutes.
Once you have opened a trade, don’t cease to follow the indicators. You can make a trade in the same direction for every Japanese candle, but as soon as you see the blue line MACD begins to approach orange you need to stop trading in that direction and wait for the trend reversal. Never open trades until you get new clear signals.
Accurate Entry With Minimal Risk – How To Minimize The Risk
Even with the best signals you can’t expect to make every trade profitable. Even pronounced trend on the graph consists of both red and green Japanese candles. It turns out that in 5 minutes price can rise, but it can also go down. Sometimes markets just get erratic and you can’t really put your finger on a trend. This means that unprofitable trades can’t be avoided. What to do? There must be a way to minimize the risks… Now we must turn to the Martingale system, which will help us keep losses on sustainable level.
The best way to explain how to do this is by giving an example:
- You made a trade in which you invested 1 dollar. The trade was unprofitable and you lost invested amount
- Now you open a second trade with increased investment. 1 USD x 3 = 3 USD. If this trade turns profitable you will cover the loss on the previous trade and remain in the profit.
3 USD (investment in trade) + 80% (return on trade) – 1 USD (loss from first trade) = 1,40 USD (net profit). So, there was a loss in first trade of 1 USD, but you covered it, making a profit from the second deal of 2,40 USD. As a result, once you deduct that 1 USD loss from the first trade you end up with net profit of 1,40 USD.
Of course, it is possible that the second trade turns unprofitable, than you need to open the third trade with increased investment. Here is calculation of what investment amount is needed to remain profitable for any number of losing trades in the row, if we assume the return on trade remains the same 880%):
1st trade – 1 USD
2nd trade – 3 USD
3rd trade – 6 USD
4th trade – 14 USD
5th trade – 33 USD
6th trade – 78 USD
Don’t worry, if you make sure you follow the MACD indicator and Parabolic SAR and you execute your trades on time it is highly unlikely you will ever get to 6th trade. Now you are familiar with Martingale system. Follow the rules described in this article with discipline and you should be in for a long series of profitable trading sessions. Good luck!
Accurate Entry With Minimal Risk – Conclusion
Like with any other trading strategy practicing is of paramount importance. Especially if you are new to the world of binary options trading. Best way to practice this strategy is to use demo account. That way you don’t need to spend any money while practicing. And when you are ready you can deposit money and start trading for real and making profits. You can head over to the Olymp Trade web site and open free demo account. If you need more info about their demo account feel free to read our article – Olymp Trade Demo Account.
Good idea is to learn more trading strategies to increase your overall knowledge about binary options. To help you with that we wrote series of articles about various trading strategies: Binary Gambit, Ladder Trading, Trading By The Hour, Trading With Moving Averages, Trading Metals, Japanese Candlestick Strategy, Parabolic SAR Strategy and RSI Strategy For Trend Reversal. There is a lot more similar content in our section Trading Advanced. If you still have many “newbie” questions you need to take a look at our Trading FAQ section.
If you feel ready to use accurate entry with minimal risk strategy you can go over to Olymp Trade site and create you free account just by clicking on the button below the text. On the other hand if you are looking for more detailed information about broker itself make sure you read our comprehensive Olymp Trade Broker Review.