Blog

Binary Options Analysis For EUR, JPY, CAD & USD

Binary Options Analysis for EUR/JPY

Complex correction in place on the EURJPY pair and, like in the case of the USDJPY, we should look to trade put options here, despite the relatively bullish move we saw the other days. The time frame is important as well as, being the daily chart, it calls for a bigger expiration date to be used for any binary options that are going to be traded.

I guess the technical picture should be pretty clear in the sense that this complex correction should come as part of a corrective wave of a bigger degree, and, from an Elliott Waves point of view, we already have a flat and a triangle as the x-wave.

It means the move to follow after the triangle is broken should be the second correction and, most of the times, this one will be either a triangle or another flat. In both cases, either a triangle or a flat, the move that follows should be a corrective one as well as the first segment in a flat or triangle is corrective in nature.

If we are to compare this chart with the USDJPY one, then the triangle is visible on both of them, only that on this cross we have the possibility to trade a bit more aggressively. This is coming from the fact that it is unlikely for the price to move back above that 61.8% retracement level you’re seeing above, and therefore we can take a put option right from current levels.

A sound binary trading plan should look like the following:

  • Buy a put option from current levels with the end of month expiration date. We need time for it as the time frame is quite big and being patient is going to be rewarding.
  • Wait for the b-d trend line to be broken before taking another trade. Even if the previous binary option is going to expire before the b-d trend line is broken, just wait for the break to come. On a break, trade another put option with the end of the month expiration date. If the break comes with less than one week until the end of the month, just do nothing, wait for the new month to start and then trade the put option with the end of month expiration as well.

This is all we can do on this currency pair given the time frame the analysis is made on and any other trade taken in the same direction should be considered overtrading. As traders, we want to avoid that, and we should always stick to a trading plan if any.

Execution is more related to patience and this is something that traders struggle with. After all, if a binary options broker is willing to offer you 70% or more rate of return on one trade, then having a bit of patience should not hurt anyone’s feelings.

It is the only way to deal with bigger time frames and it is what makes the difference between a successful trader and one that still struggles.

Binary Options Analysis for EUR/USD

Trading a currency pair from a binary options point of view should be a totally different thing than when trading the forex market. The reason for this is quite simple: binary trading involves taking into account the time element.

Not only that price should move to a specific direction, but at the expiration date, it should be there as well. How to set the expiration date for a binary options trading setup? The following things may help.

First of all, mind the time frame. The EURUSD chart above is on the four hours time frame but if you pay a bit of more attention to it you’ll see that the chart is actually zoomed out quite a lot in order for as many candles possible to be visible.

This makes the time frame even bigger than the four hours one, so trading with hourly expiration dates or so would not do any good to a trading account.

Second, split the amount to be invested in different parts in order to have multiple entries based on how the price is going to move. The overall technical picture above is showing us the EURUSD possible to make a move higher in the short-medium term, followed by a move lower on the medium to long term perspective.

That being said, we should have two binary options for the move to the upside and two for the move to the downside.

That being said, and considering the time frame involved, the following binary trading plan should be appropriate:

  • Buy a call option by the time the b-d blue trend line is going to be broken to the upside. This means the striking price will be around 1.1240 and the expiration date should be the end of the week. Most brokers will give you end of week expirations around 16:00 or 17:00 GMT times and that should be ok. If you’re finding a later expiration in the same day, that should be ok as well.
  • Buy another call option on the b-d trend line retest. This is happening only if the price is breaking the 1.1240, moves to 1.1290-1.13 minimum, and then reverses and retests the b-d trend line. This should be a nice place to buy a call option with the same expiration date as the one above, and the striking price most likely will be around 1.1230-50 area.
  • Use any move above 1.1350 area as an opportunity to buy a put option with the end of month expiration date. End of the month doesn’t mean we have to wait for one month, but only around twenty days as those highs are supposed to be sold in time.
  • Buy another put option with the end of week expiration date this time only if the price is reaching 1.15 area. If price indeed stretches that high, it should be only temporary as sellers will pile into the short side once there. In the end, let’s not forget that the longer term perspective is a bearish one here, so looking for longer expiration puts is the normal thing to do.

Binary Options Analysis for USD/JPY

USDJPY pulled a nice stunt on bears last week and actually not only last week. The previous ten trading days the pair moved only to the upside with little or no retracements, as the move was almost vertical.

The fact that even before the Non-Farm Payrolls release price kept moving to the upside was so bullish that it gave the impression that no matter the actual release, it will still continue to move up. However, the reality check came and the pair closed last Friday below the 103. What next?

The key to any USDJPY analysis stays with the one hundred mark. Imagine that the actual level has been broken only with the Brexit vote, and that is the spike lower that marks the end of the b-wave on the chart above. However, it is unlikely that the one hundred level will not be pierced anymore and this is the direction we should focus on.

Trading binary options means that we will focus on picking striking prices for put options and consider the best expiration date possible. Considering the time frame this triangle is forming, the four hours chart, then the expiration date should be set accordingly.

Such a triangle, if true, might be part as a complex correction that is about to stretch lower by the time the b-d trend line is broken. How can this happen if the Fed is supposed to hike the interest rate in December as this kind of a move from the Fed would spark US dollar buying?

The answer comes from the possibility of having a risk-off move prior to that hike and that risk-off could be sparked either by US equities or by US election result. Or both.

The overall idea behind trading put options based on this scenario is to look for some confirmation that we’re on the right track with the overall technical setup.

A sound trading plan should look like this:

  • Wait for the 101.50 level to be reached, and look for the market to bounce to minimum 102 from that level. That is a nice entry for a put option with the end of month expiration date. Actually, in order to be on the safe side, all options on this pair should have the end of month expiration date.
  • On a break of the b-d trend line, buy another put option with the same expiration date as the above one. The idea behind this second put is that when the triangle is broken, the whole running correction should be completed and the market should experience an aggressive selling as the next move.
  • Buy another put option with the end of month expiration date if/when the price is retesting the b-d trend line. Such a retest is not mandatory, but most of the times comes.

Mandatory: do not buy any option is there aren’t at least two weeks until the expiration date. If there are less than two weeks, then just wait for the next month to start and trade on the first day the put options with a one-month expiration date.

Binary Options Analysis for USD/CAD

The chart above is the USDCAD four hours’ time frame and it shows a beautiful contracting triangle that took more than the whole summer to form.

The beauty of this triangle comes from the fact that it should be a bullish one and should be broken to the upside as a consequence.

Like any contracting triangle, this one travels between the a-c and b-d trend lines and the b-d trendline is by far the most important one. This comes from the fact that by the time the b-d trendline is broken, it means that triangle is completed and we can move with the analysis forward.

This trendline is not broken (yet), but the idea of this analysis is to try to make a small trading plan for the binary options market based on this technical setup on the USDCAD pair.

Being a technical setup, we do not really care what the oil market is doing, what are the oil inventories or other external factors that normally influence the Canadian dollar. We will simply use technical analysis for our trades.

The first thing to do here is to be aware of the direction. We are bulls, as the triangle should break to the upside, so we’re interested in buying call options and call options only.

The second thing to consider is the amount to be invested. Definitely, we do not want to trade the whole amount on one call option as we will try to find out places where to add either from a time point of view or a price point of view.

No matter the amount to trade, split it into four different equal smaller sizes so we have four different call options to trade under the following trading plan dedicated to aggressive traders:

  • Buy a call option anywhere between 1.3120-1.3190 with the end of week expiration date. This means for the upcoming Friday, 16th of September. Usually, end of the week for such expiration dates will be offered by brokers around 14:00 GMT. If there’s no entry until Friday, skip this trade.
  • Buy a call option with end of month expiration date on a break at 1.3320. Any broker that respects itself will offer you end of month expiration dates for high/low binary options.
  • Buy a call option with the end of month expiration date on any dip below 1.3100.
  • Wait for 21st of September to come, as the Fed in the United States will decide on interest rates. If USDCAD is above 1.3320 before the Fed’s decision on that Wednesday, buy another call option with the end of month expiration date.

This way we’re covering both technical and fundamental analysis and the fact that this b-d trendline is a rising one tells us the market will have a bigger potential to the upside than to the downside.

More conservative traders should simply wait for the b-d trendline to be broken before buying call options with the end of month expiration date. We need to give it time as Fed will see a lot of volatility surrounding prices.