Using Fibonacci levels in binary options

Mathematics in trading has always been important. Some traders generally trust only her.

In binary options, traders often work by levels. Why? There is a accumulation of orders on them. Therefore, as soon as the price reaches one of them, you can expect either a breakout or a reversal, that is, entry into a trade.

Levels can be determined using technical indicators, support and resistance lines. Today we will talk about another tool.

Fibonacci lines on binary options are less popular among traders. And all because they seem more complicated to use. We once thought so ourselves. However, after spending a couple of hours of our time, we became convinced that this was not the case at all. Now it will take you a few minutes to understand this.

Let's first remember the mathematician Fibonacci himself, who lived back in the 13th century. He presented a sequence of numbers, where each subsequent number was the sum of the previous two.

For example, everything starts with 0 and 1. 0, 1, 1, 2, 3, 5, 8, 13, 21 and so on. First there were 0 and 1. If we add them up, we get 1. Now the last two numbers are 1 and 1. We add them up and get 2, etc.

The ratio of the number to the previous one is approximately 1.618 (the number is rounded to this value). Well, for example, divide 21 by 13 right now.

The sequence is based on the golden ratio. You can look at what it is on other sites or in books. We will not continue this topic, since the cross-section is not directly related to Fibonacci strategies on binary options. But overall the topic is interesting.

Concept and history of appearance

The considered price correction levels owe their appearance to the medieval mathematician Leonardo of Pisa. He went down in history thanks to the nickname Fibonacci, which his friends gave him. It is translated as son of Bonacci.

This mathematician in his book derived a sequence of numbers that were called the Fibonacci number. It looks like this: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233 and so on.

Naturally, all the numbers in this chain are interconnected by certain mathematical and statistical laws. At the same time, they start working with 5. Each subsequent number is 1.618 greater than the previous one.

Binary options traders began to actively use the Fibonacci sequence when it was noticed that market fluctuations in investment asset prices often follow the same pattern.

This is reflected in the standard settings of the most popular trading terminal on the classic exchange MetaTrader 4. Fibonacci support and resistance levels were built into its tools. That is, they can be used by any trader who has access to work in MT4.

However, you should not confuse Fibonacci levels with indicators for technical analysis. These are different tools that have nothing in common.

Preparation

Step No. 1. Look at the article “Training for Binary Options”. It contains educational material necessary for quality trading. Step No. 2. Look at the article “” Without this program, you will not be comfortable working with the rules of the “Following the Fibonacci Trail” strategy. Step No. 3. Look at the article “How to make money on binary options - instructions for a beginner.” It tells what results every trader should strive for. Step No. 4. Look at the article “How to trade correctly on a demo account for Forex and binary options.” From it you will learn how to safely test a new technique. Step #5: Look at the article “How to choose the right binary options broker: important factors and a list of the best brokers.”
Here you can find a good company for real trading.

Technical points

As we wrote above, to use Fibonacci levels, an investor needs to download and install the MetaTrader 4 trading terminal on his computer. In addition, it is possible to immediately trade on the site of a binary options broker that provides access to MT4.

Now, to use the instrument in question, the trader needs to go to MetaTrader 4 and select any investment asset that interests him.

The next step is to double-click on the “Insert” tab, which is located in the top panel of the trading terminal. Then from the drop-down list you need to select the “Fibonacci” item and click on the “Lines” option.

Now let's figure out the choice of the place from which we will stretch the Fibonacci levels. When choosing the starting point for applying an instrument, we should certainly take into account the direction of the trend currently prevailing in the market.

If we are dealing with an upward trend, then we should take the local minimum point as a reference point. And vice versa. With a downward trend, we will stretch the lines from the point of the local price maximum.

Settings

Step 1. Download the Fibonacci Trail strategy files. Stage No. 2. Add several currency pairs to the chart and set a fifteen-minute time frame (M15). We recommend adding no more than two assets, however you can use an unlimited number of currency pairs. Step #3: Check the chart and make sure the following indicators are present: AUTO FIBO and RUBICON. If you have any difficulties installing the template, watch the video review with step-by-step instructions

Chart of the Fibonacci Trail strategy.

Basics of use

If we analyze the quote chart, we will see that asset prices do not move systematically and measuredly. There are constant rollbacks and corrections. But at the same time, the general tendency that forms the trend is fulfilled.

In such conditions, the Fibonacci grid, which is formed by levels and candles, allows us to predict with a high degree of probability the subsequent direction of movement of quotes. Knowing the existing patterns, a trader can predict whether the trend will continue in the future or whether a turning point has been passed, marking the beginning of a new trend.

Important to remember:

• the first levels of price adjustments are 23.6 and 38.2;
• the average level most often used in trading in terms of price rollbacks is 50;
• a high level indicating a tendency for a possible reversal of the existing trend on the stock exchange is 61.8.

Purchase

1. The RUBICON indicator has formed a yellow upward arrow.
2. The control candle has fixed above all levels of the RUBICON indicator. In this case, the RUBICON levels are arranged in the following sequence: blue, blue, red.
3. The control candle rests on the support level of the AUTO FIBO indicator.
4. we pay back on a new fifteen-minute candle.
5. Expiration 1 hour - for the M15 chart this is 4 candles.
6. The risk of each bet should not exceed 2% of the deposit.
7. Recommended working hours: entire European session.

Purchasing using the trading algorithm.

Trading Rules

The Fibonacci grid is formed by several support and resistance levels. This is an axiom that not a single professional trader working on one of the exchanges or the binary options market will dispute.

Real trading can be carried out in 2 planes. It can be aimed at breaking through the levels in question or at rebounding from them. In our opinion, it is better for beginners in their work to focus specifically on the situation with a breakdown. This situation is easier to identify and use in practice.

According to the first rule, it is advisable to use Fibonacci levels exclusively on long-term timeframes. The minimum such interval with which you can work is 30 minutes or M30. But the most impressive results are achieved on the H1 hourly timeframes and the 4-hour H4 timeframes.

An attempt to use the levels in question in turbo binary options is doomed to failure. There is no point in using this tool here. In such conditions, the quote chart is greatly influenced by exchange noise, leading to numerous false signals.

According to the second rule, signals generated by Fibonacci levels are considered reliable provided that the candle broke through the line and closed behind it. In a situation where the level is broken only by the shadow of the Japanese candlestick, the signal is considered false. In this case, you should not open a trading position.

Sale

1. The RUBICON indicator has formed a yellow downward arrow.
2. The control candle has consolidated under all levels of the RUBICON indicator. In this case, the RUBICON levels are arranged in the following sequence: red, blue, cyan.
3. The control candle rests on the resistance level of the AUTO FIBO indicator.
4. We sell on a new fifteen-minute candle.
5. Expiration 1 hour - for the M15 chart this is 4 candles.
6. The risk of each bet should not exceed 2% of the deposit.
7. Recommended working hours: entire European session.

Selling according to the trading algorithm.

How it works in practice

Let's consider a trading system or strategy that works on the breakdown of Fibonacci levels in a downward trend. After overlaying the corresponding lines on the price chart, we begin to analyze the movements of quotes.

We will open a Put or Down trading position after a bearish or red candle breaks the level of 50. In this case, the expiration date of the binary option is equal to the set timeframe.

As we can see, after breaking through the specified line, the quotes continued to move down and the purchased binary option closed in positive territory. Then came the price adjustment. We waited for this moment and entered the market again after the candle broke the level of 38.2. And again our down trade worked.

Remember, before you put into practice the rules and strategy described, test them in a demo account with the broker you are trading with.

Drawing Fibo lines on a price chart

An accurate algorithm for calculating Fibonacci numbers has long been implemented in technical analysis and is included in the toolkit of any trading terminal. Below is shown how to plot Fibonacci levels in the most popular MetaTrader terminal.

After construction, the price chart takes on something like this:

Technical meaning of base levels

Fibonacci numbers for binary options have a fairly wide range of values, but, as a rule, trading strategies use a standard set with its own characteristics:

23.6% is the first level at which the price may slow down or begin a local correction. Trading practice has shown that 23.6% will not be a strong obstacle and, although short periods of pullback or consolidation are possible, the price in most cases goes to the next levels.

Buying options of any type is not recommended, especially for beginners.

38.2% is the zone in which you can already start buying options. Around 38.2% there is always a lot of open trades (open interest) so it becomes a strong support/resistance level.

It is recommended to open medium- and long-term options with expiration dates of at least 4-5 hours.

50% is the line where the trend is most likely to break, and the deeper the pullback, the longer it will take for the main trend to recover.

This is where the bulk of pending transactions from large players are located, which can quickly change the direction of the market. The best option would be options for a rebound, not for breaking through the level.

61.8% (reduced target point, COP) is the strongest level of processing of the previous price movement. This is where the positions of nervous participants who could not withstand the pressure are closed, after which the price goes deeper and deeper in the direction opposite to the trend.

Statistics show that at 61.8% the price usually reverses or gives a rollback, and a breakdown of the line means the beginning of a new trend.

76.4% - in the Forex market, StopLoss orders are usually located in this zone, limiting the maximum loss on a transaction.

With a strong current trend, corrections rarely reach such deep values, but if the price has broken through and consolidated behind the level, we open an option in the direction of movement to 100% Fibonacci.

100% (target point, OP) - complete trend reversal (Fibonacci), opening binary options is not recommended.

In addition to those listed, the levels 161.8% and 261.8% can be used, but they are not widely used among option traders - you have to wait too long for a signal.

Trading strategy signals

To summarize, it is important to highlight the main signals for buying/selling options:

• level breakdown;
• touching the consolidation level in the presence of a reversal pattern;
• placing pending orders 5-7 points above/below Fibonacci levels (some binary brokers provide the opportunity to trade pending orders).

Everything is not as complicated as it might seem. The main thing is to familiarize yourself with the mentioned theoretical framework and use the examples given as a cheat sheet. The movement of the price chart is chaotic, but natural.

Fibonacci levels

Fibonacci numbers are a set of numbers where a new number is equal to the sum of a pair of previous ones.
If we divide one of the numbers by the previous one, we get a value that is as close as possible to the golden value - 1.618. In Forex, Fibonacci numbers are used to create lines. The resulting grid includes a certain number of lines, but only 2 levels are important for opening orders.

Let's first imagine the golden ratio as a segment that is divided into two unequal parts 62% and 38%. If we divide the length of one part by the other, we get a number close to the golden mean. Next, we will look in detail at how the levels mentioned above can be used to conclude successful transactions.

How to automate trading using Fibo levels?

The trading strategy based on the Fibonacci Retracement indicator is quite profitable and effective. In practice, it allows you to receive up to 50-100% of income per month with minimal risks. If you want to improve this indicator and achieve higher income, you can use a special advisor that works based on the Fibonacci Retracement indicator. But it is important to consider a number of factors:

1. The advisor needs to be configured correctly. You should not set too large a standard lot volume (default bid amount). Otherwise, if the rules of money management are not followed, the advisor, after a series of unprofitable trades, may simply “drain” your deposit.
2. Before news releases, the advisor should be turned off. Indeed, at such moments, the volatility of the binary options market literally goes off scale. Prices begin to move chaotically in both directions, which is why the advisor cannot generate good signals. This makes it difficult to find entry points into the market.
3. You should not entrust all trading to the advisor. Turn it on only when you really have no way to monitor the binary options market. If you have free time, turn off the advisor, don’t be lazy and analyze the charts manually. You yourself will be able to find more reliable entry points into the market than an advisor working according to a strictly specified algorithm.

Fibonacci strategy for binary options

Learned how to draw lines. Now let's learn how to use them. To do this, remember a few rules.

First, we never trade on a rebound from level 0, as there is a possibility of it breaking through. Secondly, we open trades only according to the trend. That is, you need to wait for a rollback to the line 23.6 or 38.2.

Let's look at the options when we can enter a trade.

The first option is on a rebound from 23.6. But do not forget that the probability of a rebound in this case is only 50%. Therefore, this option is suitable only for aggressive traders.

The next way is to trade from the 38.2 line.

Now let's look at why it is better to work with Binary.

Trading using Fibonacci levels is more suitable for the Forex market, since there you can set stop losses and take profits. Trades are concluded at the end of the day, but it is important to exit on time. We can say that on average trades need to be concluded within 5–7 candles. In most cases, this is enough for the price to play. But it also happens differently.

We have also already said that it is better to work with Fibo on the timeframe from H1. That is, the expiration period must be at least 5 hours. And with some TOP brokers (Binomo, etc.) such terms are not available.

Fibonacci on binary options One Touch

There are also some kind of take profits on BO. The One Touch option type involves making a profit after reaching a certain price level. Many brokers offer this trading option. But usually the levels are set automatically. Binary allows us to set them ourselves and make a profit.

The profit is low, in the range of 20–30%. But considering that approximately 9 out of 10 transactions are closed in profit, we can make money even with such a profitability. For example, by concluding 10 contracts for 10 USD each, the net profit will ultimately be 8 USD with a yield of 30%. On older TFs the profitability is higher. Next we will explain why.

So how to trade? Follow the instructions:

• Open a chart of a suitable asset in MT4;
• Wait until the first wave is formed and build Fibo levels based on it;
• After touching the level of 38.2, we open a trade in the direction of the trend, and set the profit level at the line price of 23.6;
• The target level can be set at the Fibo value 0. In this case, the payouts are higher, but the risks are much higher.

Now for an example.

The signal candle is highlighted in yellow. 38.2 is listed at 1.29001. The target price is 1.29300, where the line 23.6 is located and the price has confidently reached it. On the Binary platform, the quote is four-digit, that is, 1.2900 and 1.2930 on the GBP/USD pair. Let's see how much Binary will pay for setting a target price at a distance of 30 pips with an expiration time of, say, 2 days. In general, one day is enough if you work on H1, but here the period is not important, since the deal is closed automatically after reaching the border. Therefore, we set the expiration to be higher.

On the platform, the current asset price is 1.3136, we set the expiration price to 1.3166 and get a yield of about 25%.

How to increase the profitability of the Fibonacci strategy for binary options

When trading on an hourly timeframe, the profit from one transaction is not too high. Let's see how things stand when working on four-hour and daily periods.

38.2 is set at a price of 1.2847. 23.6 – 1.2914. The difference is 67 points. Binary is ready to pay about 55% for such a difference. Of course, it’s far from 80%. But compared to the same Forex, the profit is decent.

We said that traders often trade until a rebound to the zero Fibonacci line. In the screenshot above you see that the price reached the level, and it took from 5 to 10 days (depending on when the entry was made).

The zero level corresponds to the price of 1.3024. The difference is 177 points. In this case, the profit is already about 130%.

It’s up to you to decide which way to trade: conservative or more risky. But do not forget that when trading for a rebound from the zero level, the expiration period must be increased to at least 15 days.

Now let's look at the situation on the daily timeframe.

We see that within a few days 2 signals appeared in a row and both of them played for a rebound to 23.6. The difference between the levels was 200 points. The profit in this case is about 250% if you open a deal with an expiration time of 7 days. And since we almost immediately had 2 signals, within a week we could open 2 successful transactions. Investing $10 per contract, after a week the balance would be $50.

On the daily chart, there is no particular point in trading with small investments for a rebound to 0, since it can take up to 40–60 days to win back. And even if the price passes 400 points, the profit will be about 80%. For a decent profit you need to invest more than 1000 USD.