Binary Options Trading strategy 5×5 Simple System

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5×5 Simple System for Binary Options Trading

The 5×5 system is a simple forex AND binary options strategy, which makes use of only two indicators. This reduces the number of charts and the rules are simpler to keep track of. Once you are comfortable with the system, you could even look at adding in another rule or indicator without causing a lot of confusion for yourself. The 5×5 system uses an RSI and an SMA indicators, both of these set to run on period five. This strategy can be altered a little to work with binary trading as well.

How does it work?

Create a chart using the two indicators 5 RSI and 5 SMA (smoothed moving average) and set a 50 horizontal line on the RSA only. Use it for monitoring a currency on a daily chart. The candle for the day must cross below or above the 5 SMA. Once the candle closes, wait for the next candle (on a daily chart this will be the next day) and wait for the movement to be 10 pips or more above or below the previous day’s high/low. When looking at calls, you would only enter if the RSI is above the 50 line or under the 50 line for put options.

Simple 5×5 trading strategy

  • For a call option: Watch the daily candle for a cross above the indicator 5 SMA and then close. On the following day, the candle needs to be at least 10 pips or more above the high of the previous day and the RSI needs to be above 50, then you can enter.
  • For put option: Watch the daily candle for a cross below the indicator 5 SMA and then close. On the following day, the candle needs to be at least 10 pips or more below the low of the previous day and RSI needs to be below the 50, then you can enter.

To avoid losing trades where possible, it is always better to trade in the same direction of the trend. If you use resistance and support lines, you can also get an idea if the price level will hold or if there may be other factors at work that can affect it. You can also cut out on losing trades by ignoring the signals that do not follow the current trend.

Pros and Cons

One of the detriments of this system is the length of time to wait before being able to trade, up to 2 days or more to check if the trend is stable before trading. There is also no guarantee that even after the wait you are not entering just before a retracement. This strategy does ignore the trends to a degree, but you should ensure that you only trade with the trends and not against them to avoid losses.

This strategy is easy to understand and use by anyone and it is easy to follow and remember the rules. Trading with the trend when using this strategy means you can get some good signals in the trend direction due to the SMA which is a trend identifying indicator. The RSI helps you confirm the information you need to trade. This 5×5 strategy is a good start for a trading template and adding in an indicator of your choice will help you trade binary options with this system. It is important when trading to try and keep things as simple and uncomplicated as possible.

The 5 RSI and 5 SMA that you work with in this strategy are good enough to start with. If you add in resistance and support lines you can improve the system and help you find your way to more profitable trades and fewer losses. Or look at adding in a Stochastic Oscillator to help find the resistance and support areas easier. Having to wait for days to obtain a signal with this strategy may be off-putting to some traders, but there are ways to use this strategy for lower expires. When trading on less than 4 hour expires, waiting for moves of 10 pips or more can be a problem before entering so you might not want to wait that long. Wait on a candle to close in the direction you are trading in, check the S/R lines and check the RSA is still below 50 for 4 puts and candles are still below the 5 SMA. Check the S/R lines for confirmation before trading.

Binary Options Trading strategy: 5×5 Simple System

Binary options and forex trading can be implemented using a number of basic and easy-to-understand strategies. One of them is the 5×5 a simple trading system. Available with just two indicators, this binary options strategy is a simple tool that uses the minimum number of charts with rules that are easy to follow, record and understand. Once you have already mastered the use of this strategy, you can also add a few more indicators without much work and confusion. For it to work, this system will work with SMA and RSI indicators which will operate on period 5.

Here’s how you can use the system

When creating a chart, you will use two indicators, the 5 SMA and 5 RSI, with the 50 horizontal line used only in the RSA. This chart can be used when observing a currency using the daily chart. What you should look out for is the candle of the day which should cross above or below the 5 SMA. As soon as the candle closes, simply wait for the next one and watch out for its move of at least 10 pips below or above the previous day’s low or high. When it’s above 50 then that’s the time to make calls and when under the 50 line, you should consider the put options.

  • Consideration for the call option. Track the movement of the daily candle for a cross above the 5 SMA before closing. The next day, make sure that the candle should be at least 10 pips better than the previous day’s high with the RSI at least 50 before you can enter.
  • Consideration for the put option. In the put option, the decision line is a cross below the indicator 5 SMA before closing. The next day, make sure that the candle should be at least 10 pips or more below the previous day’s low with the RSI lower than 50 before you can enter.

To avoid huge losses, you should always put the trade in the direction of the trends. Another way to reduce the losses is to ignore the signals that do not follow the trend. If you are using support lines and resistance, you can verify if the price level will move or not.

Advantages and Disadvantages of the System

One of the problems associated with the system is the waiting time which can be a test of patience of many investors and beginning traders. Sometimes, you will need to wait up to 2 days before you can confirm that a trend is stable. It also ignores some trends, but make sure that you will trade along the trend and not against it.

Compared to other strategies, the 5 x 5 Simple System is easy to understand and can be implemented by anyone including the beginners in the field. Since you are trading with the trend, it’s easier for the investor to get good signals in the direction of the trend since the SMA is used as a trend identifying indicator. The RSI on the other hand can help investors confirm all the information required in making the trade. In short, the 5 x 5 strategy can serve as a starting template for trading, and by adding and extra indicator, it will also help you in trading binary options. In trading, it’s best to trade using the most simple systems, and the 5 x 5 strategy is a perfect fit for this.

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At its most basic, investors will work with 5 RSI and the 5 SMA. But if one will add support lines and resistance, the system can be improved considerably, and can definitely help in the identification of profitable trades and avoid losses. One recommended addition is the Stochastic Oscillator which can help in easy identification of support and resistance areas. In using the system, you may need to wait for a few days to get a signal. But there are some ways on how you can use this on trades with lower expires. If a trader is trading on less than 4 hour expires, waiting for the movement of 10 pips can be stressful, so it’s best not to wait that long. What the investor can do instead is to wait for the candle to move in the direction he wants to trade, verify the S/R lines and consider the RSA is under 50 for 4 puts and the candles are positioned below 5 SMA. Finally, the investor can verify the S/R line to confirm before finalizing the trade.

We recommend you to try this trading strategy with the broker that is reliable and have a good and fast platform. One of these brokers, where you can try this is a broker IQ Option, which is now the best on the market. If you would like to know more about this company you can read IQ Option review here and make sure it’s the best option for you.

The 5×5 Simple Binary Options Trading Strategy

Full Review of the 5×5 Simple System for Binary Options Trading

This is a simple forex strategy that was posted on forex-strategies-revealed.com by Edward Revy. It’s a simple system that only uses two indicators. I like simple strategies that only use a maximum of two indicators. No messy charts, not too many rules to keep on your mind, just as easy as; 1, 2, 3 Trade! Another good thing with choosing a simple strategy is that you can always add another indicator/rule that you like without overwhelming yourself. This strategy uses only an SMA and RSI, both running on period 5. Hence the name 5×5. I tried tweaking the strategy to fit Binary Options trading and I’ve some suggestions on how you can improve it! First, let’s see how it works.

How Does the 5×5 Simple System Work?

This strategy uses only two indicators; 5 SMA and 5 RSI. Add those to your chart and set only a 50 horizontal line for the RSI. We are supposed to use it to monitor a daily chart on any currency. First, a daily candle must cross above/below the 5 SMA. When this candle is closed we have to wait for a new candle (next day candle if it’s a daily chart) to open and move 10+ pips above the previous high or in the case of a put; 10+ pips below the previous day’s low. For calls, our entry is valid only if the RSI is above the 50 line. For put options, our entry is confirmed if the RSI is below the 50 line. Take a look at the following picture:

Some of the valid entries are marked with green circles. The loss (red circle) in the picture could’ve been avoided.
Find out how, keep reading!

Entry Rules

Call Option: Wait for a daily candle to cross above the 5 SMA and close. The next day, the new candle should move 10+ pips over the previous day’s high and you will only enter if RSI is above 50.

Put Option: Wait for a daily candle to cross below the 5 SMA and close. The next day, the new candle should move 10+ pips below the previous day’s low and you will only enter if RSI is below 50.

To avoid more of the losing trades, it is recommended that you trade in the direction of the trend. It is also wise to use support and resistance lines to see whether an important price level is going to hold or not, or produce an otherwise unforeseen hurdle. Keep in mind that discarding non trend following signals would have kept you out of the one losing trade pictured above!

Why Does the 5×5 Simple System Suck?

Yes, I’m with you on this, the waiting is just painful. I have to watch an entire daily candle to close above the SMA only to go and take a nap and come back next day hoping the next daily candle will close 10+ above the previous one and THEN I can trade! I know patience is good but this takes it a bit too far, at least for binary options. Another issue is obviously the fact that once you’ve waited for such big moves to occur you might end up entering just as a retracement is about to take place.
I could add that the strategy ignores the trends but I think it’s up to you to not trade against any trends so it isn’t really a drawback of the system itself.

Why Doesn’t the 5×5 Simple System Suck?

This is a user-friendly, understandable strategy and you can quickly memorize all the rules that you need to follow. If you trade with the trend, the strategy actually gives you good signals in the direction of the trend since it is using a trend identifying indicator (SMA). The RSI is a great tool too and gives the extra confirmation you need. The 5×5 strategy is a good template if you want to add your favorite indicator for improvement.

Start Simple, Finish Advanced!

You don’t need to have a complex strategy with all of the MT4 indicators installed on your charts to make money. In fact, that would be among the stupidest things you could do. Keeping things simple is often the best approach. The 5 SMA and 5 RSI are good enough but I strongly recommend taking my advice on adding support and resistance lines to your charts! This method will improve the 5×5 Simple System and lead to more winning trades. Another tool I can recommend to those of you still not able to draw S/R-lines is the Stochastic Oscillator. It’ll help you find the support and resistance areas much easier. Try it!

Having to wait a day or two just to get a signal might have already scared away a few you out there. Don’t worry, I’ve checked the lower time frames and it looks like we can pull this off with lower expires as well. There’s only one problem; waiting for a 10+ pip move before we enter could mean disaster if we are trading less than 4 hour expires. I know for myself that most of my trades end somewhere between a few pipettes up to, at best 10 pips away from my target before the trend completely reverses on me. So I wouldn’t want to wait that long before entering. Therefore, the next best thing to do is to wait for a candle to close in the direction you want to trade in. Pay attention that in the picture above, using S/R-lines you can clearly see how previous lows have become resistance for the following high. We are still obeying the rules of the 5×5 strategy, the RSI is below 50 for our three puts and candles are beneath the 5 SMA. As a third rule, I’ve added the S/R-lines you see in the picture above. Plenty of confirmation to enter the trades!

Continue talking about the 5X5 Strategy on our forums!

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