Ping-Pong strategy

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Good afternoon, dear traders.

Today we consider the advanced strategy for binary options based on the method of Spearman rank correlation and determine the trend reversal points. The original strategy was redesigned to work with the binary options such as Touch/No Touch and consists of two key components. The first component is responsible for the rules for the entrance of a given price level, the second describes the rules for the entrance to achieve the level. Each of the strategy components is an independent trading system, each of which can be traded independently.

Features of Ping Pong Strategy

Reference section

 The Ping-Pong Strategy Principles

The strategy is based on the Spearman correlation indicator, more precisely, its more advanced modification. The signal is determined by the intersection of the two correlation indicators with different periods of calculation. The indicator defines the local support and resistance levels and displays them on the chart. Destination entry is shown with the green arrow up (from the support level), or a red arrow down (from the level of resistance). Thus, the indicator exactly determines the direction of the trend and the border of the price channel.

Using the method of Spearman’s rank correlation can find patterns in a particular currency pair. To calculate the correlation two history sections are used, so-called control and calculation sequences.

Extreme indicator chart values (reaching the overbought/oversold zone) say that now the situation is very similar to the situation in the past.

Important to understand!

  • If the option execution price (strike price) is above the level of support or below the resistance level (green and red lines on the chart) – buy Touch option. Instrument price will bounce from the level and continue to move in the direction of the strike price. Ideally, the distance from the strike price level should not exceed 15 points for the M15 timeframe and 30 points for the M30 and H1 timeframes.
  • If the option execution price (strike price) is below the level of support or above the resistance level (green and red lines on the chart) – buy No Touch option. Tool price will bounce the level and continue to move in the opposite direction of the strike price. Ideally, the distance from the level of support/resistance to the strike price should be no less than 30 points.

Rules for buying the “Touch” option

  • Make sure that the option execution price is at a distance of not more than 15-30 points in the direction of movement reversal shown by the arrow;
  • To confirm the signal, Spearman correlation line must be in the overbought or oversold zone;
  • Buy option after the appearance of the signal in the form of arrows on the chart.

Expiry period should be long enough so that price in that time can manage to reach the level. Roughly speaking, the period of the strike must be at least 4 bars on the chart, which will be 60 minutes for the M15 timeframe.

Rules for buying “No-touch” option

  • The price reversed from the key level and the signal appeared in the form of an arrow;
  • The execution price is above the level of resistance or below support levels.

In this case, the expiration time should be as short as possible. That is, you need to make sure that the price for this time does not have time to reach the strike price. 10 minutes expiration will be enough.

Examples

In this case, the execution price is within 30 points from the resistance level, so we trade in the 30 minutes time frame. Upon receiving the signal in the direction of the price, buy the Touch option with 2 hour expiration period.

The execution price is the resistance level, so in the case of reversal signal buy No Touch option with 10 minutes to an hour term of expiration.

Conclusion

To be successful this strategy requires strict calculation and strict following the signals. You should enter the position immediately after the signal, while indicator lines are still in the overbought or oversold. Rank correlation method makes it possible to find the turning points on the chart, but for precise signals working out the strike price shall be within 30 points of resistance or support level. Timing expiry also plays an important role. The greater the expiry time of a “Touch” option, the greater the chance of its execution. For the “No Touch” option everything is exactly opposite – the smaller the period of expiration, the greater the chance of the contract. The “No-touch” option can produce a greater number of successful transactions, but the signals in the direction of reversal will appear more frequently.

Download strategy files

Take care, Michael

ForexTraderPortal.com

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