Strategy for Trading Gold in Binary Options

Good afternoon, dear Binary options traders!

Investors from all over the world often choose gold (and in some cases, silver) to protect capital in the long term. Inflation, geopolitical influence, and instability of the national currency are the main reasons why they choose this asset as a financial asylum.

However, in recent years the role of gold has changed somewhat, and the mere presence of yellow metal in the investment portfolio no longer gives the same level of safety as before. That is why the speculations on the gold rate have become so popular. Binary options is an excellent platform for fast transactions to earn money on the exchange rate change. Next, we will try to find out how to trade gold in Binary Options and analyze a strategy designed specifically for this tool.

Specificity of trade

The value of gold is usually expressed in US dollars, so the instrument market ticker is XAUUSD. If you look at the historical chart of the rate, it becomes clear why gold has always been considered an excellent tool for hedging risks. Nevertheless, a continuous ten-year increase in value was interrupted in 2011. At the moment, the rate is just below $1300. In this case, the cost of one ounce reached $1800.

In terms of the size of the gold and foreign exchange reserves, the United States maintains an impeccable leadership, Germany takes the second place. Partly for this reason, the main reserve currency is precisely the US dollar, and the euro occupies the second line. But, apart from the vast gold reserves, the USA also has a large number of large international financial corporations, which allows the combined states to exert a significant influence both on the course of gold itself and on the exchange rates of other countries.

Binary options greatly simplify the calculation of risks. Gold is a very volatile instrument, and therefore the target level and the level of loss limitation must be calculated fairly accurately. But, when trading on binary options, only the price direction matters, and not how many points are passed.

Traditional graphical analysis works well on gold. For example, round levels work well, for example, 1100.00, 1200.00, 1300.00, etc. The bounce is not quite accurate, so you should take into account not the level itself, but the zone around it, about 50 points from the top and bottom.

Another advantage of the tool is noticeable and often predictable false breakdowns. For example, here we see a breakdown at 1200.00 level with further confirmation of the closure of the candle behind the level. But, after that, we see variations of the “Morning Star” pattern, which tells us about a possible reversal. Thus, we can quit the transaction that has no potential, or not enter it at all.

Fibo levels work well, the correction almost always corresponds to 61.8% or 38.2%. Together with the round levels, the forecasting of rebounds is greatly simplified. In this example, the correction of two wave levels was completed by 60% of the previous movement. The third wave on the chart ended near the round level of 1300.00, which again confirms the benefit of using both approaches in symbiosis.

Trading strategy

Platform: any
Currency pairs: XAUUSD (Gold)
Timeframe: H1
Expiration time: 60 minutes
Trading time: American session
Recommended Brokers: IQ Options

Gold is traded around the clock, on exchanges around the world, but the main centers are London and Zurich. At 13:00 of GMT time, the trade opens, which you can see on the chart by a sharp increase in volumes.

The essence of the strategy is as follows. At 13:00 GMT time, we open the gold chart and watch the direction of the last hour candle. At this time, London is already open, and the direction of the closed candle will indicate the direction of our deal. That is, if the candle is bearish, buy the Put option. If the candle is bullish, buy the Call option. The expiration time is 1 hour.

An important point is always to pay attention to the appearance of the candle. First, the body of the candle should be a large part of its overall size. Secondly, the bullish candle should close in the upper half of the candle, the bear candle in the lower half. This will be a sign of a stable momentum.

Also, be sure to pay attention to the news, because around the same time they are out on the US dollar, so after entering the position there is a possibility of a strong price shift. If important news are released during the transaction, it is best to either reduce the expiration time to half an hour, or not enter the market at all.

Examples on the chart

If the body of a candle is small and does not have a clearly directed impulse, we are not entering the market. That is, the market itself has not yet chosen the direction of further movement, and we just need prerequisites for the trend formation. You can determine this by the small size of the candle and the big shadows.

Here the signal candle, marked by a vertical line, opened almost at the bottom and closed near its maximum - a sign of a strong upward momentum. Such a candle at the opening of London session is a good sign for the continuation of the movement. Expiration in 1 hour is almost always enough.

If the signal candle is of bearish type, we enter the deal for a downward movement. Put option is opened right after opening the session. The expiration time is the same - 1 hour clock candle.

Conclusion

It is worth taking into account that gold, for the most part, has lost the status of a “quiet harbor”, and already does not give that sense of security that it was earlier. In turn, technical analysis has worked and will work, which allows us to earn money on gold regardless of whether its value is growing or falling.

Regards, Michael

ForexTraderPortal.com