Another popular Binary Options trading strategy is the Mother Candle Strategy. It is a classic technique for trading, but it just has a brand new name. This strategy is popularly used by Forex traders but it can also be used by binary traders. What is it and how does it work?
The Mother Candle Strategy comes with an attack pattern as what candle chartists say because it has a twist in its inside bar. A simple candlestick analysis is what is relied upon by the strategy. It attempts to capture price breaks led by longer candle movements. It is proposed for multiple time frame usage but it is recommendable for intra-day short term trading.
Price action is the entire basis of this binary options strategy. It makes use of candlestick analysis for signaling and predicting trending asset entries. This is typically made for ten to sixty minute charts but it can be used for any time frame even though even though a ten minute and sixty minute is not recommendable. This is because of a higher market noise level as well as higher false signal chances. The entire system depends on a price/candle pattern that is popular on another name. The pattern comes to like when the prices trend and create a longer candle and then creates another small candle with a body that is inside of the other candle. This first candle created is known as the “mother” while the other one is called the “child.” Other chartists have other names for this based on the smaller candle’s in the shape, size, location, harami and attack pattern. The signal is provided during the mother candle’s body’s 1st close. With this, trades have to be taken to the close’s direction. On the first close out of the mother candles’ body, the signal is then given, and this is when trades have to be taken in the close’s direction. To filter false signals and probable bad trades, a twenty bar moving average as well as support and resistance is recommendable.
WHY IS THIS STRATEGY BAD?
Novice traders can’t exactly appreciate this strategy. It sucks mainly because it is an advance signal that may take years for you to master. When you take a signal off from its candlestick pattern, this signal can have a higher chance of failing especially when other factors are not considered. Resistance and support, market sentiment, and trend can greatly impact on the strategy. The strategy’s authors indicate that you have to use moving averages and resistance and support in order for bad trades to be filtered. The sad part is that the authors did not emphasize about how to use these moving averages. It is a sound strategy and one that can be quite difficult to analyze.
WHY IS THIS STRATEGY GOOD?
It does not completely suck because it is widely used, and many traders consider it useful. Chartists of Old School HLC price calls this pattern as inside bar. Candlestick enthusiasts call it Harami. This signal often leads price reversal and may happen at the primary movement’s bottom or top of a secondary correction of short, long, or near term of importance. This means that it can happen at any probable reversal point. This is why it is very powerful. You can identify a probably harami and a reversal can just be at the corner.
Yes, it is an ideal strategy but it comes with a downside. Novice traders need not use it. There is basically nothing new about it and traders have long been trading using this technique. It has a very basic price action signal or candle stick. If you want to implement this, it can take years for you to perfect. You will have to use trend lines and resistance and support or Fibonacci. You may also have to use moving averages. This signal can be ideally used but it works best when you add an analysis tool to your current strategy.