Short time frames feature a very unique market environment that requires special strategies. This article is dedicated to the strategies that work especially well with short time frames.
General thoughts on strategies for short time frames
In short time frames, you see a very zoomed in picture of the market. When one of your candlestick is only representing 30 seconds of market action, it is hard to find long lasting trends. Fundamental factors do not influence the market. Instead, market movements are erratic and random.
This is due to the fact that the market rises and falls every time someone want to buy or sell an asset. Whether more people will try to buy or sell over the next few weeks is somewhat predictable, but there is no way of knowing whether more people will buy or sell over the next few seconds.
To become a successful binary options trader, you should not try to predict what you cannot predict. On short time frames, this is a lot. Therefore, you have to change your approach to trading. Instead of trying to predict whether an asset will rise or fall, you should use a more gambling type strategy.
With this kind of strategy, you are not trying to predict what will happen. Much like in poker, where you can almost never be certain to win a hand, you are working with probabilities. You know that you might lose the trade you are about to make, but you also know that, if you make this trade 100 times, you will have more money than you started with.
Here are a couple of strategies that help you accomplish this goal:
Trading boundary options based on volatility indicators
Boundary options are the ideal asset for short time frames, because they do not require you to predict which direction the market will move in. All you need to predict is whether the market will move far enough. That is perfect, because that is what volatility indicators are for.
Volatility indicators such as the average true range tell you how far the market has moved on average over the last few periods. You can use this knowledge to predict how far the market can move until the boundary option your broker offers you will expire. From there, you can estimate whether the market has a realistic chance of reaching the target price or not. If it has, invest. If it has not, do not invest. Some traders use a fixed ratio of volatility to distance of target price to make this judgment, others evaluate each market situation individually.
Trading 60 seconds options
If you want to trade the shortest time frames possible, you need to use 60 seconds options. 60 seconds options are a special form of high / low options with the incredibly short expiration time of only 60 seconds. Some brokers also offer 30 seconds options and 120 seconds options. Those follow the same rules.
Finding a suitable strategy for 60 seconds options is hard. They require you to predict whether the market will rise or fall over merely a few seconds, which is exactly what you should try to avoid. Under normal market conditions, making this prediction is almost impossible.
To trade 60 seconds options successfully, you need to find special market conditions. Those conditions are created when important news hit the market, or when the market completes a formation from technical analysis. Then, many traders invest in the same direction and create a breakout. You can use this breakout to invest in a 60 seconds option. Get in while the market is hot, take he first part of the movement, and get out. 60 seconds options are perfect for this kind of strategy.
To find ideal trading opportunities, you need to monitor the market carefully and find spots where breakouts will happen in advance. To stay on top of news that can influence the market, some brokers such as Redwood Options or Cherrytrade offer daily updates on news and events that will influence the market.