5 minutes compressed spring’s pattern – Strategy for binary options
A very interesting candlesticks pattern is the one of the spring that compresses and then expands. Now let’s try to understand which strategy we can use to exploit this “elastic” behaviour of the price. I developed this trading strategy for binary options which allows us making good use of the compression and expansion of prices, that often happens in a 5 minutes time-frame.
As you can see in Figure 1 (above) the price begins fluctuating, identifying in this way a channel that we bounded with two blue lines. With a little imagination it’s as if the price coming from a downward trend began to advance, forming a spiral with 5 minutes pace. Like in every spring, if the compression is big, the expansion will be greater. Yes, ok! But, in which direction? The direction I consider is the one in which the outlined channel is broken in a direction at the same time in which the Bollinger Band is broken in the same direction. Once the breaking down candlestick has been closed you can invest in the same direction with an expiration from 5 to 20 minutes (so a maximum of 4 candlesticks in 5 minutes).
The second image represents a compression that immediately follows the first one. In this case too, you can observe that we intervened only when we went out of the channel and at the same time of the Bollinger Bands.
In this further image it appears that the strategy seems functioning even upward. Breaking of the upper channel, breaking of upper Bollinger Band and then upward investment.
Here we are still in a downward position in which you can see that the expansion happens downward but then the price seems retesting just on the channel line and then continues expanding, anyway with an expiration of 5 minutes or more, until a maximum of 20 minutes (4 candlesticks), we are always in the money.
Like in all strategies I published I will never stop reminding you that it’s a strategy, so it doesn’t give any assurance of success, such as any other form of trading. So be always very careful when you invest.
This is a pattern I analysed several times, because it’s very frequent for a lot of assets, so I tried to find a strategy to exploit it.
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Recommended broker: 24option which allows operating with 5 minutes (300 seconds) expiration and has a good response time at the opening of the position. If necessary you can also use other brokers, provided that they answer in a satisfying way and allow trading with a maximum expiration in the next 20 minutes.
I hope I gave you another reflection hint to continue studying the markets and become experienced traders about binary options.
If you have some questions… we can discuss them here in the remarks’ section and any suggestion will be welcome!
Good luck to everybody and … nice holidays to those resting at seaside.