Bazooka Trader Pin Bars

Table of Contents
Why Binary Options? . ................................................................... 2 Choosing the right Binary Options broker: . .................................. 4 Why Bazooka Trader Pin Bars? . .................................................... 8 Introduction to Bazooka Trader Pin Bars strategy . ...................... 9 Support & Resistance: . ................................................................. 9
Triple Top & Triple Bottom . . ................................................................. 11 Triple Top . . . ...................................................................................... 12 Triple Bottom . . . ................................................................................. 13 Conclusion: . . . .................................................................................... 14 Pin Bar: . . . ......................................................................................... 15 Using Pin Bars with Support & Resistance . . . ........................................... 16 Call: . . . .............................................................................................. 16 Put: . . . .............................................................................................. 16 Trend lines and moving averages with Pin Bar . . . ..................................... 17 Fibonacci Retracement Levels with Pin Bar . . . .......................................... 18 Conclusion . . . ..................................................................................... 19

Scalping In Binary Options . ......................................................... 19

What is Scalping? .................................................................................... 19 Other Strategies for binary options trading . ................................................ 21 Using technical indicators to trade Binary Options successfully . ..................... 23 Using MACD and 100SMA in conjunction . .................................................... 24 Using Bollinger Bands and Slow Stochastic in conjunction . ............................ 25 Explanation of technical indicators . ............................................................ 26

Overall conclusion: . ..................................................................... 29

Why Binary Options?

Although Binary Options trading has seen a boom in popularity recently, it has been available since the early part of the 20th century. Financial investment firms and banks have offered them for decades. There were many early proponents of binary options, and the Rothschild family is just one example. The main reason that binary options have exploded in popularity has to do with the Internet. Its easier than ever to track financial markets in order to engage in effective binary options trading. These days, many hedge funds revolve around binary options and use them to earn millions of dollars per year. With that in mind, its clear that binary options arent going away any time soon. Cash-or-nothing options were first permitted by the Securities and Exchange Commission, or SEC, in 2008. The initial request to allow these options was made by the Options Clearing Corporation. Since 2008, binary options have been traded on the American Stock Exchange as European cash-or-nothing binary options. They are also traded on the Chicago Board of Exchange, or CBOE. Binary options are standardized, which means that they can be traded on stock exchanges with continuous quotations.

Binary options trading have become popular amongst traders mainly because of many reasons. 1. Comfort: Its a comfortable method of trading, because the trader doesnt have to think about a lot of strategies and financial reports. All he has to do is just predict the price movement. 2. Lower Risk Before entering a trade, trader has complete idea about the exit, be it a profit or loss. Whereas wrong calculations on traditional trading could take you for a ride on the losing side.

Copyright 2013 Bazooka Trader Pin Bars

3. Choice Of The Underlying Asset One of the benefits of binary options is that it offers a wide range of assets. Assets are the resources whose prices are quoted in any established market, and whose prices vary consistently. Binary options allow one to trade using different assets, which include commodities, stocks, indices, or currencies. It is essential to choose those assets with which one is familiar with, so that one can assess their behaviour in a proper manner. Many traders also analyze news updates when considering the assets to select. The categories of assets can be simplified further, just as currencies, which are a general term, can be seperated as different currency pairs such as the yen to dollar or euro to dollar. One needs to consider current news about distinct assets while choosing them. 4. Wide Selection Of Options For Binary Trading In binary options trading, one needs to estimate the position of the assets price in comparison to the strike price, by the expiry time. If a trader calculates that the value of the asset will increase above the strike price, then the Call option is chosen. The Put option is preferred if a trader considers that the value of the asset will fall below the strike price. This is one of the popular options in binary trading. Digital options also provide many trading options, which are preferred by investors. The concept of a one touch option is quite interesting. Rather than saying if the value will be more or less than the strike price, this trading option requires that the value must touch the strike price within the end of the expiry time. Due to the challenging and exciting nature of this trade, the payout is also considerable.

Copyright 2013 Bazooka Trader Pin Bars

Choosing the right Binary Options broker:

One of the most important investment decisions you'll make has nothing to do with stocks, bonds or mutual funds. This crucial decision is picking a broker. There are dozens of companies offering brokerage services on the internet, and many of them are just as good as or better than traditional, brick-and-mortar businesses, but how to decide which one is best for you? Here are 3 critical factors you'll want to consider:

Availability: Try hitting the company's website at different times throughout the day, especially during peak trading hours. Watch how fast their site loads and check some of the links to ensure there are no technical difficulties. The broker's background: What are others saying about the brokerage? Just as you should do your research before buying a stock, you should find out as much as possible about your broker. Customer service: There is nothing more exasperating than sitting on hold for 20 minutes waiting to get help. Before you open an account, call the company's help desk with a fake question to test how long it takes to get a response.

Copyright 2013 Bazooka Trader Pin Bars

Copyright 2013 Bazooka Trader Pin Bars

(1)

Simple Option

Simple options, calls and puts, give the purchaser the right, but no the obligation, to buy or sell a specific amount of currency at a predetermined rate on or before a specific date.

It provides the buyer with an instrument which ensures against adverse exchange rate movements.

In return for this protection, the buyer pays a price for the option which is known as a premium.

If unfavourable exchange movements occur, the buyer hedging an underlying exposure will exercise his option and be protected at the predetermined rate (strike price).

If favourable exchange rate movement occurs, thee currency option will not be needed and will expire worthless. The hedged buyer will have benefited from the favourable movement and will execute the transaction in the foreign exchange spot market.

A Call Option gives the purchaser the right (but not the obligation) to buy the underlying currency on or before a specified date at a predetermined A Put Option gives the purchaser a right (but not the obligation) to sell the underlying currency on or before a specified date at a predetermined price.

Copyright 2013 Bazooka Trader Pin Bars

An American style option can be exercised on any business day up to the expiration day and time, while a European style option can only be exercised on the expiration date. Factors determining the value of Options: Spot rate - The current price at which a particular security can be bought or sold at a specified time and place Strike price - The price at which a specific derivative contract can be exercised Time to expiry -The latest time until which an options or futures contract is valid. Volatility - A variable in option pricing formulas showing the extent to which the return of the underlying asset will fluctuate between now and the expiration Interest rate - An interest rate option provides a way to manage interest rate risk. If you are a buyer, you get the right to pay (for a maximum interest rate), or to receive (for a minimum interest rate) at a predetermined strike price or interest rate for a set period. If the interest rate goes against you, then the option will compensate. If the interest rate goes in your favour, then the option expires worthless. The option makes payment to compensate for a change.

Copyright 2013 Bazooka Trader Pin Bars

Common Used Terminology: Delta: change in option value with respect to change in spot rate Gamma: change in delta with respect to change in spot rate Theta: change in option value with respect to change in time to expiration Vega: change in option value with respect to change in volatility Rho: change in option value with respect to change in interest rate

Why Bazooka Trader Pin Bars?

Although it might look easy to do binary options trading, its not quite as easy without a proper method to analyze the price movement and predict the outcome. Using a proper method to identify the price movement is significant and helps you monetize the market trend and make profits. This strategy will help you do that by plotting and identifying simple patterns on the chart. This strategy is not restricted but applies to any form of trading and you can use the same patterns to do traditional trading.

Copyright 2013 Bazooka Trader Pin Bars

Introduction to Bazooka Trader Pin Bars strategy

Bazooka Trader S&R strategy is a price action based system. Unlike the regular indicator based systems, this uses price action to decide on the trend. Indicators are mostly lagging which most of the time gives signal after missing the trend, thereby making us catch it halfway and this might not turn out to be the best strategy for many. Using price action methods have been mostly successful, if used in right way, on the right time and the right properties. Bazooka Trader S&R Strategy will help you achieve that by following simple rules. Bazooka Trader S&R strategy as the name indicates is based on the Support and Resistance along with the Pin Bar and Triple Top patterns to identify the breakout and price reversals and ride along the trend.

Introduction
Support & Resistance: Support and Resistance are the lower and higher price level which holds the market into a channel. Support and Resistance are significant on deciding the price movement, since its a direct outcome of the market sentiment. Support and resistance levels often broken (which would indicate a breakout mostly) and new price levels are formed. Understanding these patterns helps one to identify the breakout and price reversals.

Copyright 2013 Bazooka Trader Pin Bars

A simple illustration of S&R

Support: Support is the lower price level for a session which was not broken and indirectly shows the buyers sentiment that the price has reached the market low, which would encourage buyers to start buying. Thereby bringing up the demand and price along with that. Below given image would explain more about identifying the Support level.

Copyright 2013 Bazooka Trader Pin Bars

10

Resistance: Resistance is the vice versa of Support. Its the higher price level and it shows the Sellers sentiment that the price has reached the market high and thereby encouraging them towards selling. Below given image would explain more about identifying Resistance level.

Triple Top & Triple Bottom

The triple top and triple bottom are reversal patterns that are formulated when a security attempts to move past a key level of support or resistance in the direction of the prevailing trend. This chart pattern represents the market's attempt to move a security in a certain direction. After three failed attempts, the buyers (in the case of a top) or sellers (in the case of a bottom) give up, and the opposing group in the market takes a hold of the security, sending it downward (sellers) or upward (buyers).

Copyright 2013 Bazooka Trader Pin Bars

11

Triple Top
This bearish reversal pattern is formed when a security that is trending upward tests a similar level of resistance three times without breaking through. Each time the security tests the resistance level, it falls to a similar area of support. After the third fall to the support level, the pattern is complete when the security falls through the support; the price is then expected to move in a downward trend.

The first step in this pattern is the creation of a new high in an uptrend that is stalled by selling pressure, which forms a level of resistance. The selling pressure causes the price to fall until it finds a level of support, as buyers move back into the security. The buying pressure sends the price back up to the area of resistance the security previously met. Again, the sellers enter the market and send the security back down to the support level. This up-and-down movement is repeated for the third time; but this time the buyers, after failing three times, give up on the security, and the sellers take over. Upon falling through the level of support, the security is expected to trend downward.

Copyright 2013 Bazooka Trader Pin Bars

12

This pattern can be difficult to spot in the early stages as it will initially look like a double-top pattern. The most important thing here is that one waits for the price to move past the level of resistance before entering the security, as the security could actually just end up being range-bound, where it trades between the two levels for some time. In the triple-top formation, each test of resistance at the upper end should be marked with declining volume at each successive peak. And again, when the price breaks below the support level, it should be accompanied by high volume. Once the signal is formed, the price objective is based on the size of the chart pattern or the price distance between the level of resistance and support. This is then deducted from the breakout point.

Triple Bottom
This bullish reversal pattern has all of the same attributes as the triple top but signals a reversal of a downward trend. The triple-bottom pattern illustrates a security that is trading in a downtrend and attempts to fall through a level of support three times, each time moving back to a level of resistance. After the third attempt to push the price lower, the pattern is complete when the price moves above the resistance level and begins trading in an upward trend.

Copyright 2013 Bazooka Trader Pin Bars

13

This pattern begins by setting a new low in a downtrend, which is followed by a rally to a high. This sets up the range of trading for the triple-bottom pattern. After hitting the high, the price again comes under selling pressure, which sends it back down to the previous low. Buyers again move back into the security at this support level, sending the price back up again, usually to the previous high.

This is repeated a third time, but after failing again to move to a new low, the pattern is complete when the security moves above the resistance level to begin trading in an uptrend.

In this pattern, volume plays a role similar to the triple top, declining at each trough as it tests the support level, which is a sign of diminishing selling pressure. Again, volume should be high on a breakout above the resistance level on the completion of the pattern.

Conclusion:
The significance of these two formations is that an established trend has hit a major section of support/resistance, which stops the trend's ability to continue. This is an indication that the buying or selling pressure that is supporting the trend is beginning to weaken. It also is an indication that the opposite pressure is gaining strength.

The chart pattern is signalling that there is a shift in the supply and demand of the security and of the balance between buyers and sellers. When a reversal signal is formed in a triple top, there is a shift from buyers moving the security upward to sellers moving the security downward.

Copyright 2013 Bazooka Trader Pin Bars

14

Pin Bar:
Pin bars are nowadays one of the major factors on price action based trading systems. They show a clear response from the market by avoiding the price to move beyond/below certain level and thereby forming pin bar candle. Most of the time, the rejection is followed by a reverse in the price movement direction on the opposite direction and Pin Bars majorly help in finding the reverse in price movement directions. There are only two types of pin bar we will be using which are Bearish and Bullish pin bars. Bearish pin bar is the one with a long spike, short body and Close below Open. On the other hand Bullish pin bar is the one with a long tail and short body. Below given image would show an example of pin bar pattern.

These Pin Bar patterns play a major role in our strategy. Pin Bar combined with Support & Resistance could help us identify the price movement reversal and thus identifying the trend and trading according to the trend could be yield more profitable trades.

Copyright 2013 Bazooka Trader Pin Bars

15

Using Pin Bars with Support & Resistance

Based on our previous strategy we have to wait for the price to breakout the Support & Resistance level to enter a trade, which might take long time and the number of trades could get reduced drastically. Hence to make use of the time we spend meanwhile, we could look out for the price reversal trends. A pin bar that forms after the price hits an important support or resistance level can be used as a signal to enter the market. When a pin bar forms the trades taken should be in the opposite direction of the tail.

Call:
If the price moves up this forms a pin bar with tall upper tail, then the signal is short.

Put:
If the price moves down then forms a pin bar with tall lower tail, then the signal is long.
Copyright 2013 Bazooka Trader Pin Bars 16

Apart from the above mentioned method of using Pin bar with Support & Resistance. Pin bars can be used with other line methods as shown in the following segments.

Trend lines and moving averages with Pin Bar

Pin bars that form after the price touches a trend line or moving average can be used as signals to enter the market.

Combining Pin Bar with Trend Lines

Combining Pin Bar With Moving Averages

Copyright 2013 Bazooka Trader Pin Bars

17

Fibonacci Retracement Levels with Pin Bar

Pin bars that form after the price touches a Fibonacci retracement level can also be used as signals to enter the market. Combining Pin Bar with Fibonacci Retracement Levels

Copyright 2013 Bazooka Trader Pin Bars

18

Conclusion
Pin bars are often created near extremes in price swing, and they often occur after false breaks. This is why pin bars are traded in the opposite direction of the tail.

Pin bars can be combined with other line studies to generate rading signals. Support and Resistance levels, Fibonacci retracement levels and trend lines can be used together with pin bars to generate trading signals.

Scalping in binary options

Scalping can be a great way for traders to make quick profits by opening multiple trades. When you make use of scalping in the right way and under the right trade set ups, if your market research is correct, binary options trading along with scalping can get you great profits.

What is Scalping? Scalping is defined as a trading strategy that can be used both in forex trading and binary options trading and is one of the most commonly used ways for traders to profit from the market price movements. As you might know, prices in the markets moves by small points known as pips. Sometimes these pips can be as small as 5 decimals. Now imagine a trader who has opened 10 trades on a EURUSD currency pair, which moved 5 pips. Now add the 5 pips times 10 trades, which brings us to a profit of 50 pips made by the trader. Scalping has become so popular that now-a-days most online brokers, especially forex strictly enforce a no scalping policy as such a strategy can be detrimental to a traders success.

Copyright 2013 Bazooka Trader Pin Bars

19

Principles of Scalping Scalping, basically works on the very simple principle of buying low and selling high, but is done at a much faster frequency and volume of trading. From a binary options trading point of view, scalping is not that commonly used due to the way binary options trading works. The moment you open a binary options trade, there isnt much you trader can do, apart from perhaps selling back the option or perhaps closing the trade prematurely. So, does binary options scalping work? The answer is yes and no. For example if you were to trade a EURUSD contract which is presently trading at 1.2358 and were to trade this currency pair by placing a CALL which expires in 45 minutes, the moment the binary option is placed, the trade is locked in, thus giving not much of a chance for the trader to scalp. Now if you compare this to a forex trading, it is different, because the trader can at any time set up their stop losses and take profits. However, if the EURUSD was known to be on a rally and you placed a CALL option on this currency pair just at the right time when a new trend had emerged, then the binary options trader could easily open two or more similar trades and make sure that their profits are maximized accordingly.

Are binary options scalping a safe strategy? Unless you know what you are doing and have sufficient facts to back you up, scalping in binary options can be disastrous. Going back to the previous example if a trader opened three trades on the EURUSD with a CALL option and towards the expiry time the trend reversed, then the losses faced by the trader would be three times as much. However, success with scalping binary options requires a very simple logic. Trading 60 second options is one of the safest bets considering that the options expire in 60 seconds this can be a great way to ride the trend and make profits. Of course, the trader would need to be more cautious as well as quick, given the trends in forex can easily reverse at any given point in time.
Copyright 2013 Bazooka Trader Pin Bars 20

Trading 60 second options offers traders the advantage of limiting their trades to a 60 second period as compared to placing a trade on an option that expires in 15 minutes. The logic with scalping is to make multiple profitable trades. Thus, taking advantage of 60 second options enables traders to basically define their trading period and thus be able to trade either CALL or PUT options accordingly. 60 second options are available with TradeRush who in fact pioneered this type of binary options trading with short expiry times. Of course, there are many more binary options brokers that offer 60 second expiries, but what better a place than TradeRush which actually conceptualized the 60 second expires.

Binary Options Scalping Strategy before you start To conclude, binary options scalping can provide traders a way to make fast profits by opening multiple orders at the same time. However there are some very strict criteria to look into as scalping doesnt work well with all binary options brokers. Here are some pointers: Conduct enough research into the asset that you want to scalp using binary options Keep the expiry times as short as possible in order to profit from the price action When scalping binary options invest small amounts of money instead of putting all your capital into one trade that you want to scalp Since scalping relies heavily on liquidity make sure that you trade during news events which either meet or beat market expectations

Other Strategies for binary options trading

No single binary options strategy will deliver the same results for all who use it as different people use different ways of reading, analyzing, and playing the ever risky financial trading game. This, however, should not deter you from investing in this opportunity and possibly make a considerable return if that is your desire. The primary goal of every
Copyright 2013 Bazooka Trader Pin Bars 21

strategy is to establish and develop a detailed plan of action that you can use to minimize the risks involved in financial trading. Sticking to this plan will promote discipline which is essentially disregarding emotions that may only serve to hinder your progress towards profit. If you wish to invest in binary options, you may find that either a specific trading strategy or a combination of two or more strategies will deliver positive results. The number of Binary Options strategies is almost too many to mention, but we have outlined some of the more important ones that may be applied in most cases:

1. Reversal is the binary options strategy wherein you buy an option contrary to an asset's present trend, especially if the price movement is radically going either up or down. An investor who employs this strategy realizes that the price of an asset will not remain indefinitely at a certain point and may perhaps revert to its original trading value. Reversal takes into account the proven axiom that what goes up must come down and usually at the same speed at which it climbed.

2. The hedging binary options strategy entails safeguarding whatever profit has been made on an asset prior to its maturity, often when there is little time left. An investor will sell an asset to realize his or her present gains in anticipation of any downward price movement. He or she may also retain a portion of the asset and possibly earn more from it if the asset remains in the money all the way up to maturity. The buyer will at the very least get back his or her initial investment along with a little income while leaving the remainder for any last-minute trades. Additional profit can still be realized from the remaining asset but if the opposite is true, any losses will be more than offset by the gains made from the earlier selling before maturity. 3. Double trading is most often used by investors who have a good grasp of what goes on in the financial market. If an investor buys an asset and then sees that it is performing to his or her advantage prior to maturity, he or she may buy more of the same asset as long as the option follows the same movement towards the final price.

Copyright 2013 Bazooka Trader Pin Bars

22

4. Pairing or straddling is a variation of double trading. It refers to buying put and call options that are both in the money. If the price upon maturity is anywhere between the two prices at which you bought the asset, you can still generate a return.

Using technical indicators to trade Binary Options successfully

Technical indicators are mathematical analyses of financial instruments. We can use technical indicators to better understand their behavior. By understanding the behavior of a financial instrument we can predict its movement in the short and even long term, and this can greatly improve our success when trading Binary Options. In the examples provided in this section we will focus on a few of the leading technical indicators: Bollinger Bands, MACD, Stochastic Slow, and Simple Moving Averages (SMAs). But first, in order to understand the power of technical indicators, we must accept the reason that technical indicators work. The simple fact is that technical indicators are successful because of their popularity among traders. The reason for this is that volume generates movement, meaning that the more people trade in a certain direction the more that direction will continue. By trading using these indicators you are essentially trading in the same direction as many other traders. This insight can be very useful when trading short term, especially in Binary Options. In the examples below we will be using combinations of 2 technical indicators for each trade signal. The reason for this is that when one strategy confirms another, it is more likely to be correct. Another way to think of this is that if many traders follow one indicator and many others follow a different indicator, then when both indicators give us a signal at the same time and in the same direction, then many, many traders will trade in that direction, creating momentum and reinforcing that direction.

Copyright 2013 Bazooka Trader Pin Bars

23

Using MACD and 100SMA in conjunction

The chart above is a 1 hour chart of Gold futures, with the price of Gold indicated by the bold black line. We can also see 2 technical indicators, the MACD, shown as verticals lines below the chart, and a 100SMA (simple moving average calculated over 100 data points), shown as a blue line overlaying the chart. For further information on how these indicators are calculated, please refer to the last section Explanation of technical indicators. The 1st trading signal is given by the MACD as it crosses over 0. This is highlighted by the dotted blue line. Many traders use this as a signal that Gold is changing direction. You might be right if you choose at this point to buy a Call Binary Option. However it is much wiser to wait for a confirmation signal, which is a point at which many more traders will enter
Copyright 2013 Bazooka Trader Pin Bars 24

trades and reinforce this direction. The confirmation signal is given by the 2nd technical indicator. This 2nd trade signal occurs where the price of Gold (bold black line) crosses over the 100SMA (blue line). We have also highlighted this crossover with a dotted blue line. At this point many more traders who are using this indicator enter in this direction and reinforce your 1st signal. This is a much safer point to trade a Call Binary Option. The result is that in the short term, prices remain above the 100SMA, increasing your chances of success if you traded a Call Binary Option at the 100SMA crossover.

Using Bollinger Bands and Slow Stochastic in conjunction

The chart above is the same 1 hour chart of Gold futures as in the 1st example. Here we show other popular indicators. When they are used in
Copyright 2013 Bazooka Trader Pin Bars 25

conjunction to confirm each other then usually trading volume is high and the trend will persist. Our 1st indicator is the Bollinger Bands (green lines) overlaying the chart. These green lines show the average price highs and lows within the trading range. When the price of Gold bounces off the bottom Bollinger Band this is our 1st signal. When this 1st signal is confirmed by a 2nd technical indicator this means that even more traders will enter to reinforce the trading direction. Our 2nd trading signal is given by the indicator at the bottom which is the Slow Stochastic. The Slow Stochastic is simply a combination of 2 moving averages of different lengths. When they cross over each other this means that a change has occurred in the direction of the price movement of the financial instrument. The crossover is highlighted above by a dotted blue line. The entry points to trade Call Binary Options are the same as in the 1st example, and the outcome is the same. As a final point, using multiple indicators to confirm each other is common practice amongst advanced traders and has been proven to be a very effective strategy to trade Binary Options successfully. You may choose any combination of technical indicators that you wish. The combination of indicators shown above is for illustrative purposes, and you may find another combination that works better for you.

Explanation of technical indicators

Bollinger Bands Bollinger Bands are a technical analysis tool invented by John Bollinger in the 1980s. Having evolved from the concept of trading bands, Bollinger Bands can be used to measure the highness or lowness of the price relative to previous trades. Bollinger Bands consist of: A middle band being an N-period simple moving average (MA) An upper band at K times an N-period standard deviation above the middle band (MA + K) A lower band at K times an N-period standard deviation below the middle band (MA K )

Copyright 2013 Bazooka Trader Pin Bars

26

Typical values for N and K are 20 and 2, respectively. The default choice for the average is a simple moving average, but other types of averages can be employed as needed. Exponential moving averages are a common second choice. Usually the same period is used for both the middle band and the calculation of standard deviation.

MACD MACD stands for Moving Average Convergence / Divergence, a technical analysis indicator created by Gerald Appel in the late 1970s. It is used to spot changes in the strength, direction, momentum, and duration of a trend in a stock's price. The MACD is a computation of the difference between two exponential moving averages (EMAs) of closing prices. This difference is charted over time, alongside a moving average of the difference. The divergence between the two is shown as a histogram or bar graph. Exponential moving averages highlight recent changes in a stock's price. By comparing EMAs of different periods, the MACD line illustrates changes in the trend of a stock. Then by comparing that difference to an average, an analyst can chart subtle shifts in the stock's trend. Since the MACD is based on moving averages, it is inherently a lagging indicator. As a metric of price trends, the MACD is less useful for stocks that are not trending or are trading erratically. Note that the term "MACD" is used both generally, to refer to the indicator as a whole, and specifically, to the MACD line itself. Simple Moving Average A simple moving average (SMA) is the un-weighted mean of the previous n data points. For example, a 10-day simple moving average of closing price is the mean of the previous 10 days'closing prices. If those prices are

Copyright 2013 Bazooka Trader Pin Bars

27

then the formula is

When calculating successive values, a new value comes into the sum and an old value drops out, meaning a full summation each time is unnecessary.

In technical analysis there are various popular values for n, like 10 days, 40 days, or 200 days. The period selected depends on the kind of movement one is concentrating on, such as short, intermediate, or long term. In any case moving average levels are interpreted as support in a rising market, or resistance in a falling market. In all cases a moving average lags behind the latest data point, simply from the nature of its smoothing. An SMA can lag to an undesirable extent, and can be disproportionately influenced by old data points dropping out of the average. This is addressed by giving extra weight to more recent data points, as in the weighted and exponential moving averages. One characteristic of the SMA is that if the data have a periodic luctuation, then applying an SMA of that period will eliminate that variation (the average always containing one complete cycle). But a perfectly regular cycle is rarely encountered in economics or finance. For a number of applications it is advantageous to avoid the shifting induced by using only 'past' data. Hence a central moving average can be computed, using both 'past' and 'future' data. The 'future' data in this case are not predictions, but merely data obtained after the time at which the average is to be computed.

Copyright 2013 Bazooka Trader Pin Bars

28

Slow Stochastic In technical analysis of securities trading, the stochastics oscillator is a momentum indicator that uses support and resistance levels. Dr. George Lane promoted this indicator in the 1950s. The term stochastic refers to the location of a current price in relation to its price range over a period of time. This method attempts to predict price turning points by comparing the closing price of a security to its price range. The indicator is defined as follows:

where H and L are respectively the highest and the lowest price over the last n periods, and %D = 3 period moving average of %K. In working with %D it is important to remember that there is only one valid signal-a divergence between %D and the security with which you are working.

Overall conclusion:
Whichever binary options strategy you feel will earn you a substantial return, you must have a good understanding of the market and its trends, the willingness to use your available resources wisely, and the discipline to stick to your chosen strategy every time you trade.

Copyright 2013 Bazooka Trader Pin Bars

29