Traders use many different trading strategies that allow them to identify the best points to enter and exit their transactions. Some methods are based on candlestick patterns and some on indicators. The one I will present today joins the RSI, the EMA and the engulfing pattern.
Setting up the chart
You must be logged in to your IQ Option account. Today's strategy gives the best results in the markets with high volatility. Take it into account when choosing the asset. Set the chart timeframe for 1-minute.
We will use two indicators in this strategy, the Relative Strength Index and the Exponential Moving Average. The RSI will be used to identify the medium-term trend. The EMA serves as a long-term trend filter.
Click on the Chart Analysis icon and find the RSI indicator. Leave the default settings. Then find the EMA and add it to your chart. Change its period to 200. You can see on the above chart that my RSI has got just one horizontal line at the level of 50. How I did that? Simple. I set the Overbought level at 50. Then I went to colour settings and made the Oversold level transparent changing its opacity. This way I have an RSI indicator window with only one horizontal line I am interested in.
On the IQ Option platform, you have the possibility to save the configurations. This is very convenient when you use a strategy often. Next time you will just have to find a ready template instead of adding all needed indicators. Simply write the name you want this particular template to be called and click Save.
The strategy is used on the chart with a 1-minute candlestick period set. You should, however, keep the position open for 5 minutes. The assumption is that the price will fall or rise within 5 minutes from the signal received. So set the expiration time for 5 minutes for your binary option.
Trading binary options with the RSI + EMA + engulfing pattern strategy
Trading binary options with the strategy that combines the RSI, the EMA and the engulfing pattern is not very complicated. It requires you to follow a few simple rules and to act as soon as you get a signal to open the transaction.
Opening short positions with the RSI + EMA + engulfing pattern strategy
The first thing is to observe the EMA200 line. The price bars should develop beneath it which indicates there is a downtrend.
Next, look at the RSI window. There is a horizontal line with a value of 50. The indicator should run below this line.
With these two conditions met, wait for the bearish engulfing pattern to appear. The body of the bearish candle should engulf the body of the former bar. When you notice such a pattern, open a short position right when the next candle begins to develop.
Your trade should last for 5 minutes.
Opening long positions with the RSI + EMA + engulfing pattern strategy
When you plan on opening a long position, there should be an uptrend in the market. To ensure this is the case, check where the candles are developing in relation to the EMA200 line. You are looking for a situation when the price is above the EMA200.
Now, check the RSI window. The indicator's line should move above the value of 50.
The last thing you are waiting for is the appearance of the bullish engulfing pattern. The pattern is valid when the body of the bullish candle covers the body of the previous price bar. Open the long trade immediately after the signal at the opening of the next candle. Hold the position opened for a duration of 5 minutes.
The strategy that joins the EMA, the RSI and the engulfing candlestick pattern is quite easy to use. You identify the trend with the help of the EMA200, then assess the price momentum with the RSI and wait for the trigger which is the engulfing pattern. You should observe the chart carefully and enter the trade right after the occurrence of the candlestick pattern. This will give the best results.
We are using the EMA200 here to identify the trend. We assume there is a downtrend when the price closes below it and the uptrend when the price closes above the EMA line. But as the price frequently consolidates around the Exponential Moving Average, you may wish to adjust these criteria a little bit. You may, for example, rely on 5 consecutive candles. So you will identify the downtrend when the last 5 candles were below the EMA200 and the uptrend when the last 5 candles were above the indicator's line.
You may also experiment with different trade duration. Maybe 4 minutes will work better for your profits. Or maybe 3?
Whatever you choose, trade in the IQ Option demo account first. You will not risk your own money but you will get the time necessary to try different settings and to find out what brings you the best results.
Have you ever used the strategy that combines the RSI, the EMA and the engulfing candlestick pattern to trade binary options? Share your results with us in the comments section which you will find further down the site.
Best of luck!
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