This journal entry is dedicated to one of the most profitable trading strategies identified so far – Trend Trading Strategy. All trades described here have been done with real money using trend trading strategy. Each trade is thoroughly explained to make it understandable even for new traders. In other words, this piece is a comprehensive manual that will give you a step-by-step instruction on how to grow your investments. In this article you will find out:

• How to use Trend Trading strategy to make profitable trades
• How to identify trends on the market
• How to spot the right moment to make an investment

Trend Trading strategy summary

Trend trading strategy is one of the easiest yet most efficient strategies for binary options trading due to dual nature of options. It’s only the price direction which matters when it comes to trading binary options. A trader has to predict whether the price will go upwards or downwards. If the prediction is correct, the option expires in the money and the trader is welcome to collect the profit. The returns vary depending on the broker. Personally, I work with Anyoption where the profit margin can go up to 80%. Another great competitive feature of this broker is that even losing trades return a certain percentage of invested money making it easier to manage risks while trading.

The concept of trend trading is about spotting the trend and finding the right moment to purchase a call (upward or sideways trend) or put (downward or sideways trend) option. There are three types of trends:

1. Uptrend
2. Downtrend
3. Sideways

To find out what direction the price is trending on the market, moving average indicator should be used with a period of 50 by closing price. You can easily add the indicator in the charting software of your choice.

With trend trading strategy, it all comes to doing the following simple steps:

1. Identify the trend direction using moving average
2. If the trend is headed upward
   • Draw a trend line by connecting the lower candles
   • Wait until the price hits the trend line at the next valley
   • Purchase CALL option
3. If the trend is headed downward
   • Draw a trend line by connecting the higher candles
   • Wait until the price hits the trend line at the next peak
   • Purchase PUT option
4. If the trend is headed sideways
   • Draw support and resistance levels
   • Wait until the price hits either support or resistance level
   • Purchase CALL option when the price hits support or PUT option when the price hits resistance

And now… when we know how to use the strategy, let’s move on to practice. 

Natural Gas

Once everything is set up, it’s time to start hunting on trends. The first market where a strong upward trend was identified was natural gas market. In that case, moving average changed the direction which signaled that bulls had taken over the market and the trend is upward. Once the trend was identified, I drew a trend line by connecting the lower candles. It was high time to purchase a CALL option because the price had hit the valley. That’s exactly what I did.

Eventually, the trend continued meaning that my prediction was correct and the option expired in the money. Since I invested $50, the return resulted in $87.50 meaning I made $37.50 (75% profit).

Twitter

Another trade was taken with Twitter (TWTR) stock. The price was headed downwards that time which was also indicated by the moving average. Once the trend direction was identified, I drew a downward trend lineby connecting the higher candles. Fortunately, it was the time when the price hit the peak which signaled about purchasing a PUT option. I decided to bet $50 on the fact that the price would go down.

At the end the price moved downwards as it was predicted which resulted in $37.50 profit.

Bank of America

This trade was taken with Bank of America (BAC) stock. The moving average indicated upward trend which was a good opportunity for buying a CALL option. As usual, I plotted an upward trend line to spot the right time when the price would be at the valley. 

Unfortunately, that was the case when the trend reversed and broke the trend line to the opposite direction which resulted in the option expired out of the money. However, I didn’t lose everything that I put into that trade as the broker I work with gives some return even if the prediction was incorrect so I lost $47.50 out of $50 placed. No strategy can guarantee 100% winning rate and trend trading strategy is not an exception.

Coca Cola

The final trade was taken with Coca Cola (KO) stock. This trade describes the third type of trends – sideways trend. When it’s not clear whether the price is headed upwards or downwards, it’s likely you are dealing with a sideways trend which describes a horizontal price movement. In that case, the task was to identify support and resistance levels and plot them on the chart. Once that was done, the only thing to do was to wait when the price hits either support (for CALL option) or resistance (for PUT option) level. In my case, the price hit support line and I purchased a CALL option.

Eventually, my prediction turned out to be correct and the price went upwards and option expired in the money which made me $37.50 in 15 minutes.

Final Thoughts

Trend trading strategy is a powerful instrument for making money trading binary options. The strategy is relatively simple yet comprehensive enough to cover all possible scenarios. The profitability of the strategy is impressive. The good thing about it is that it’s suitable for both new and seasoned traders. You can always reference this article if you forget some aspects of the strategy and I hope it will help you in your trading sessions. If you have any questions or anything to say, feel free to add comments below. Your opinion on the strategy is more than welcome!