Channel Bounce – Binary Options Strategy

This is a binary options strategy based on trend line channels. Channels are simply parallel trend lines that may be horizontal or diagonal in orientation. For trading purposes, we mostly consider channels as diagonally oriented trend lines. These trend lines act as support and resistance areas explained in the Support & Resistance article.

These diagonal trend lines provide a a solid base which a trader can use to apply High/Low as well as Touch/No Touch options.

Lets discuss this strategy using the 5 min EUR/USD chart below.

5 min EUR/USD chart

This channel is drawn on the 5min time frame. I find it much easier to spot, then on higher time frames, but will also be effective on the 15min time frame. Applying this is as easy as using your trend line drawing tool on your preferred charting software. To draw this channel you need to spot 2 or more Points at the top as well as the bottom of the channel that form a up or downwards channel. In some cases it might be a a range channel with no significant trend to it. Please note it will never match up perfect.

Applying the Channel Bounce Strategy

Place a High/Call trade option when prices touches the bottom of the channel and Low/Put when it touches the top of the channel. We can also refer to it as bounces within a channel. A rule of thumb is to wait till the candle closes before entering the trade. Price may close a few pips outside the channel, providing you with a better entry. Patience is always the key to using a strategy. Another rule I follow is to only take 4 trades in such a trend as price will break it sooner or later. Greed is the failure to any trader’s success! Touches can be applied in the same way by taking a No Touch “down” at the bottom of the channel and a No Touch “up” at the top of the channel. Allow a 6 pip spread when using the no touch option to be on the safe side.