Binary Option Trading Strategies. Tunneling
Tunneling refers to using data on a chart to create two lines which represent the outer edges of the normal trade for a specific asset. It is known to be a very effective binary options strategy, although you will need to understand a few basic details regarding charts and graphs. With a little practice you will quickly be able to assess the data available and decide when an asset is moving up or down; this will ensure you buy the right option at the right time.
The process is actually very basic; you will need to locate the average figures for the price of your chosen asset and then plot them onto a chart. These are known as the moving averages as they represent the mean price over a period of time. You will need to take the averages from different time slots and plot the timelines next to each other. This will give you the average prices for a variety of different time periods and you will be able to see when they intersect each other. It is effective on all asset types although it is commonly used by those who monitor and purchase options involving currencies.
You will then need to use exponential moving averages in pairs; you will need to draw two lines which represent the 18 and 28 time slots; ideally the lines should be coded to match each other. You will then need to repeat the process with two lines representing the twelve and five time slots. The first pair of lies will create the effect of a tunnel whilst the second set should criss-cross these lines. You may also like to draw a fifth line which represents the twenty first time slot. This is known as the RSI indicator.
The best time to perform a trade is when the lines intersect each other. To decide what kind of trade to place you will need to assess the direction of the inner lines; if they are moving in opposite directions you can purchase an option which is decreasing in value. Likewise, if they are moving towards each other you can assume the price is going up.
The optimum time to place your trade is when the two inner lines cross each other, this will ensure your asset has reached the top of its price and will start to decline; you will need to place a put option to cover the declining price.
The final factor that should also be considered is the movement of the RSI line. If it goes under 50 on your chart then you should see this as the best time to sell your options. When it manages to go over the fifty then you should buy your chosen asset as this will be the best possible opportunity.
Once you have grasped the concept this is actually a relatively simple way of analyzing the market and placing a successful trade. However, initially it can seem very complicated and it is advisable to practice your trades before you purchase one for real. If you have access to a demo account you can also practice using this.
A final tip is to always place your trade when the inner lines cross the tunnel lines or the actually tunnel lines cross. The more you practice the easier this will be to understand and implement.