Options trading strategy for MA and RSI

Ted Capwell

The Binomo trading platform offers an assortment of the 5 most popular indicators. The choice is not very big, but it is sufficient enough to enable traders to trade on a variety of strategies. It also includes the most popular tools. This article will provide a review of a trading strategy that works with two indicators – the Moving Average and the RSI (Relative Strength Index), which will give us a confirmation signal.

A brief overview of trading instruments

The Moving Average is the main indicator, and it is widely used for technical market analysis. It is a line that, in general, repeats the movements of price formations on the chart, and at the same time it smooths out insignificant price fluctuations. As a result, the trader sees a picture showing the main trends on the market. Determining the direction of the current trend is simple and easy to see when you look at the chart. Therefore, the main value of moving averages is the capability of recognizing moments of convergence and divergence of lines with different periods, which makes it possible to predict the beginning and end of trends with high accuracy.

The RSI was developed 40 years ago, and it is a tool designed to determine the beginning and end of trends, as well as their strength. It works on the principle of oscillators. It is based on SMMA, which differs from other types of MA in its mathematical formula for calculating the smoothing constant. The scope of the indicator is very broad – it is used both by traders on short-term markets and on stock and currency exchanges.

Configuring the trading terminal

We add two indicators. First, the Moving Average with a period of 8 (all other parameters are by default). And secondly, the Relative Strength Index. We will use the RSI as a filter which will show the potential strength of the emerging trend. Therefore, we set a long period of 30. We also remove the overbought and oversold zones from the window, setting their levels to 0 and 100.

Configuring the trading terminal

Above is an example of the correct settings of the parameters for the RSI indicator.

Signal for options “Up”

We should open a trade on an increase when the rate of price growth begins to outpace the MA. This is manifested on the chart by the candles breaking through the line from below and exiting above it. The option is acquired immediately after the closing point (not the shadow) of the growing candle is above the moving average.

The Relative Strength Index will help us distinguish a false breakdown from a growing trend. Due to its large period, it shows only real price trends that have sufficient potential. Entering the market is allowed only if the RSI line shows growth. And it should last at least 2 candles, and the more the better.

Signal for options "Up"

Signal for options “Down”

The basic principle of trading on the strategy is described above, so we will not repeat it. The rules for buying an option “Down” are similar: a downward candlestick must break through the moving with a period of 8, while the RSI must show a downward trend for a minimum of the last 2 candles. An example is shown in the picture below.

Signal for options "Down"

Trading rules for the strategy

The duration for transactions varies from 2 to 5 candles on the chart. When selecting expiration terms, you should take into account the time frame of the chart and the general volatility of the market. When trading on strongly pronounced trends, the duration of options should be reduced, and if the trend is weak, increased.


An example of real trading on the MA and RSI

For clarity, we will check the effectiveness of this strategy in the “field conditions,” so to speak, of real trading. So, open the Binomo platform and set up the chart. We set the time frame to 15 seconds and the expiration at 1 minute. The CRYPTO IDX asset is optimally suited for short-term trading. We also add the necessary set of indicators with the required parameters.


An example of real trading on the MA and RSI


The signal is evident on the chart, so we buy the “Down” option for 60 seconds. The volume of our investment was $10, which is about 3% of our account, so we are not breaking the rules of money management.


The CRYPTO IDX asset


The term expires and we get our profit. The volatility of the market is quite low, in fact it is practically flat, slightly resembling an uptrend. This is clearly seen from the Relative Strength Index – the line showed very slow growth. However, in order to successfully close the operation with a profit, one point is actually enough.


“General Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.”