Raphael Binary option strategyThe Raphael binary option strategy is considered an ultra short term trading strategy that is akin to scalping. It is extremely popular among many traders for its simplicity and profitable outcome. Essentially, the strategy calls for a careful observation of the market over three different time frames of decreasing scale. Initially, the trader will observe the market over a one hour time frame chart, then to a 15 minute chart and finally down to a five minute chart. The goal of the observations is to try to discern the current market trend and see where price reversals are likely to occur.
RSI and Stochastic Indicators
The simplicity and easy adoption of the Raphael simple strategy is primarily due to its heavy reliance on the usage of two technical indicators, the RSI and the stochastic indicators. The RSI is used to determine the market trend. If the reading is higher than 50, then the market trend is on the rise. Conversely, if the reading is below 50, this meant the market trend is on the decline. As for the determination of the strength of the trend, this falls back on the stochastic indicator. Generally, the stochastic values should support the trend values as indicated by the RSI. Strong signals are indicated when both the RSI and stochastic values are diverging from the trend as indicated by the hourly chart. It should also be noted that the RSI readings must move accordingly with the market trend and not at the level of the signal line as this will give a false signal.
Once both the RSI and stochastic indicators are diverging from the hourly chart trend, then it is time to focus on the 15 minutes and plot out the support and resistance line. After the support and resistance lines are drawn, the trader should start to look for any signs that the market is reversing. Upon confirmation of market reversal, the trader can now focus on his 5 minute chart to decide the best time to enter and exit the market. Use the stochastic indicator on the 5 minute chart to look for overbought or oversold market conditions. Depending on the direction of the trend, any dip or peak in the value of the stochastic indicator will signal a buy. This observation will hold true until the stochastic value starts to diverge or indicate an overbought market condition.
The Bottom Line
On the whole, the strategy is good as it permits a trader to ride on a larger range of a trend instead of just a small segment midway through the trend reversal. Furthermore, with the use of the RSI and Stochastic indicators, the trader gets to notice the trend forming after major support and resistance lines hence letting the trader have the advantage of a longer window for market entry.