Probably all traders know what channels are and why they are needed in trading. But building channels is sometimes difficult, since it is not always clear what the current market situation is and what will happen next. And here the Linear Regression Channel indicator for binary options can come to the rescue.
This indicator automatically builds channels on the chart, dividing the range into two. As a result, we get the support level, resistance level and the 50% level in between.
Description of the indicator for binary options Linear Regression Channel
This indicator is present in many terminals, including a live chart for binary options on our website. But the most convenient option is considered to be indicators for MetaTrader 4 .
Instructions for installing indicators in MetaTrader 4:
The indicator is as simple as possible and needs almost no description. All it uses are support and resistance lines that form a price corridor:
The lines are shifted from each other by a standard deviation, which allows you to get clear price boundaries. This deviation has a value of “2” and cannot be changed, but this does not matter, and it will become clear why later.
The indicator settings include:
- Calculation of levels based on closing prices.
- Number of bars to build the channel.
If everything is clear with the first point, then the second point allows you to build channels of almost any range:
| Channel length 50 bars | Channel length 100 bars | Channel length 150 bars |
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As a result, on the same section of the chart you can get price channels of different widths and directions. To do this, you need to change the “barsToCount” parameter to any other required number of bars. As a result, changing the number of bars for calculation eliminates the need to change the value of the standard deviation.
Trading using the Linear Regression Channel indicator for binary options
This indicator is good because when using it, a trader bases his trading on technical analysis. There are many strategies for binary options that are built on channels, and they all use the same rules, which are very simple. Next, we will look at the three most popular trading methods.
If we talk about expiration for making transactions using this indicator, then you can use 1 candle for quick transactions and small time frames, but if you work on time frames from M30 and higher, then you should consider an expiration equal to 5-10 candles.
Also, long expirations will be more useful when trading and working with the trend (described in more detail in the third method).
Trading using the indicator for binary options Linear Regression Channel for channel breakout
The first most popular way to trade using price channels is their breakdown. The disadvantage of this method is that the indicator redraws the levels when the highs or lows are updated. If this did not happen, the indicator would always have the same values, which would make it inoperative. Therefore, when trading for a breakout, you should mark levels when the price approaches them, and then open a position if the price closes below or above this level:
Please note that a trade is not opened if the candle closes in a range.
Of course, do not forget about the level, which does not change its location:
Breakout of the 50% level is more convenient, since this level is not redrawn.
Trading using the indicator for binary options Linear Regression Channel on rebound
The second most popular method of trading using channels is rebounding from levels.
In this case, we need the price to close in the range when approaching the level, and not above it. A particularly good signal would be a candlestick shadow breaking above the level, but closing below:
Trading using the indicator for binary options Linear Regression Channel according to the current trend
This option differs from the second in that rebound trades are opened only in the direction of the channels. If the channel is directed upward, then only Call options are considered, and for a channel directed downward, Put options are considered. The same applies to the middle channels.
The channel is directed upward:
The channel is directed downwards:
Conclusion
As you can see, the indicator for binary options Linear Regression Channel is universal and allows you to work both with and against the trend, and its settings allow you to set both short-term and long-term channels.
However, do not forget that any trading involves the use of money management and compliance with risks , so it is better to test all options on a demo account, and only after that switch to a real account.
Also, do not forget that one of the foundations of profitable trading is a properly selected broker, which can be found in our rating of binary options brokers .
Download the Linear Regression Channel template and indicator
Can't figure out how this strategy or indicator works? Write about it in the comments to this article, and also subscribe to our YouTube channel WinOptionSignals , where we will definitely answer all your questions in the video.
See also:
The whole truth about the Binarium broker
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