Getting back in to a routine: Long-term binary plays on EURAUD and GBPAUD

I’ve not posted for a while as I’ve been busy with one family emergency after another.  I’m just starting to get back into my working routine after an eventful couple of months. During this period my trading has been limited to some news trading as part of  ‘The Wallachie Fan’ and some much longer term Binary Option plays.

These two trades are of the latter variety and completed at the end of the last quarter however due to circumstances I’m only getting round to writing about them now.  They’re both head and shoulder plays in AUD.  I find the Binary Options work well for me when:

1. Trading Head and Shoulder patterns on larger time frames (Monthly, Weekly & Daily) as they give me more room to maneuver,

2. Meaning my entry doesn’t have to be pin-point accurate,

3. There’s no margin or overnight costs to factor in and

4. I like the flexibility that I can set both the level, the trade size and the exit date to suits my analysis,

5. Making them pretty much fire and forget trades.

Earlier this year there was Head and Shoulder patterns on the weekly charts across a series of AUD currencies. Whilst many people (including myself) jumped on the AUDUSD  Bullish Head and Shoulders patterns there was also two Bearish patterns on the EURAUD and GBPAUD which I also traded on a longer term Binary play. Lets take a look.

EURAUD

I was lucky with these two trades as I was already watching AUD after the Bullish H&S formed and fired off earlier in March on AUDUSD. It wasn’t till a couple of weeks later that they also fired off against Eur and GBP.

I had a neck line of 1.4980, a high of 1.5828 which gave me a projected target of 1.4132 based on a range of 848 pips from Classical TA description of a Head and Shoulders pattern.  Once the set-up fired off I had a series of ‘No-Touch’ Barrier trades lined up at certain levels above price. My exit date was Friday 27th June (the green vertical line) – just in front of the end of Q2 – and approximately 13 weeks away.  This gave me a natural exit point and also a good R:R on my position.  I’ve found that the longer the time-frame the better the price (no surprise there really).

I also added in a much smaller ‘Touch’ barrier trade at the projected level – but for a much longer period. I find I’m much better at working out where price will ‘No-Touch’ rather than working out a level and time-frame within which price will hit. And that’s why the Binary.com platform suits my longer term style.

GBPAUD

The GBPAUD set up like the AUDUSD and EURAUD however the set-up was nowhere near as nice as the other two currencies (and purists would tell you it’s not a proper H&S pattern) however this didn’t stop me. it actually fired off the week before the EURAUD trade and I only traded this with a smaller position size as I was wary of shorting GBP (its been consistently the Strongest currency on my STAM matrix for most of 2014).

This provides a good insight into why trading these positions with a binary option rather than direct position can work out well.  The neckline was triggered on 18th March on the Daily time-frame and had you taken a direct position you’d have sold in the region of 1.8170. Your stop would probably have been a good 5-700 pips away depending on how you’d trade it.  That’s a sizable Trade Risk to hold.  If you look at the price action for the next 10-13 weeks after an initial drop price just started creeping back up and actually ended up going a good 100 – 150 pips above the entry-level. If you were holding a direct position you’d ave been sat somewhat uncomfortably watching your position lose money…and that’s before margin and overnight costs are included!

The pleasure of the Binary Option is that even though price ended up going sideways from the entry-level the trade was still a confirmed full win when it closed at the end of Jun. Whilst I kept an eye on it I was just able to fire and forget the trade and let it play out. When you’ve had an eventful few weeks and months like I have being able to hold such low-maintenance positions is a god-send.

Admittedly the frequency of opportunity on the weekly charts is much lower – but these days I’m happy with that. If you want to learn more about how I trade Binary Options then drop me a line.

Trade well,

Paul