How Do You Trade a 5-Minute Timeframe?

As we know, binary options allow users to choose an extremely small time frame to conduct their trade. The time limit can be set to as low as 2 minutes. Users are even allowed to end their trade without reaching the time limit. This allows traders to take advantage of the significant volatility in their desired markets. In this article, we will be going over how 5-minute binary trading works, 5-minute binary trading strategies, and the best indicators for 5 minute binary options strategy.

Strategies

5-minute binary options trading can land you generous profits if you choose the correct strategies. Some of the most popular strategies are enlisted below.

CandleStick Strategy

Traders study market patterns using candlestick charts. Candlestick charts are ideal for studying patterns and price direction in volatile markets. This strategy assists traders in determining the market’s current emphasis. In candlestick charts, daily signals are stronger than hourly signals. Adopt a broad viewpoint to understand the market in which you wish to invest.

Momentum Strategy

Another incredibly effective strategy widely practiced by traders is the Momentum or Swing strategy. Momentum is defined as the force required to move the price of an asset in the market. 

It measures the strength of a particular trend. It takes the number of traders and the amount invested in a particular asset into account. Once a trend gains momentum, it is most likely to swing in that direction for a particular period.

However, once the momentum or market price goes too far, it swings in the opposite direction to create a balance. Now, it is for the user to predict when the swing is going to take place and invest accordingly. It is most likely for them to sell their assets while the momentum is rising, and buy them when the swing takes place. 

Pivot Strategy

The pivot Strategy involves the pivot points of price trends of a particular asset in the market. This strategy is considered risky, as the points at which the trend is considered to reverse or change direction are solely determined by analyzing previous trends. This strategy indicates pivot points of price trends in a market and allows you to place your trade accordingly. 

For example, if you want to trade in bitcoin and the charts are reaching the pivot point, and it is expected to go low then the current price is considered to be the peak, so it is likely for you to immediately sell.

Indicators

Another significant factor that can contribute to a raise in profits is indicators. You can use multiple indicators complementing best to your acquired strategy to boost the amount you generate. A few of them are enlisted below:

Bollinger Bands

A Bollinger Band indicator shows the volatility of your preferred asset and in turn helps you make an informed decision. The indicator appears in a bubble form around the price line on the chart indicating the trends of the asset you’re trading in. Hereby, a range is created where the upper and lower boundaries are standard deviations from the moving average.

A thinner bubble indicates lesser volatility in the market. Bollinger bands can also indicate when an asset is being oversold or overbought in the market. Precisely, they’re one of the best indicators to acquire while making an effective trade.

Moving Average Convergence Divergence (MACD)

An MACD indicator provides a mode of quantifying the momentum of the price trends of your desired asset. MACD uses two moving average lines created by referring to historical data trends to indicate when conditions are favorable for you to place your trade.

An interception between the two moving lines indicates the possible increase or decrease in the asset’s value. Also, the further apart the two lines are, the stronger the signal to trade.

Moving Averages

Moving Averages is a type of indicator which confirms a particular trend by referring to previous price patterns. They are known as moving averages as the data is continually updated, following the change in prices. There are mainly two types of moving averages indicators, namely the following:

1. Simple Moving Averages

SMA is the simplest and just provides the mean average of the available figures. These figures are precisely the closing values of past trends, giving you an average that relies on past data.

2. Exponential Moving Figures

EMA also relies on historical data but gives more importance to the most recent figures. It accounts for a higher percentage of the average. For traders interested in short-term contracts EMA is the most relevant.

Conclusion

The most common trading strategies are the candlestick strategy, the momentum approach, and the pivot technique. The best indicators are Bollinger bands, MACD, and moving averages. These strategies and indicators are beneficial; but, a thorough awareness of trends and meticulous analysis of your activities are critical.