The SMA Crossover binary options indicator uses one of the most popular technical analysis methods – moving average crossover. This method can be very useful for binary options traders, but it requires careful use in conjunction with other tools. In our review, you'll learn which technical indicator is best suited for this role and how to create a profitable trading strategy based on it.
Content:
- Characteristics
- Installation
- Overview and settings
- SMA Crossover Trading Rules
- Opening a Call Option
- Opening a Put Option
- Conclusion
- Download SMA Crossover
Characteristics of the SMA Crossover Indicator for Binary Options
- Terminal: MetaTrader 4
- Timeframe: M5
- Expiration: 3 candles
- Option Types: Call/Put
- Indicators: Sma-Crossover.ex4, SuperTrend cci (mtf).ex4
- Trading instruments: currency pairs, commodities, cryptocurrencies, stocks
- Trading hours: 7:00-19:00 (GMT+2)
- Recommended brokers: Quotex, Pocket Option, Alpari, Binarium
Installing the SMA Crossover Indicator for Binary Options
The SMA Crossover indicator is installed on the MetaTrader 4 platform using the standard method. To do this, add the indicator to the terminal's root folder: open the "File" menu in MetaTrader 4 and select "Open Data Folder." In the window that opens, navigate to the "MQL4" → "Indicators" folder and move all files there. Templates are installed similarly, but they must be placed in the "templates" folder. For more information on installation, watch our video:
SMA Crossover Binary Options Indicator Review and Settings
The SMA Crossover indicator for binary options will certainly be of interest to traders who use moving averages in technical analysis. This indicator's popularity has remained strong for many years, and for good reason. This simple approach to price forecasting, based on calculating average values over a specified period of time, which came to the binary options market from Forex, has repeatedly proven its effectiveness. Digital contract traders, like their counterparts in the forex market, have appreciated the advantages of using it to identify trend reversals.
The SMA Crossover indicator is based on two simple moving averages with different calculation periods. They should be selected based on the financial instrument and the timeframe you plan to trade.
We found that for the EUR/USD currency pair, the optimal calculation period for the fast moving average is 5, while for the slow moving average, it is 15. The image above shows these parameters of the SMA Crossover indicator and its signals, marked with arrows.
Below are the parameters that determine the distance of the signal arrow from the candle.
You can also enable pop-up messages, configure indicator alerts to be sent to email, and edit the sound alert for these notifications.
Now let's discuss the most interesting part: a signal to buy a call option occurs when the fast moving average crosses the slow moving average from below. This behavior of average prices, as reflected by moving averages, indicates a strengthening bullish trend, making it an excellent opportunity to buy a call option.
On the other hand, a crossover of the fast moving average from top to bottom alerts the trader to selling pressure and the beginning of a correction in the market – an ideal moment to buy a put option.
Trading Rules for the SMA Crossover Binary Options Indicator
The SMA Crossover binary options indicator is an excellent tool for generating a large number of high-quality trading signals without redrawing. However, as we know, there is no holy grail, and even a good tool requires fine-tuning. In our experience, the Super Trend indicator is best suited as an additional filter for SMA Crossover signals. It reacts to changing price trends faster than classic moving averages, meaning it can warn traders earlier that SMA Crossover signals can no longer be trusted.
The Super Trend indicator has a few settings. The most important one is "CCI Period." We used the default value, but you can always change it depending on the asset and the selected timeframe.
By adding the Super Trend indicator to your chart, you can be sure of the trend's direction: buy Call options only when its line turns blue, and when it turns red, buy only Put options.
If you're new to technical analysis methods and want to learn effective techniques, we recommend checking out this collection of articles on our website:
- Technical analysis of binary options
- Technical analysis of cryptocurrencies
- Autochartist: Technical Analysis on the Go
- D. Murphy's book "Intermarket Technical Analysis"
Opening a Call Option
- We are convinced of the presence of a bullish trend – Super Trend in blue.
- A green SMA Crossover arrow has appeared.
- At the opening of a new candle, we buy a Call option.
Opening a Put Option
- We are convinced of the presence of a bullish trend – Super Trend in red.
- A red SMA Crossover arrow has appeared.
- At the opening of a new candle, we buy a Put option.
We recommend choosing an expiration time of 3 candles. We recommend choosing the holding period based on historical data testing results.
Specifics of Using the SMA Crossover Indicator for Binary Options
After testing this indicator, we found that it generates the best trading signals not at the moment of a trend reversal, but rather during its development. The image below shows such an example. Note: the green arrow for buying a call option appears some time after the Super Trend indicator line changes from red to blue.
On the other hand, signals received immediately after a trend reversal are questionable and should be treated with caution. An example of such an unsuccessful signal is shown in the image below.
The disadvantage of such trading signals is that they arise at the end of a price movement, whereas the example above (with the purchase of a Call option) shows a classic entry into the market along the trend after a correction.
Advantages of the SMA Crossover Indicator
The obvious advantages of the SMA Crossover indicator include its ease of setup and use. Even a novice binary options trader can easily use this indicator in their trading. Furthermore, the SMA Crossover is suitable for any asset and timeframe. Furthermore, buy signals for Call and Put options are generated based on mathematical calculations, eliminating the influence of emotions on trading decisions.
Disadvantages of the SMA Crossover Indicator
The SMA Crossover indicator is based on moving averages, which can fail to keep up with rapid market price movements, sometimes resulting in false signals. Please note that this technical indicator should not be used in flat markets or during off-peak financial market hours. The absence of major players and volatility leads to a high number of false signals. Therefore, we recommend using this indicator only during active trading hours and in trending markets.
Conclusion
The SMA Crossover binary options indicator can effectively replace the classic moving averages so beloved by many traders. Its arrow-shaped signals don't clutter the chart and don't repaint, unlike some other technical indicators of this type.
Flexible parameter settings allow binary options traders of all levels to find the optimal combination for their asset and timeframe. You can activate pop-up messages and email notifications, which is convenient when trading on higher timeframes when constant market monitoring is not possible. Before real trading, be sure to practice on a demo account with a reliable broker. We recommend learning how to properly calculate risks and manage capital from the very beginning. We wish everyone successful trading and a favorable trend!
Download the SMA Crossover Indicator
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