Using Fibonacci Time Zones Tool in Binary Options

Using Fibonacci Time Zones Tool in Binary Options

Submitted by adil on Thu, 05/22/2014 - 19:26

Using the Fibonacci Time Zones Tool

Fibonacci Time Zone Tool is based on Fibonacci ratios. This tool is based upon reversal strategy, which makes it best suited to be used with Call/Put trading strategy. Following steps are involved in using this strategy for binary option trading:

Correctly draw the Fibonacci Time Zone Chart: This is the first and most important step in this method. A slightest mistake in the chart will cost you everything because all the next steps depend on this chart. The Fibonacci ratios are calculated by adding two consecutive numbers to get the third number.

The Time Zone chart is drawn according to the trend of the asset. It can be drawn from swing high to low and vice-versa. The vertical lines to represent time zones will be automatically drawn by the indictor software according to Fibonacci ratios. At first the lines will be clustered, but will spread out as the ratio number increases.

Understanding what the vertical lines tell: The plotted vertical lines are the potential reversal points that show most favorable time to make trades. Most experts and analysts advise to ignore the first 5 vertical lines, just because they are usually very close. But using a long term chart, such as a daily chart can enable you to utilize even the first five lines to make successful trades.

Creating a trading strategy based on the chart information: We are going to use a candlestick chart with MACD indicator to accompany Fibonacci Time Zone tool to find when the best time for placing CALL/PUT contracts is. The following strategy is best when used with a 4 hour chart.

Call Trade: Find the vertical Fibonacci chart line where MACD indicator is blue, once you find such a line, make a horizontal line from the lower end of the candle present on that vertical line, and stretch this horizontal line until the next vertical Fibonacci chart line. See if the trend moves from up to down and bounces back up after hitting the horizontal line in between the two vertical lines. If the bounce happens and MACD indicator is blue at the same time, place a CALL contract with an expiry time of 8-hours.

Put Trade: Find the vertical Fibonacci chart line where MACD indicator is red, make a horizontal line from the upper end of the candle present on that vertical line, and stretch this horizontal line until the next vertical Fibonacci chart line. See if the trend moves from down to up and bounces back down after hitting the horizontal line in between the two vertical lines. If the bounce happens and MACD indicator is red at the same time, place a PUT contract with an expiry time of 8-hours.

It is important to understand that using only Fibonacci Time Zone tool is not a guarantee of success; every trader must use this tool with other indicators available for technical analysis. Using candlestick chart and MACD indicator as described above can help considerably in making sure the time is best for trading.