In this article we will teach you a simple strategy that you can use to make money with binary options: the M5 trend strategy. For this strategy, we use the fact that the market often moves in trends. That is, the price moves in a certain direction, and continues in that direction (until the trend reverses).

(Would you prefer this information in a video? In this video the strategy is explained and illustrated with charts. The video is in English, and uses the software of broker AnyOption.)

You can take advantage of this fact due to the unique nature of binary options. With binary options you only need to predict the direction of the price. You don't need to know exactly where the price is going or you need to back out. If you predict the direction correctly, you earn money with binary options. It's that simple.

Trends in the M5 chart

To apply this strategy use the M5 chart, that is, the five-minute chart. Each point (or candle) in the graph represents a period of five minutes. The M5 chart is ideally suited to observe short term trends. And since most binary options have a maturity of between 30 minutes and 24 hours, it is the short-term trend that we are most interested in

Choose an underlying asset (e.g. a stock or index) in which you are interested, and open the M5 chart of that asset. Look at the price trend over the past few hours. The price is never just up or just down. It always moves erratically. Yet in the erratic price movement you can often recognize a trend. If you take a careful look at the graph, you will see that despite the volatility, the price has a general direction. This is the trend.

Positions

If the trend is up, then the value is likely to rise further. In this case you would want to buy a call option. If the trend is downward, then you would want to buy a put option to take advantage of further decline. If the trend is sideways, then there is no clear direction to predict. In that case, do not buy any binary option! Focus instead on some other underlying asset where the graph does show a trend.

The chart below illustrates this well. This is a 'candlestick' graph, in which each green or red bar shows movement within the 5 minutes period. In the beginning there is a clear upward trend. Take advantage of this with a call option. Over time, the trend ends and the chart begins to move sideways. That's the time to step out. Almost at the end, the chart indicates an upward movement, but it's still too early to draw conclusions. Wait until the trend is clearer before you make a purchase.

Once you have found a clear trend, then you will want to buy a corresponding option. You have to bear in mind that it is never certain that the trend will continue; It is only a probability. That's why you want to limit your risk. You do that, first, by not putting all your trading capital into a single option. For example, if you have 1,000 pounds on your trading account, then you buy an option for 50 pounds. This way, you have room to be wrong a couple of times without risking too much.

Secondly, you want to spread your risk. You do that by buying different options. For example, look for four different price charts that show a clear trend, and buy an option on all four. It is best when they are all on different types of underlying assets. For example: a Google share, the DAX stock exchange index, the currency pair USD/JPY, and gold. Even if you are wrong about one of the four trends, you still make a nice profit on the other three. (Read also our article about risk management of binary options.)

Would you like to watch all of this in a video? Then click here.