While there are many different strategies that you can use while trading on the stock market, one of the easiest strategies that you can implement on Binomo is trading candle colors.
The main objective when using this strategy is simply to identify a large-bodied candle and trade based on the color. The candle must also be large-bodied because it means that the price momentum is strongly pointing to a specific direction.
In other words, large red candles signify strong downtrends while large green candles signify strong uptrends. If you’re going to implement this strategy to earn money by trading, you should try placing a buy position after a large-bodied green candle closes. This gives you a higher chance of landing a winning position.
To help you understand this strategy better, I’ll give you an example using the EUR/USD currency pair. I’ll be implementing the Martingale money management strategy so that my trades will have better chances of resulting in profit. You’ll also see how trading based on candle colors is a rather low risk strategy that even beginners can do successfully.
Tips for successfully trading candle colors on Binomo
So, you want to use this strategy when trading on Binomo?
The first rule of thumb is to identify the candle you will follow and wait until it closes. The trading position you make next should be based on the color of the candle.
Let’s say I find myself a nice bearish candle. Once it closes, I’ll enter a 5 minute sell position immediately. This is until the next candle closes lower. If the trade loses, then I’ll still enter the same position that the next candle will open at. I’ll keep doing this until I see another candle of the same color.
The second rule is to alternate your trades between the green candles and the red candles. For instance, if I enter a buy position and it results in profit, I’ll stop trading for a while. I’ll wait first until a red candle develops, and then enter a sell position.
Here’s a chart to better explain what I’m talking about.
Trading candle colors: an explanation
In the above example, I waited for a bullish candle and entered a 5 minute “higher” position. I profited from that position, hence the first smiley face. As the next ideal bearish candle comes around, I enter a 5 minute “lower” position. Sadly, it turned out to be a loss, hence the sad face. I then entered another “lower” position, which ended well this time. That means that I profited from the trade, signified by the last smiley face.
For this one, I again waited until a bullish candle started developing. Once it closed, I entered a 5 minute “higher” position, resulting in a profitable trade. Next, as a bearish candle appeared, I entered another trade, but unfortunately, it didn’t turn out the way I expected it to, so it resulted in a loss. However, at the open of the next candle, I immediately entered another “lower” position. In the end, I still profited from that trade.
In the next example, I again waited for a bullish candle to appear before entering a 5 minute “higher” position. It resulted in a profitable trade. After a series of bearish candles that are not large-bodied or ideal, I finally entered a buy position, this time a “lower” one. However, the trade ended in a loss this time.
Candles to avoid when trading candle colors on Binomo
Although you can technically use this strategy on any candle, it still works best on a specific type, namely the ones with a large real body and small or no wicks.
Special candles, on the other hand, should be avoided as much as possible since they’re much harder to predict accurately.
Another tip: you should also always enter trades at the open of the next candle, and all trades should last 5 minutes. All trade entry points are at the open of the next candle. The trades should last 5 minutes.
Using the Martingale money management strategy, I managed to complete 5 trades – 3 wins and 2 losses. Profitable? In a way, yes.
Attached is a table that provides an example of how much profit you can get using this system.
Does the Martingale system work when trading candle colors?
In a way, you can say that trading candles alongside the Martingale system is effective to some degree. However, most of the time, it has little returns.
In my experience, I traded a total of 5 times. The total trade cost was $121. The two trades that were unprofitable lost me a total $23. But since I had three trades that ended up winning, it still earned me $19.
That said, although I did earn a profit using this system, it’s still quite small especially if you compare it to the total amount that I invested just to reach this amount.
In conclusion, even though trading candle colors alongside the Martingale system can be a simple and low-risk trading strategy, it’s still worth noting that results can be rather meager compared to other strategies. In other words, don’t expect very high profits if you’re going to use this strategy.
Now that you know how to use this strategy, you should try it yourself using the free Binomo practice account! You can also learn more about Forex options trading in general by checking out our full Binomo Forex options trading guidebook.
Good luck on your trading journey with Binomo!
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