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Cashed in a $9.50 Binary for $92.50. Nice start to the week

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  1. Saw the pattern of a bullish USDJPY trading gradually higher in successive trading ranges
  2. Bought the 109.64 09:00 binary option for $9.50 at 08:00 just before the dip below the trading range
  3. Was thinking after it dipped I should have waited for the MACD trap and bought it cheaper or bought a slightly lower strike for the same price
  4. Turned out the MACD trap was set much earlier (see arrow) so that thinking was not right
  5. Got the pop I was looking (USDJPY moving to a new higher trading range) and closed the trade at $92.50
  6. Could easily have waited for $100 (another 10 minutes) but my emotions overtook me (still working on that)

Here is how the chart played out:

 

 

 

 

 

 

 

 

 

 

 

 

 

If you would like a word doc with the details of the trade step by step send me an email at jimmy@eurusdtrader.com

The MACD Trap

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I listened to a YouTube video that said the high frequency traders fool the retail traders by “gaming” the MACD. I found this interesting and decided to look into it.

MACD stands for Moving Average Convergence Divergence.

The typical retail trader uses MACD to get “signals” and has little or no idea what the MACD actually is or does.

Here is what makes up the MACD signal:

  1. The MACD LINE
    1. this is the difference between two exponential moving averages (emas); the default emas are 12 and 26
  2. The SIGNAL LINE
  1. This is a 9 period simple moving average of the MACD line

Here is how it works:

  • BUY when the MACD LINE goes above the SIGNAL LINE
  • SELL when the MACD LINE goes below the SIGNAL LINE

Some traders prefer a HISTOGRAM that plots the variance between the MACD LINE and the SIGNAL LINE

Here is how it all looks at the bottom of the chart:

 

 

 

 

 

 

 

 

The “trap” might possibly be the SELL “signal”:

 

 

 

 

 

 

 

 

Followed by apparent “range buying” and then a bullish continuation:

 

 

 

 

 

 

 

 

You can see how the buying went from the bottom of the range to the middle of the range to the top of the range; and then the breakout…