This Pattern on the GBP/USD Is as Binary as It Gets!

This Pattern on the GBP/USD Is as Binary as It Gets!

When you trade binary options, having good trend-following strategies is critical to achieving consistency. Finding trends to follow can sometimes be hard to do, but there is a pattern that happens quite often, and it is based on the open of the London Exchange at 3am EDT.

This Pattern on the GBP/USD Is as Binary as It Gets!
This Pattern on the GBP/USD Is as Binary as It Gets! Getty Images

If you area really early riser, this can be a great time to capitalize on volatility.

In “The Ultimate Guide to Trading and Investment”Josh Martinez wrote about the London Breakout strategy discussing two key observations:

  1. The Low or High of the daily session often reveals itself between 2am-5am EDT, after the opening of the European Exchange and the London Exchange.
  2. The opposite High or Low tends to reveal itself between 8am-2pm after the opening of the New York Exchange.

Think of it like a see-saw, with the hours of 5-8 being the fulcrum.

This observation is about as binary as it gets. If you can identify a Daily Low that occurred between 2-5am, then the probabilities are in your favor that the Daily High will occur later in that trading day.

Let’s take a look at the week of May 8-12 2017

This Pattern on the GBP/USD Is as Binary as It Gets!

ThinkorSwim workspace prepared by Sean Jantz,


On this hourly chart, you can see 5 consecutive days where this pattern was obvious.

What can you do with that information?

  • Nadex Spreads – If you get up early enough, there is an opportunity to pick up a nice chunk of the early morning move, where the GBP/USD can easily move 50 pips or more.
  • In-The-Money (ITM) Binary Options – If you’ve identified an uptrend or downtrend you can BUY or SELL from a strike price close to where the trend started. Your risk premium is higher, but so is your probability of success.
  • At-The-Money (ATM) Binary Options – If you can lock in at ATM trade early in the trend, then your risk capital is less and your reward potential is higher
  • Out-Of-The-Money (OTM) Binary Options – These trades have a lower probability of success, but also a lower risk premium. If you can catch a trend early, there is an opportunity to capture profit.

Let’s take a closer look at Wednesday, May10:

This Pattern on the GBP/USD Is as Binary as It Gets!

As it’s pretty clear to see, the morning high at 4:30am was never threatened for the rest of the day. If you were awake that early in the morning, you had the opportunity to capture a large chunk of a 50 pip move to the downside with Nadex spreads.

You could have placed a daily (3pm) binary options SELL order from the strike price nearest the daily high. Although your risk premium would likely be higher, the “see-saw” effect keeps the probabilities on your side.

A Word of Caution

  • If you don’t see a trend, or if the market is chopping sideways, then you may want to sit this trade out.
  • UK Economic news is usually released at 4:30. Always check the economic calendar. If there is a high impact news report, it’s best to let the markets digest the news before you trade.
  • Finally, the “see-saw” pattern doesn’t happen all of the time, but it happens quite frequently. Some times the Daily Low and High occur after 8am.

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