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SignalKING 588.78% $47,635.66 17378 47.6% 316 270 Invest
SignalGold 192.51% $9,625.48 667 59.37% 38 238 Invest
SignalMAX 523.59% $76,046.14 12184 69.74% 169 209 Invest

Option Strategies! Trade with or Against the Trend?

Option Strategies! Trade with or Against the Trend?

In the previous article, we were looking into a martingale-based strategy, and it’s time to work with another one. The option strategy I am going to describe is one of the most popular ones among novices, it’s very amazingly simple and used either at option exchange, or at forex and stock exchange. This strategy doesn’t have the definite author and name, because widely used and called in different ways. But, the base is trend-trading.


1.Trend Theory!
2.How to Do Trend-Trading?
3.Trend-Trading Advantages!
4.Trend-Trading Disadvantages!
5.A Strategy for Novices!

Trend Theory!

Any currency quotation, stocks or metals rate or indices move in a specific direction, which always changes. And the trend is this very direction. There are three kinds of trends: uptrend (a price rises), downtrend (a price falls) and flat (a price doesn’t change). Surely, never a one asset have a defined direction, that’s why the trend is just a general tendency of movement, and it always has different corrections and bounces.

Traditionally, trends are looked for in long-term charts (longer than 1 hour), though, it’s not like that at option exchange. Considering the fact most traders buy short-term options (less than minute), they search trends in minute and 5-minute charts, that’s why they change several tens of times a day. However, a trend is a relative term, and we can see downtrend in an hour-chart, but uptrend in a minute-chart. Then, experienced traders realize that uptrend in the minute timeframe is a correction from the main one in the hour-chart. If you use short-term trading, i.e. buying 30-second options, you should take minute-chart tendency into consideration; and if you use long-term trading, holding the order longer than half-hour, then you must pay attention only to hour trend.

How do traders use trends? For experienced, tendency is the essential part of a trading strategy, that they concern looking for and bolting out signals for buying and selling; as for novices they often use only one trend for rate predicting. Surely, these strategies give less profits, but they are comprehensive and thus, so popular. Usually, a trader buys an asset then uptrend is defined, and sells when sees downtrend. It’s quite logic, but not always working. Nevertheless, this option strategy exists and we’ll talk about it in details further.

How to Do Trend-Trading?

Firstly, opentwocharts. Whatwillyouopendependsonoptionsyouchoose. If you choose a 60-second options, open a minute and 5-minute chart. You’ll look for a trend in a 5-minute chart, tracking the price behavior and your bet in a minute chart. For estimating a trend, just use a straight line. Experienced traders can do this in a moment, just after a look at the chart, but if you can’t – build two straight lines. One of them will go through maximums of the chart, the second – through minimums. And if this canal is going up – it’s uptrend; down – downtrend. And if it has no direction – it’s a flat.


After estimating the trend, build a trend line (this straight line). At uptrend it’s built at minimums, at downtrend – at maximums. At flat two horizontal lines are built, creating a canal of a price. Usually, traders don’t use flats, waiting until sides of such a canal will be broken. You can see how it looks like in pictures of this article.

When all preparations are over, you can start trading. Pay attention to the chart when your trend is estimated, and once the price reaches the trend line, enter the market toward the trend. For example, you’ve built a trend line at minimums of the 5-minute chart. As the rate reaches this line because of the correction, buy an call-option.

If your bet fails and the price breaks the trend line, wait and look whether the trend will change back.

Trend-Trading Advantages!

  1. Any novice understanding what the trend is and how to work with it, can use this strategy. One doesn’t need to study the indicators’ working algorithm, find technical analysis figures in the chart and realize laws of the financial market. All you need is to estimate the trend – every trader is able to do this. Most newbies can visually estimate the tendency at once - it’s not that difficult.
  2. You don’t have to use multitude of indicators, conflicting with each other sometimes. You just work with one indicator – the trend. So, this strategy is amazingly simple and convenient.trend-trading-33


  1. Starting trading with this strategy, you have an opportunity to combine it with other, more complexed strategies. You can download an indicator, trade with news, look for non-indicator analysis figures, etc. You’ll have just one rule – trade with the trend, and if some indicator says to buy during downtrend, miss this signal.

Trend-Trading Disadvantages!

  1. Anytrendwillchangeandneveraonecanbeeternal. The longer the trend is, the more probable is its change soon, or a flat. Think you’ll be able to gain enough before the trend changes? Probably, but don’t forget you can’t estimate the tendency once it starts. A price must go in some direction for a while, until you realize that is not a correction, but a new trend. And then, it can be so that you’ll buy an asset only when a new trend will change to the opposite.
  2. One can’t say for sure whether the rate will bounce off your trend line. Sometimes, the price breaks it, but then returns to the canal. For example, you can buy a 60-second option, but your bet won’t work due to the correction. But you’ll suppose if the rate breaks the line, a new trend is to appear. Then, you buy the opposite option, but a minute later it turns that the trend stay still – and you lose both bets. So, don’t place a bet toward the trend until you are sure that the trend has fully changed.

A Strategy for Novices


As I’ve already mentioned, only newbies use this strategy, as they can’t work with more difficult ones. Trend-trading is very simple, but not always that profitable, so I recommend using it at a demo-account for practice. And only when you’ll create or study an advanced strategy, start trading with real money.


For the conclusion, I will add this option strategy can be used only combined with other tools. If you use it alone, you’re likely to lose – it’s especially about novices unable to estimate a trend sometimes.


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Technical Summary

Timeframe 2018-03-19 14:08:11 GMT
1.2321 +0.0031 (+0.25%)
Summary Strong Buy
Moving Averages: Buy (12) Sell (0)
Indicators: Buy (7) Sell (0)
EUR/USD 1.2321 Strong Buy
EUR/RUB 71.3505 Strong Buy
USD/RUB 57.9210 Strong Sell
GBP/USD 1.4061 Strong Buy
USD/JPY 106.13 Neutral
EUR/JPY 130.76 Strong Buy
AUD/USD 0.7709 Strong Buy
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