Skip to main content

Retro Trading Strategy

There is nothing new under the Sun. The fashion just repeats patterns and styles with some transformations. Retro is always in fashion because it was used and proved its value. From our experience, mean reversion strategies tend to be the most profitable. One of the reasons for that is that the market moves sideways more of the time than it trends. Even when it trends, it moves in waves that often oscillate around its moving average.

Binary trading can be very profitable if done correctly. Unlike traditional forex trading, binary options trading is much simpler and quicker to understand. With this type of investment, it is easy to make a lot of money in a very short time, but it is also easy to lose a lot of money over the same short period.

The Retro trading strategy is based on two popular indicators used everywhere in financial world from the stock exchanges to bank analysis. Every trader is familiar with Stochastic and Bollinger Bands. Bollinger Bands can be used in combination with different indicators, like RSI, as well as support and resistance, moving averages, and any other research tools that may support your analysis.

You can find both tools are present in the basic functionality of the Pocket Option broker.

Basics of the Retro Trading Strategy

Well, as you probably guessed the system employs an indicator and an oscillator. A perfect combination for a maximum effect. In addition, Retro Strategy is carried out on the lower timeframes, and the signals to enter the transaction occur quite often, which, if you follow the rules of money management allows you to get a stable and high income.

Let us do the settings before we start trading. It is recommended to use currency pairs as an asset. Choose the Japanese candlesticks or bars as a chart.

The timeframe should not exceed 5 minutes. Let us reiterate that the works well on the lower timeframes, so do not use it for timeframes higher than M5.

We need to set up Bollinger Bands as a price channel. Leave the default settings for the Bollinger Bands, which are preset in the Pocket Option terminal.

Stochastic should be adjusted in such a way that it better reacts to market changes, because trading is conducted on the lower timeframes. For this purpose, the parameters of fast and slow lines, as well as deceleration should be set to 5, 3 and 3 respectively.

How to trade with Retro Strategy

We agreed to use the Bollinger Bands as a price channel and therefore, we will pay attention to the breakdown of its lower or upper boundaries. A breakout is a situation when the candle closed outside the price channel. The Stochastic Oscillator seeks to find oversold and overbought zones by incorporating the highs and lows using a normalization formula: An overbought level is an area where the market is perceived to be extremely bullish and is bound to consolidate. An oversold level is an area where market is perceived to be extremely bearish and is bound to bounce. Hence, the Stochastic Oscillator is a contrarian indicator that seeks to signal reactions of extreme movements.

A trend change is considered to have taken place when the fast signal line leaves one of the “over” zones.

Generally, traders look to place a buy trade when an instrument is oversold. A buy signal is often given when the stochastic indicator has been below 20 and then rises above 20. In contrast, traders look to place a sell trade when an instrument is overbought.

The Call Option should be purchased when the candle has broken the lower border of the price channel, the stochastic indicator has been below 20 and then rises above 20.

The Put Option should be done when the candle breaks the upper border of the price channel and the Stochastic leaves the overbought zone.

The expiry time for trading on M5 should be 15 minutes.

The retro trading system combined two traditional tools: the Stochastic Oscillator and the Bollinger Bands. This combination gives traders a timely signal for trading with high probability of profit. The system described in this article is called “Retro” for a reason. It was successfully used by traders on the stock, commodity and currency markets.

Leave a Reply

Your email address will not be published. Required fields are marked *