Binary Trading Strategies 3 — Questions and Answers
Question 1: In a news-trading strategy, what should a trader review before an economic release?
- The economic calendar and forecast vs. previous values (Correct answer)
- Only the broker's logo design
- The number of other traders online
- The color of the trading platform
Correct answer: The economic calendar and forecast vs. previous values
Knowing forecast versus prior figures helps anticipate whether the actual result will move price.
Question 2: How does the moving-average crossover strategy generate a CALL signal?
- A shorter MA crosses above a longer MA (Correct answer)
- A shorter MA crosses below a longer MA
- Both MAs flatten completely
- Volume falls to zero
Correct answer: A shorter MA crosses above a longer MA
When the faster moving average crosses above the slower one, it signals bullish momentum for a CALL.
Question 3: What does an RSI reading above 70 typically suggest for a binary trade?
- The asset may be overbought and due for a downward move (Correct answer)
- The asset is strongly oversold
- Volatility has stopped
- The expiry must be extended
Correct answer: The asset may be overbought and due for a downward move
An RSI above 70 indicates overbought conditions, often preceding a price pullback.
Question 4: In a support and resistance strategy, where would a trader most likely place a CALL?
- When price bounces off a strong support level (Correct answer)
- When price breaks far below support
- At a random midpoint
- Only at market close
Correct answer: When price bounces off a strong support level
A bounce off support suggests buyers are stepping in, favoring an upward CALL trade.
Question 5: What is the main goal of a money-management strategy in binary trading?
- To limit risk per trade to a small percentage of capital (Correct answer)
- To bet the entire account on each trade
- To ignore stop limits
- To maximize the number of trades regardless of risk
Correct answer: To limit risk per trade to a small percentage of capital
Sound money management caps the amount risked per trade, preserving capital over time.
Question 6: The Bollinger Bands strategy signals a potential reversal when price does what?
- Touches or pierces the outer band then turns back (Correct answer)
- Stays exactly on the middle band all day
- Moves outside the chart entirely
- Disappears from the screen
Correct answer: Touches or pierces the outer band then turns back
Price touching an outer band often signals an overextension and possible reversion toward the mean.
Question 7: Why is backtesting important before deploying a binary trading strategy live?
- It shows how the strategy would have performed on historical data (Correct answer)
- It guarantees future profits
- It removes all market risk
- It increases the payout rate
Correct answer: It shows how the strategy would have performed on historical data
Backtesting evaluates a strategy against past data to gauge its historical reliability before risking real money.
Binary Trading Strategies 3
In a news-trading strategy, what should a trader review before an economic release?