Boom 500 is one of the synthetic trading assets under the Deriv.com (formerly called Binary.com) platform; the other being Boom 1000. Boom 500 differs from its complementary pair (Boom 1000) in that the market has a tendency of a boom spike for every 500 tick it makes.
Trading Boom 500 is a worthwhile adventure which has left many traders in amazement. For some traders, the market is termed the ‘market of the poor’ since its leverage rate permit traders to use 0.2 (the default lot size offered by Deriv.com) for trades with an equity that is as low as $5; a feature that does not sail through in other Boom and Crash markets.
To other traders, the market is as unpredictable as the other Boom and Crash markets. The reason being that, the regular boom spikes leaves traders confused as to which strategy could work perfectly on it. After series of trials with different strategies, they end up wearied due to either consistent loss of money or a slow growth process. If this is the challenge you encounter when trading Boom 500, then, this article is for you.
First, I need you to understand that forex is a market with high volatility index. Hence, a single trader cannot determine the direction of the market.
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You cannot determine the direction of the market. What I mean is, no trader can comfortably say, at this point, a boom spike will take place. That is why, a particular strategy on how to catch the boom spikes will work today and fail by tomorrow even when all indications are in place. At the other end, no trader can also say he/she knows how long the market will sell.
This is why focusing on selling those bearish candles can offer a temporary solution but appears ineffective in the long run owing to the fact that focusing on selling the bearish candles always leave traders with using either outrageous lot sizes per trade or multiple positions to trade. This makes traders have open trades of many positions which, at the end of each trading day, may result in more than 10 trades in a day.
With very little information on how to trade Boom 500 successfully, many traders turn to trading aids (customized indicators and robots) which also work today and fail by tomorrow.
Table of Contents
To successfully trade Boom 500, the following must be integrated and understood.
⦁ A good risk management as it pertains to a good risk to reward ratio.
A good knowledge of risk management is the first step to a successful trade. This is because the surest strategy that never fails is ‘a good risk management’. To achieve this, one must have a good knowledge of his/her risk to reward ratio. For Boom 500, I usually suggest a risk to reward ratio of 1:3; risking 5 pips to get a reward of 15 pips. As much as this may not look attractive, it is the surest way to grow small accounts. Protecting your equity and growing it steadily should be a top priority. This is because, how much you make daily is not as important as how well you grow and understand the market. Once you keep growth as your focus, the return will naturally find itself to your bank account. Do not forget that It is always better to make $0.50 daily for a week than to lose $.20 in a day for a week.
⦁ A good entry and exit point
This will depend on so many factors. A proper understanding of your indicators (for indicator traders) or an astute knowledge of price action (for naked chart traders). This is because, market reactions or price movement always have a reason behind it, most of which may not be understood when it happens. Your focus should be on how to be prompt with your entries, make allowance for contingencies, have a good stop loss position and above all, secure your profits. Learn to outgrow losing your profits. To do this, develop exit strategies for every trade set up you place. In situations where you cannot determine an exit point, please stay out of the market to be on the safe side. Also, trade cautiously with a minimal lot size that will reduce your pain threshold if losses abound.
⦁ A big picture of the market:
A big picture of the Boom 500 market is not different from that of any other forex market. To achieve this, it is always safe to begins one’s analysis from a higher time frame. This is because, the higher time frame tells the real story of the market. Without the higher time frame analysis, no accurate prediction can be made. After seeing the real picture, break down the analysis to the lower time frames to get a wait or a strategic entry and/or exit. As seen in the chart above, the market can be seen to be on a long bearish trend. For many traders, this type of trend is mostly avoided due to the spikes which are so obvious in the lower time frames. After seeing the trend in the higher time frame chart, I broke down the analysis to lower time frame.
This made me know that although a symmetrical triangle is the story the market is sharing on H4, M30 tells me that a double bottom pattern has been formed and that I should expect the bulls to dominate the market for a while (I cannot state how long the bulls will dominate the market). Thus, with this knowledge gleaned from the market structure I know where to strategically place my trades using entry and exit strategies for double bottom chart pattern (if I wish to trade it).
⦁ Understand the market psychology
Boom 500 market has a unique market psychology. For an appropriate understanding of the market, always look away from the spikes. Also, do not focus on the M1 bearish candles. The spikes and M1 bearish candles are your greatest distraction from the entire market view. The market aims to make you a scalper. But you can outgrow that stage. Focus rather, on understanding the market movement, a good analysis from the higher time frame, the leverage rate that makes it unique, how much liquidity and volatility the market has as distinct from other markets. This will help you understand what works and the reason for which you must base your trading decisions. It will inform you of the appropriate lot size to use per equity size and when to know if you are over-leveraging or over-trading.
⦁ Understand that you need time to grow in the knowledge of the market.
Rome was not built in a day. Even so, you cannot become an expert trader overnight. Give yourself time to grow in trading proficiency. It may not happen in four months but you can grow and become better in four months than you were months ago. To do this, develop your study life. Study books, watch videos, pay for seminars, listen to teachers, have a study group, develop a trading plan, develop a trading strategy and above all, stick to what works. What works in that you must understand yourself and what works for you and then grow in its process. For Boom 500, the market, by default, makes scalpers out of traders. However, with a good knowledge of the market structure and price action, you can successfully trade as a day and swing trader. I often tell traders that the best way to trade Boom 500 is to either day trade or swing trade the market. This will take a good chunk of your time to develop yourself in its processes but it is always worth the attempt. Remember, forex is not a get rich quick business. But, through forex, you can get richer than you think.
Deriv offers complex derivatives, such as options and contracts for difference (“CFDs”). These products may not be suitable for all clients, and trading them puts you at risk. Please make sure that you understand the following risks before trading Deriv products: a) you may lose some or all of the money you invest in the trade, b) if your trade involves currency conversion, exchange rates will affect your profit and loss. You should never trade with borrowed money or with money that you cannot afford to lose.