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Boom and Crash trading is what most of us are aware of, but unfortunately, not many people truly understands it. I have been trading Forex for over 10 years; and Boom and Crash for the past one year and I have interacted with different breed of traders. One of the things that strike me about traders, especially newbies is their hunger for quick cash not knowledge. Many newbies are just looking for how to make quick money, they don’t mind wasting money testing different strategies and Signal groups in order to achieve their dreams.
Most often, this kind of quest always ends in disappointment, because making sustainable income from Forex needs dedication, skills, passion, patience, risk management capacity, etc. Before, we continue, I just need to make one thing clear, if you are looking for quick money, please this is not the article for you, but if you are looking for how to gain more knowledge and make sustainable income from Forex, then read on.
So what is Boom and Crash?
Boom and Crash are indices that are only available on the Deriv.com platform. They include Boom 500, Boom 1000, Crash 500 and Crash 1000. The Boom indices (Boom 500 and Boom 1000) has like a default sell circle; which means anytime you open Boom 500 or Boom 1000 chart, no matter the trend, the default characteristics of Boom is sell. Whereas the Crash Indices is always on the buy circle but sell at interval depending on so many market forces which we will discuss in this articles.
So How do we trade this indices.
Trading the synthetic indices is both hard and easy; hard if you don’t have the skill and right knowledge; easy if you have the mixture of the two. So if you want to make sustainable income from these indices, you need to get the right knowledge first. Please note: You don’t need to pay any self acclaimed Forex guru to get the knowledge, there are many free guide online. I started my journey in Forex by reading all the materials on Babypips.com, then demo trading to define my strategy.
Trading these indices is the same thing as trading currency pairs; buy at support and sell at resistance. There is a detailed article on how to trade the Boom and Crash indices, if you haven’t read it yet, kindly click here.
Market forces to look out for in synthetic indices
Unlike currency pairs which can easily be affected by fundamental analysis, synthetic indices trading mostly depend on Price action, Market structure, Supply and Demand, etc. If I am buying boom for instance based on the market structure, the only time I can exit the market in loss is if there is a market structure violation which is mostly caused by Supply and Demand.
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These Four things I am going to mention are very vital to your trading journey.
Price Action
Market Structure
Risk Management
Patience and Psychology
Why Trade synthetic indices
Synthetic indices are very easy to learn and understand. They are newbies friendly, I have few newbies who love scalping crash and Boom and they have mastered the skill so well that their risk to reward ratio is very good.If you are looking for how to trade boom and crash indices successfully, then this article was written for you. As a rule of thumb, there is no strategy that is 100% perfect, but I will try to share some tips that will guide you in your journey to become a successful trader.
First, what is Boom and Crash Indices?
If you are a newbie , you must have heard of Boom 500, Boom 1000, Crash 1000, and Crash 500. For the sake of clarity, Boom and Crash are ‘synthetic indices ‘ that is found only under the Deriv.com (a binary.com brand) platform.
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With Crash 1000(500) Index, there’s an average drop in the price series that occurs at anytime within 1000(500) ticks.
With Boom 1000 (500) index, there’s an average of one spike in the price series that occurs at anytime within 1000(500) ticks.
How to Trade Boom and Crash Indices Successfully
A number of traders (both expert and beginner) have had issues with the market structure of boom and crash. This is because, unlike the currency pair, boom and crash have been structured to either buy or sell using spikes at an even period of tick.
For instance, when trading either the boom (Boom 500 or Boom 1000) or crash (Crash 500 or 1000) assets, one will observe that the boom market sells by default while the crash assets buy by default. However, when boom markets buy, it buys with long bullish spikes while crash markets sell with long bearish spikes. This characteristic feature makes the boom and crash unique but, also scary for beginner traders (See Figure 1 to 4).
How to Trade Boom and Crash
Figure 1: Boom 1000 chart showing a bullish spike.
How to Trade Boom and Crash
Figure 2: Boom 500 showing the default sell candles.
crash 500
Figure 3: Crash 500 chart showing a bearish spike.
How to Trade Boom and Crash
Figure 4: Crash 500 chart showing the default bullish buy candles.
Develop a Strategy
Like in every forex market, different trading strategies are employed by traders to make profits. This includes scalping, day trading, swing trading, and position trading. As a trader opts for a particular type of trading strategy, foundational factors influencing such a choice include a person’s trading style, trading psychology, exposure, and experience. All these foundational factors anchor on two basic characteristics: Personality and Knowledge.
Trading Boom and Crash, My Story
When I began trading boom and crash markets, I began my trading adventure as a scalper. In fact, in the first year of my trading experience, more than 95% of boom and crash traders that I have been privileged to meet were scalpers. As much as I knew that there were other trading strategies, scalping was the basic trading strategy I felt was suitable for trading boom and crash markets.
This was further confirmed by the way the market was structured (spikes in boom buy and crash sell situations), and also on the low risk to reward ratio when day or swing trading with very small lot sizes. For instance, in currency pair trade, using a lot size of 0.01 for a $100 account is a good risk management decision.
However, trading boom and crash with a lot size of 0.01 is a difficult adventure that will demand more than 100 pips before a trader gets a profit of $1. For that reason, Deriv.com upgraded the lowest lot size of the market from 0.10 to 0.20 to enable profit maximation. In as much as I know that it is a suicidal adventure to trade a 0.20 lot on a $100 account, the market structure is the basic platform for which the default lot was set to 0.20 to enable traders to have a return of $1 for every 5 pips and vice versa.
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Generally, scalping the Boom and Crash market tends to be the norm due to the market structure and psychology. For that reason, many traders tend to focus on just lower time frames; precisely, M1 to M15. This rather makes it difficult to convince traders to look away from the spikes (which are so obvious and influencing in lower time frames) and put their focus on the general big picture of the market (the market trend).
However, the boom and crash market can still be ‘day or swing traded‘ if a trader has a good knowledge of the market psychology, price action, and good risk management. In fact, the best way to make profit lies in day trading or swing trading. This is because either of these trading strategies always respect the price action. Figure 5 to 7 shows the price action chart as observed in Crash and Boom markets.
How to trade boom and crash
Figure 5: Crash 500 chart showing price action chart.
Crash 500
Figure 6: Crash 1000 chart showing price action chart.
Crash 500 chart showing price action chart.
Figure 7: Crash 500 chart showing price action chart.
From the above setup, it is never wrong to begin trading boom and crash as a scalper but it will be wrong if you continue as a scalper. The aim of trading is not just in making profits but also in the personal development of one’s skill. Hence, as one sets out as a scalper, one should also endeavor to be part of the market’s big picture by improving to a day, swing, and position trading.