Boom and Crash

Allen Matshalaga, C.E.O of the AVFX Trading HUB company.

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Deriv Strategy

Updated: January 2024

5min Read

Deriv.trading formerly known as “Binary.com” is the only broker that offers a synthetic indices account, and on this account, you can trade indices such as volatilities, range breaks, jump, step indices, boom and crash. We will look at volatility indices in another separate article, for now, let’s focus on Boom and Crash.

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Is trading boom and crash profitable?

Answer

Yes, trading Boom and Crash can be very profitable, especially if the reasons for entry align with the overall trend direction. If traders use other strategies or indicators as confluence to further confirm their entry, making money trading Boom and Crash indices will be a breeze for them as they will only be taking high-probability trades.

What is Boom and Crash?

Boom and Crash indices are financial instruments that simulate market volatility. They are unique to certain brokers and can be traded 24/7, making them an attractive option for traders looking for action around the clock.

The Boom and Crash indices are derived from historical price movements, and they are designed to replicate the sudden market spikes (boom) and sharp declines (crash) that often occur in real-world markets.

How to Trade Boom and Crash

Trading Boom and Crash requires a comprehensive understanding of the indices and the factors that influence their movements. Here is how you can get started.

Choose a Reliable Broker

To trade Boom and Crash, you need to select a reputable broker that offers these synthetic indices. Look for a broker with a user-friendly platform, competitive spreads, and a variety of trading tools.

www.deriv.trading is the popular choice, with competitive leverage, and specializes in synthetic indices trading, providing traders with an array of options for Boom and Crash strategies.

What is the Best Boom and Crash Strategy to use?

Among the myriad of strategies available, the “Boom and Crash 1-Minute Strategy” stands out for its popularity and effectiveness. This strategy focuses on short-term trades, utilizing the one-minute timeframe to enter and exit positions quickly.

Traders employing this strategy closely monitor the indices, looking for rapid price movements and seizing opportunities as they arise. Open a demo account, practice with virtual money and follow along this strategy.

Boom and Crash 1 minute strategy

This Strategy involves zero price action because it’s based solely on indicators and is traded on the M1 time frame only. We will look at three indicators to trade Boom and Crash Indices, combining them to come up with one powerful strategy.

For this strategy we need 3 main indicators, which are:

MACD
RSI
MOVING AVERAGE

MACD

Image showing how to insert MACD into a trading chart and its default settings

Moving Average Convergence Divergence commonly known as MACD, is a trend following indicator or oscillator used to spot divergences in price movements.

It was created by Gerald Appel in the late 1970s and It was designed to reveal changes in the strength, direction, momentum, and duration of a trend in a stock market.

It’s a lagging indicator, meaning it reacts or gives a signal after price has already confirmed it’s direction. So as such, when using MACD, you will less likely be finding yourself in traps or false signals.

Because of it’s smooth and clean appearance, it is easy to read and you can catch divergences with an ease and swiftly. Above is a picture of MACD and its default settings.

On MACD we will use the default settings:
FAST EMA ————- 12
SLOW EMA ————- 26
MACD SMA ————- 9

RSI

How to customize RSI to trade Boom and Crash

The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum oscillator that measures the speed and change of price movements. The Period will be changed from 14 to 1 and its Levels from 30 and 70 to 9,10,11 and 90,91,92.

We are going to customize the RSI settings like shown in the image above.

Allen Matshalaga
Author

Moving Average

A moving average (MA) is a widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random short-term price fluctuations. So now let’s go ahead and combine these indicators on your chart.

MACD, Moving Average, RSI on 1 indicator window on Desktop PC, Laptop and on Mobile Smart Phone Android and IOS

Open your deriv.trading MT5 chart and first put your RSI indicator on the Boom and Crash Indices, make sure you are on a 1 minute timeframe. Then secondly, drag your MACD from your left hand side indicator window if you are using a laptop and put it on the RSI window.

Lastly, drag your Exponential Moving Average or EMA 5 to your MACD and RSI Window. Your chart should now look like the image above. On the left is how it would look like on a laptop or PC and to your right its how it look on your mobile phone.

MACD, RSI & Moving Average Strategy

1 Minute Timeframe Boom and Crash Indices Chart Strategy

This is how you take high probability trades with this strategy.

First step you must zoom out your chart to the maximum till your candlesticks look like thin lines. The reason for doing this is to get the bigger picture, because if you take trades in any zoom level you will find your self going bearish in a bullish market.

Now as you can see clearly from the image above, the red line which is the moving average shows how price reverses at our custom RSI levels. This means that we look to buy at 9,10 and 11 levels and then sell at 90,91,92 levels.

Take Profit Strategy

As much as a good entry is of great importance, a take-profit strategy is also essential. A lot of good traders make money only to give it back because they did not set a Take Profit (TP). Take profits help traders eliminate greed and they also improve discipline in a trader.

For this strategy, our TP’s are clearly illustrated in the chart above. If you are bullish on a trade it means your TP will be at 90, 91, 92 levels and if you are bearish your TP will be 9, 10 and 11 levels.

This is by far the simplest yet most effective boom and crash strategy you’ll ever come across. Do not forget to zoom out to the max first, before jumping into trades.

Boom and Crash Strategy Pros & Cons

Pros:
High Volatility: Boom and Crash indices offer frequent opportunities for profitable trades due to their inherent volatility.

Accessibility: These synthetic indices are available for trading 24/7, catering to traders from different time zones.

Flexibility: Traders can adopt various strategies, including short-term and long-term approaches, depending on their preferences.

Cons:

Risk of Loss: High volatility can lead to significant losses if not managed properly.

Limited Availability: Boom and Crash indices are exclusive to certain brokers, limiting accessibility for some traders.

Conclusion

The “Boom and Crash 1-Minute Strategy” is a popular choice for short-term traders due to its effectiveness. Remember that trading indices carry inherent risks, so always trade responsibly and never risk more than you can afford to lose.

Frequently Asked Questions

What are Boom and Crash indices?

Boom and Crash indices are synthetic instruments offered by certain brokers, simulating market volatility and providing trading opportunities around the clock.
How do I trade Boom and Crash?

To trade Boom and Crash, choose a reputable broker, study the market structure, analyze price movements, identify buy and sell signals, and employ effective risk management strategies.
What is the best strategy for trading Boom and Crash?

The “Boom and Crash 1-Minute Strategy” is a popular choice for short-term traders, focusing on quick trades based on one-minute timeframes.
What factors should I consider before placing a trade on Boom and Crash?

Before trading, pay attention to market volatility and use technical indicators to validate your trading decisions.
What are the pros and cons of trading Boom and Crash?

Pros include high volatility, accessibility, and flexibility, while cons involve the risk of loss and limited availability with specific brokers.