Chart Patterns Every Successful Binary Options Trader Should Know
The Exchange does not open easily. The influx of individuals on stock markets took place mostly during privatization or stock market euphoria. It is rare that investors begin during the most turbulent periods. In fact, seeing the arrival of new investors in unfavorable periods is always a good thing. Although not having the same legal value as a stock or bond, the binary option has the merit to discover financial markets and speculation at large to a population accustomed to the casino and online games. Continue reading →
While it’s important to set personal rules (e.g., trade only with the trend, no more than three trades per day) and attainable short-term goals (e.g., achieve an ITM percentage of 60% or higher), which may differ from those of other traders, I feel a big mistake is to set a monetary goal that must be met by a certain date or, worse yet, every single day.
Chart patterns are an essential part of technical analysis in binary options trading, but there are some patterns that are especially useful to the trader who wishes to maximise their success. Here is an outline of some of the best known and most effective chart patterns that you may observe on your technical charts and which can inform your executed trades.
This popular pattern is a continuation pattern which suggests that the current market trend will continue. The special characteristic of this pattern is that it serves as a prediction that there will be a pause in the increase of the asset’s price, or possibly a short decrease. The upward trend will be followed by a short decrease before a new increase will form. This reveals the cup part of the pattern. The handle is then formed by a small movement of similar directions and then the price will shoot much higher. This is an easy pattern to identify and can be observed on longer term time frames from a couple of months up to longer than a year.
Often, on the release of major economic news, a lot of volatility will be caused in the market immediately around the release but soon, the market trend resumes its original trajectory. Long term traders can therefore add positions at a better price than they could otherwise by looking at the long term chart and establishing a resistance level in which they are able to sell if the market price reaches this level. Once the price of their chosen asset moves into this area of resistance, they can begin looking to sell and place a stop above the resistance zone. If a trader looks at the short term charts in order to observe bullish or bearish reversal patterns in the price action, they can improve their chances of successfully executing this strategy even more.
There are 3 different varieties of triangle pattern to be seen on technical charts – descending, ascending and symmetrical. Each of the three types has different properties and signifies something different, however they all have their time frame in common which will general range from a couple of weeks up to a couple of months. The symmetrical triangle is probably the easiest to understand. Being preceded by trend lines which approach each other slowly until there is a breakout in either a downward or upward direction, the symmetrical triangle is a sign of a stable trend in whichever direction the breakout heads, with resistance and support serving as the triangle’s sides. The ascending triangle shows flat resistance with ascending support. Usually, there will be an upside breakout which confirms the trend. The descending triangle forms the opposite of an ascending triangle, with flat support and descending resistance. The breakout will occur to the downside, confirming the new downtrend. Triangles are very reliable patterns, virtually always confirming emerging trends. They are easy to spot and use to predict the short term momentum of the market.
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Hedging strategies are very commonly used by experienced binary options traders in order to mitigate losses and minimise risk when executing a trade. If you’ve ever heard of "hedging your bets" this is exactly what the investor is doing when they put this strategy into action. One way of ensuring that they end up "in the money" hedging may seem counterintuitive to some investors, but it is a good way to increase profits little by little. The benefit of using a hedging strategy is that an investor descreases their risk and the possible volatility of their investment by reducing the change of losing and locking in current profits. Hedging woorks by moving the risk from the stop-loss zone to the area that is above the breakout point. At the breakout point, the prices are most likely to rise and there is less chance of loss. By placing both a put and a call option, a trader can decrease any risk associated with the high return yet fast paced binary trade contracts.
