Binary Options Trend Lines
Binary options trendlines can be referred to as one of the standard trading tools that is utilized by those involved in the trading market. The binary options trendlines are quite effective for those who may be thinking about delving into the market of binary options trading. Understanding how to use these trend lines with regard to market analysis and the potential shaping of various patterns lessens a trader’s reliance on other tools and indicators. An uptrend can be defined as a situation where there is an increase in prices or a continued decline. A downtrend, on the other hand refers to a reduction in the increase of decline of prices.
Locating binary options trendlines enables an individual to identify the status of the current sentiment present in the market. The trend in such circumstances can be described as sentiment persistence. Using these trend lines to determine the sentiment, a trader is able to pick the best strategy available to them with regard to offering high profit. One should take note of strong trends, however, as this may be an indication of a potential change in direction in some cases. Traders are able to turn to Binarymate as their main brokers if they are in search of a supportive and reliable platform from which to trade from.
The use of binary options trendlines allows a trader to predict potential occurrences in the future that could take place and adjust their activities accordingly. It should be noted that trend lines are not exact indicators and should not be treated as such. They are more like maps depicting the boundaries between optimism and fear.
Drawing a Trend Line
It is essential to learn the proper way of creating binary options trendlines if one plans to utilize them in their trading activities. Going about this action without accuracy will result in misleading results that can bring about loss of profit.
Uptrend (Bullish) Line
When drawing an uptrend line, one will need to take the following steps.
Locate the lowest point
Locate the preceding lowest point following the one first identified
Draw a line between these two points and maintain the direction taken
Downtrend (Bearish) Line
The following steps will need to be taken in order to draw a bearish line.
Locate the most recent highest point
Locate the second highest point on the chart and draw a line next to it
Extend the ensuing line from left to right on the chart past the current date and onwards
Outer and Inner Trend Lines
Once one is able to draw binary options trendlines, the next step lies in identifying the kind of trend involved. The trend shown by such lines can either depict an outer or inner trend taking place. An inner trend line represents a movement in the sentiment of the market and indicates a momentum that will lead to fast changes taking place. An outer trend line marks the boundaries at which potential prices will have a difficult time breaking through. Locating these two lines assists a trader in determining the strike prices related to profitable binary options.
Trend Lines in Relation to Trading Strategies
The binary options trendlines can be used to determine appropriate strategies while trading, but a basic knowledge of trading terms will be required. There are a large number of strategies that can be implemented by traders and are available online. These sources include professional terms that are not always easily understood.
A price movement corridor for example, refers to the potential spread of a swing in price in one direction or the other. The aides in the identification of the current market mood and allows one to make more accurate projections. A couple of parallel lines are used in the making of a corridor.
A Price Corridor Example
As shown above, a downtrend depicts a superior market sentiment with regard to an asset’s sale and a potential continuation of such movement. In such a case a trader is able to buy “put” options at a profit.
The upper line represents resistance and shows the highest value price trends during a certain timeframe. When making this line, only peak values should be taken into consideration.
The bottom line represents support and shows the lowest value price trends for a certain timeframe. When making this line, only peak values should be taken into consideration.
Trend Line Strategies
One needs a reliable strategy if they are to be successful in their trading activities. The trading of binary options simply requires a trader to determine whether the price of an asset will rise or fall and then act upon that information. The exact points do not really matter and all that is needed is a correct prediction with regard to the direction taken. OptionFair provides the most user friendly platform available to online traders.
The use of binary options trendlines could be seen as a strategy in itself. As such it is essential to understand what they are made of. These include:
Support lines – Represent the lower extremities of pricing. This trend line does fall below the mark price and supports an upward trend as a result.
Resistance Lines – Represent the higher price extremities. Does not offer a price break higher than them giving out resistance as a result.
The longer these lines maintain their trajectory the better chances a trader has of making an accurate forecast. The stronger the trend the higher the chances of it maintaining its direction. The more times the price has been unable to overcome these binary options trendlines, the stronger the trend. StockPair offers the best tools available when it comes to binary options trading.
Fibonacci Resistance Lines
The Fibonacci resistance tool relates and as such using it is essential to the success of a trader. These tool’s ratios provide a pattern that can related to all prices. Stops/Limits as well as Put/Call options are placed near Fibonacci lines to enhance success rates. Though these lines cannot predict the future, they are quite useful in locating resistance and support. One should choose between four hours, one day and weekly based charts when trading. One can use Fibonacci lines while trading through the following means:
Find the Fibonacci line in the chart one is using.
Use this line to find detect the price in relation to the Fibonacci ratios
Locate the nearest Fibonacci line in relation to the strike prices one is interested in
The relation between Fibonacci lines and strike prices is essential as they are able to validate the accuracy of the trader’s decision. One can use this example available on OptionFair to determine their grasp of this concept.
A trader aiming to make a profit from a strike price that is above a Key 61.8 Fibonacci line is unlikely to be successful as such a position indicates chances of resistance present. Choosing a strike price below the line at 61.8% will be a better option for a trader in such a circumstance. Essential Fibonacci ratios in binary trading include 38.2%, 61.8% and 50%.
Locating the higher and lower extremities on a chart is the first step. The Fibonacci tool will the two extremities and create related ratios. Identifying such patterns helps one to identify the current sentiment. This allows one to choose the most likely direction that an asset will take.
Support and Resistance Lines
As mentioned earlier, these lines play a huge role in the prediction of a particular trend. These lines serve as basic tools for the prediction of current market sentiments.
Refers to the position where the price stops declining and remains stagnant for a short while.
Refers to the position where the price stops rising and encounters a temporary standstill.
Drawing the Lines
The current highs and lows will need to be located when drawing these lines. Once this is done, the trader will then draw a line underneath the recent low and one on top of the current high. It is advisable to wait for a zone of support, which is signified by three or more failed moves to break the support or resistance lines.
First Trading Strategy
Purchasing near a support location is advisable for those wishing to enter the market. A resistance location, on the other hand will be ideal for those looking to sell. Strong support indicates a particular low has been established while strong resistance indicates the presence of an established current high. It should be noted that lines tend to break regularly and one will thus need to adjust their strategy accordingly.
The stronger the support lines are, the better chances one has of predicting a trend.
Identifying Strengths and Weaknesses
The stronger a line, the more it will resist breaking. Three failed tries can serve as good indicator of a potential point of entry. The longer the lines resist breaking the better the chances of success. Once one has a good grasp on this knowledge, they are able to move on to other patterns available in the market.