Here you will learn how to develop a winning strategy for binary options. The easiest and perhaps ONLY way for making steady profits at a reasonable pace, is by implementing technical analysis, trend monitoring and other statistical data into the structure of your method. Thorough and high-level analysis however, holds very little significance when it comes to binary trading, for it forecasts trends over longer periods of time than expected from your typical binary option.
Monitoring trends would allow the investor to make educated predictions of whether a price of a certain asset is going to go up or down, thus placing either a call or or a put option. Recent history of the value of the asset can answer the question whether or not a trend is forming, or the fluctuation in price was just due to a regular whiplash from some other sector of commerce.
A trend is defying is the price of a certain value keeps falling/rising over a certain period of time (in binary trading, it is a matter of hours to a week, or even longer).
If we were to seek patterns in the otherwise random nature of the market, we can even see small trends forming on a bigger or more global trend network. Such trends can last up to several months, with the sub-trends changing by the hour. Any money invested on a binary option should thus be regulated to both the smaller and bigger trends respectively.
At their most basic level, there are two distinguishable kinds of market trends:
An uptrend can be cited, when the price of a certain asset (under the given time period) goes up/down (positional highs and positional lows) in value more so, compared to instances that preceded that time period. There would be some occasional decreases to be expected; but overall we will be looking at an overall increase. We will see this clearly by observing all the different spikes going off from the otherwise docile action price.
The diagram shown above illustrates what an uptrend looks like in a conventional market chart. The red line represents the uptrend, running diagonally across the chart from left to right.
Like the name suggests, a down-trend would indicate the exact opposite price developments compared to the uptrend. Positional highs and positional lows both come closer to the original binary option price as time passes by. Below you will see what a downtrend chart looks like, which we can say is a mirror image of an uptrend chart. The more insignificant these differences become over time, the more downtrend the action price becomes. Knowing when it is an uptrend and when it is a downtrend is important for recognizing some important patterns (as we will see below).
Although there is some talk going around the investment circles, that you cannot expect to place viable bets for future events, just by looking at a cut-out chart of past instances. The best thing in this situation is monitoring moving averages in the price of your underlying asset; thus making pinpointing the direction the value of the asset is going to take.
If we are to consult the statistics, the net-gain amount realized when an investor successfully implements trend monitoring as a means by which to make predictions, will always compensate for any potential loss that occurred following the same system. Price movement history is readily available almost all over the internet, so comprising a strategy that utilizes this information is recommended for beginners and professionals alike.
Support and Resistance Levels
An important thing that must be taken into account when monitoring trends is the position of the support and resistance levels on that particular asset. What a support level does, is that it provides a sort of a safety catch, should the one is concerned that price of a certain assets plummets well below the desired levels. It basically shows where the investors that are buying think that the prices will stop decreasing. A more straightforward approach of how to spot the support and resistant levels, is measuring the lowest and highest points of any given system, for a given time period (look at the below digram to get a better understanding of the concept).
A resistance level acts the same, but it deals with increases in the price of a certain asset instead. Most of the times their predictions would be true, and the price of a certain stock will not increase above the resistance level. There have been many instances where the price simply breaks out, and it basically moves the positional price up as well.
As we can see from the digram listed above, there are a total of 4 price decreases in that particalr sequence of fluctuations, which basically makes up the support level. Likewise, we can see 4 price increases, which would of course will define the resistance level. Both the support and resistance levels on any given trend line are enough to give an overall look at how the increase/decrease in price of of the underlying asset will affect the trend in the future. Slower markets are especially encouraged to follow these levels; where the overall activity of their value does not fluctuate as much as to create a confusion (like during night-time).
“Moving averages” are used as an indicator to pinpoint a certain trend, or subdivision of trends depending on the situation, by presenting a comprehensive average of the movement of the price for that particular time period. A 10 day indicator would thus show the average rate by which the price of a certain asset is going for the period of 10 days, just to clarify the concept. Figuring out what those averages are in the first place can be done in a variety of different ways. In our case (trading with binary options) it is best to draw recent statistics, and calculate price averages based on information that is not old enough to give unstable predictions. For binary option trading it is best to the exponential moving average (or EMA); where as the simple moving average (or SMA) is not recommended, although they can be compared to give even more accurate readings.
Traders who specialize in the binary options, can effectively spot a trend over time periods as long as an hour. The best results however, should be expected when monitoring a whole days worth of activity (as to minimize any minor and sudden fluctuations, which are also known as noise). If the monitored time period drags for longer than a day, the chances for making an accurate prediction drop, due to too much moving variables.
Trends can also be influenced by events that are outside the standard financial interventions. A flooding of a warehouse somewhere in India, can mean a tremendous decrease in price for lets say IMB computers (whose warehouse it was).
Motoring trends for as long as a day, would normally mean a stable 60 to 85% investment success. The overall rate of success on can expect when using this strategy depends solely on the daily price action, and the personal observational/decision making skills of the trader who is making the bets. It also favours strategic thinking, rather than relying on dumb luck; in terms of good and straightforward statistics (which clearly point that by choosing organized investing, one can expect not only to make all the right moves, but also develop a keen intuition that would help with larger investments).
Other elements that will contribute to the overall well-being of any binary investment includes forward thinking (thinking in advance); knowing how to decipher and apply old gathered information; and a financial platform (most likely a virtual one), which gives the traders the opportunity to diversify their investment and be able to make the best of the situation, so to speak.