This is a generic strategy, and it can be very powerful at times when applied correctly to your binary options trading. One of the big advantages of this strategy is that it can be fully automated, and many charting packages come preprogrammed with signals that rely on patter recognition. You can make this strategy as hands on, or as hands off as you would like. With this in mind, there are things that you need to know about the strategy when it comes to effectively applying it. We’ll also take a look at the things to watch out for with this method.
Application is Key
This trading strategy rests on a very simple principle: certain patterns have developed over the years that indicate future actions are about to happen. Many of these patterns are very easy to spot, too. You just need to be able to find them and time your trades appropriately. These patterns include triangles, wedges, flags, and so on. These are just a few of the patterns that exist, and the more you use this strategy, the more you will find that it opens up a lot of trading opportunities to you.
To get started with this, you will need to find a very reliable piece of price charting software. You will also need to chart the asset on a scale that pertains to the trades that you will be making. Most binary options traders will want signals that update every 60 seconds, but other timeframes can be beneficial to you if you are taking out long term trades. You can use software to find the patterns you are looking for, but many people benefit just from scanning price charts themselves and executing trades when they find the signal that they are looking for.
It’s important that you don’t use every single pattern out there when you do this. This will lead to information overload, and you will find tons of signals. Also, be sure that you specialize in just a few different assets at the most. Running signals searches on many assets all at once, even with just one or two patterns to look for, will also cause information overload. You will find that there is just too much to interpret on your own and you will spend less time trading and too much time trying to decipher what’s going on with the price charts. Information is good, but too much needless info can hurt you.
Drawbacks to Chart Patterns
The biggest drawback of using chart pattern recognition strategies, either automated or manual, is that they do not tell you what you should do as far as your expiration timeframe should go. Software can be very powerful when it comes to recognizing the layout for the specific patterns you are on the lookout for, but they can’t do much when it comes to telling you how long you should set your expiry for. This is something that you will need to do on your own, and it takes some experience to get to a point where you can be consistent here. For this reason, even though much of the work for this strategy is done automatically by your computer, it is still an advanced strategy and shouldn’t be used by those new to trading unless there is some guidance in place.
If there is any sort of economic news occurring on the day that you are using this strategy, your results will be highly variable, and the odds of losing money go up substantially. If you do use this strategy, make sure that there is nothing scheduled pertaining to the asset that you are using before executing any trades. Having a grasp on fundamental info is a must, too.
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