The reason behind performing analysis for binary options trading is to accurately predict future asset price movement. There are several different types of price action that traders will be looking for within technical charts, each of which will point to the correct type of trade to select. The following five types, when acted upon in the correct manner, will help all traders to maximize their daily earnings.
A trend is simply price movement that continues in a single direction for a period of time. Price trends provide some of the greatest profits of all, which is why traders are advised to seek them out. There is never any guarantee as to how long a trend may last, but analysis will help with making a general determination of this time-frame. Do consider evaluating multiple time-frames, as in doing so, both short and long-term trends can be identified. Each and every trend can provide multiple profit opportunities.
Flat, or side-to-side movement is actually the lack of price action. Even though asset prices are in constant movement, there are periods of time during which the movement is very limited. These periods present the prime opportunity to take advantage of Boundary and No Touch trades. The same as a price trend, flat movement will not continue indefinitely. Once again, technical analysis can help one to determine when the price may start to exhibit more substantial movement.
Breakouts are points at which an asset price exceeds either a record high or low, or exceeds a key level of support or resistance. This type of price action does not occur frequently, as a strong shift in investor sentiment is required. However, major market news can quickly send a price soaring or falling. In addition to checking charts for prospective breakouts, market news should be monitored for any report that would cause a large number of investors to actively buy or sell shares. Breakouts tend to occur quickly, be scheduled data reports can point traders in the right direction well in advance of the actual movement occurring.
Price reversals are just that, a reversal of the direction of movement. It can take quite a lot of skill to accurately predict a price reversal in advance. However, binary options traders who are able to identify breakouts and support and resistance levels should be able to see the potential for a reversal. Watch for a reversal any time a price completes a breakout, or nears a key level of either support or resistance. Technical charts can be set to point these levels out for you.
Volatility is often linked to erratic movement, but the term can also be used to simply describe active price action. Standard market investors often fear this type of movement, as it can make decision-making a tough task. However, those who trade options can profit under volatile conditions so long as he or she is able to pinpoint short-term movements and uses these along with short-term contracts. With just a bit of practice, trading under volatile conditions will be nothing to fear.
Any single asset has the power to exhibit more than one of these types of price action within just a short period of time. The ability to correctly determine which type of movement is currently taking place, along with which type of movement is most likely to occur soon is that all traders must develop. The good news is that anyone who trades binary options on a consistent basis will learn to quickly identify each type of price action.
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