With the ever growing popularity of 60 Second trades comes an increased number of binary options strategies for use with this trade type. Many of these strategies focus primarily on trend trading in some form. Trading along with a price trend can indeed yield big profits, but what happens when the trend comes to a close? This is where we start looking at the potential for a price reversal.
Before jumping in, let’s consider for a moment the typical behavior of asset prices. Every asset is going to have the highest and lowest recorded prices, as well as a median price zone. It is this median zone that the price will try to move back towards once a price trend has concluded. What this means is that traders can assume with some degree of certainty that after a trend concludes, the price is going to start to pull back towards its daily average.
Reversals can sometimes be difficult to forecast in advance. This is because it can also be difficult to know exactly when a trend will come to an end. The beauty of this strategy is that it does not require you to predict a reversal in advance, but instead begin to trade with this price movement once it has already begun. In doing so, the overall level of risk is decreased. The use of 60 Second trades works to reduce risk even further. The fast-moving positions prevent you from being locked into time-consuming investments while market conditions are changing.
There is more than one way to utilize this strategy. The first is to go ahead and start trading with the prevailing trend and then stop when the asset price is nearing an area of resistance. Monitor the price movement and should it reverse once resistance plays its role, begin trading again, but this time in the opposite direction. The second method is for those who are late in noticing the trend. Here, you’d monitor price movement and wait for a reversal to take place. As soon as it is noted, start trading.
This binary options strategy does require that you are constantly monitoring price movement. It oftentimes requires patience as well. Price reversals are extremely common, but there always exists the possibility that the price of the asset could push past the level of resistance. Breakouts, or new record high or low prices, are also possible. These require strong market sentiment, but are certainly not out of the question when surprising data is released. Keep a close eye on financial news while trading.
The two main advantages to this strategy are the fact that you do not have to forecast the reversal in advance, and the use of the 60 Second trade type limits the amount of time allowed for strong shifts in investor sentiment. The main drawback is that since prices can bounce around, it is possible to start trading on a false reversal. One way to avoid this is to monitor the prospective reversal for a few minutes to make sure that the price is actually trying to retreat to its median zone. Once this has been verified, purchase the binary options trade according to the confirmed direction.
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