Many traders are wondering what does it mean to follow market trends and to trade based on trends. This article will provide a deeper insight into this trading strategy that is based on market movements and their predictions. The trend is very easy to understand and trade with.
By definition, in binary trading, a trend is considered to be a series of movements on the market in a certain direction (like higher lows or lower highs). Trends help traders to understand how and when to trade: if the trend is bullish, it is recommended to trade call options, and in the case of a bearish movement, traders should rather choose put options.
Trends are also visible on trading charts, usually provided by brokers on the platform. Every trend has a trend line that is, along with support and resistance lines, helping the trader to find out when is the best moment to make a trade with their binary broker.
All traders should know that trends are not always easy to find. For example, in case the markets enter the period of consolidation it will be hard to notice a reliable trend trade with, but once the strong trend is recognized, traders can utilize it to make more profit.
Elliot Waves Trends
One of the most popular strategies of binary trading with trends is Elliot Waves theory. When the market is moving impulsively, a trend might occur. For this reason, it is important to really understand the significance of impulsive moves and changes on the market in every moment.
An impulsive move consists of five waves: three impulsive and two non-impulsive waves. The non-impulsive waves are commonly known as corrective waves – or the moment when the trader should focus on buying binary options.
In Elliot Waves theory, there are several different moments when it is considered that traders should start buying or adding more to their options. It all depends on how entire market is moving and forming.
Let’s say that the market just experienced the 1st wave, and the 2nd wave has started. In that case, traders can take advantage of Fibonacci retracement tool and take a look at the first wave. In case the retracement is over 61.8%, it is suggested to trade buy options. In the case of a bullish first wave, it is better to select call options, and in the case of a bearish wave, rather invest in call options instead.
Fourth and the fifth wave are also correlated to one another. The 4th wave, in most cases, travels below 38.2%, compared with the 3rd wave. Perfect striking price, in that case, can be found with binary options at 23.6% and 38.2%. If the nature of the 3rd wave is bullish, trade call options, and if it is bearish select put options.
Channeling – Easy Analysis Method
In order to trade binary options with trends, traders should invest some time in their education and learn how to use channeling as well. Channeling is a technique used to predict market movements thanks to two trend lines. The upper trend line is created by the market peaks or the highest price achieved in a certain time period. The lower line is created by the market’s low, or the lowest price.
This way, traders can notice the breakout points when it’s the real time for trading, either up or down. This form of analysis is mostly used for short to medium-term trading, rather than for long-term trading. Channeling can also be combined with other binary trading analysis methods, and it is best used in times that are neither consolidation periods or extremely volatile.
High Lows and Low Highs in Trends
Traders who want to follow trends in binary markets can also take advantage on high lows and low highs. When such movement occurs on the chart, it is sure that the trend will start forming. Soon, it will be possible to notice a channel as well, and traders can buy put options in bearish movement, or call options with bullish movement.
Binary traders should never underestimate the importance of charts. Charts can provide much useful information that lead to better money investment, and loss prevention, but also prevent traders from missing on a trend.
When using charts and discovering trends, traders must be aware of the importance of timeframe as well. The expiration time of the binary option must be correlated to the timeframe that was used for analysis. Using the long-term chart and trading short-term trades will never be successful. This important step is easy to miss, so make sure that the trading chart has everything properly set before trading analysis.
Trending – Binary Trading Strategy
Trending is very important and popular strategy in binary options trading as it is easy and doesn’t require many tools. It is mostly used in moments when the market is moving. In case the market is still, it is better to use some other strategy like ranging.
Traders must also be aware that there is no universal strategy, and that method used for market analysis must be always chosen wisely, depending on what is going on. Understanding the importance of versatile analysis is the key to success.
Traders should also follow when the markets are closing and opening in order to place profitable trades. Every market has different rules when it comes to market movements. For example, Asian session is known to be ideal for using ranging rather than trends.
As mentioned, traders must keep in mind to apply proper time frame on the chart. One-hour binary options are best traded after using the same time frame for market analysis. Once the traders master this technique, along with several other strategies the trading will become even more fun, and the income will be even more reliable.
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