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Types of Trades for Ranging or Trending Markets

As a binary options trader, it will serve you well to learn to recognize different types of markets.  Markets can take on different personalities depending on economic conditions.  The interplay of these factors is quite complex, but you can learn to recognize what type of market you are in even without becoming an economics expert.  Different types of binary options trades are ideal for different types of markets.  Here are four different market situations you should learn how to recognize:

  1. A bullish, trending market.  This is a market that displays a strong upward trend over a certain length of time.  Note that a market which is trending on one time frame may not be trending on another.  Looking at different time frames gives you a sense of context.

  1. A bearish, trending market.  This is a market displaying a strong downward trend.  It is the opposite of the bullish, trending market, but behaves in a similar fashion.

  1. A ranging, or consolidating market.  This is a market which is displaying neither a strong upward or downward trend.  Oftentimes if you have moving averages plotted on your chart, they will be weaving tightly together, not separating and moving apart and upward/downward.  Bars may be flat and close together or be making short moves up and down.  Markets spend much of their time consolidating.  It can be tough to profit during times of ranging price, but if you can learn to do it, it will give you an edge.

  1. A choppy market.  This is a particular type of consolidating market that I feel deserves its own special mention, because it is particularly lethal.  Markets displaying a lot of chop will present a trade with whipsaws and fakeouts.  Price will swing one direction and then abruptly swing the other, back and forth and unpredictably.  These are usually poor times to trade.

You can use this video for a visual explanation as well:

Binary options brokers offer a number of different types of trades.  Most commonly, you will encounter High/Low, One Touch, No Touch, and Range trades.  You may also see 60 Second trades or other “Turbo” options (usually 2-5 minute trades).  Which market conditions are ideal for each type of trade?

You will notice that nowhere in this list did I describe any situation where you would want to be trading during choppy market conditions.  The reason for that is that you are unlikely to ever profit when the market is choppy and there are a lot of fakeouts.  Most traders who are profitable simply sit out these times and wait for conditions to improve.   Spotting a good setup is not enough if you want to be profitable.  You need to be trading in the right context.  A better way of putting it would be this:  You need to take market conditions into account as part of your understanding of a great setup.

Binary options trading gives you a number of different ways you can profit in trending and ranging markets.  The fact that there are multiple types of trades available is a great boon all by itself.  Traders in Forex or the stock market often struggle to profit during consolidation since they can only profit off of price movement, whereas with binary options, you can profit when price is trading even in a narrow range.   You need to choose a broker which offers you the trade types which interest you though; some brokers only offer High/Low.

Another benefit of binary options trading is the fact that there are so many different types of assets you can trade.  When you are stuck with choppy market conditions with a particular stock or currency pair, why not look at another one, or maybe check out an index or a future?  You might very well find excellent ranging or trending conditions or spot a breakout happening on another asset.  With dozens of different financial instruments available, there is always something to trade with binary options!

If 60 second trades is something that you are interested in – learn all you can about them by clicking here!

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