Using Price Patterns To Trade Binary Options
There are many ways you can build strategies for trading binary options; most methods will center around fundamental analysis, technical analysis, or price patterns. There is no single “best” approach to trading binaries or anything else; it comes down to your personality as a trader and what is most intuitive and successful for you. If you like to keep things simple, however, one type of method which may interest you is the use of price patterns.
What is a price pattern?
Over the years, traders have discovered that there are certain patterns price bars on a chart can make that tend to lead to specific outcomes. There are dozens of price patterns in existence that have been identified to be reliable in producing results.
Typical examples would include head-and-shoulders, pinbars, double lows with higher close or double highs with lower close, triangular consolidation, and so forth.
If you look up these price patterns you will find charts with examples of formations that have been identified, followed by trend breakouts or price movements which could have resulted in profit. We link to a few resources that have listed common price patterns and what they usually mean.
What are the advantages of trading price patterns?
Price patterns are simple; while some traders include other technical indicators on their charts to help them analyze context, you can trade them without any indicators if you want. You’re less likely to get lost in conflicting signals if you do something this simple. You also will discover that price patterns can translate well from one market to the next. The same patterns which can help you to spot movement in the gold market might help you to spot a trade in the currency market.
What makes trading price patterns challenging?
While it may sound simple (and it is), trading price patterns isn’t necessarily easy. The reason is that you do need to learn to identify price patterns in the first place, and you’ll quickly learn that not all price patterns are made equal. Some are better than others. Some are also located in better contexts than others, and identifying a great context and a true A trade isn’t necessarily as easy as it appears. With practice, however, you’ll find out that trading price patterns can be very rewarding, especially if you like your trading to be simple. You can use this method to be successful in many different binary markets, and you’ll find that it’s easier to adapt to different situations than many other more complex methods of trading.
- Candlestick Charts
- Glossary of candlestick types and another here, here.
- Example Binary Option Trade
- Binary Trading Strategy