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Summary
Binary trading is one of the easiest to understand trading options one can
find in the market. With the chance of getting a payoff in two options,
namely, you get a fixed monetary amount or walk away with nothing.
Hence, trading binary options can be a bit like gambling.
Its all or nothing with this option. While many people tend to stay away
from them, they can bear fruitful results for those willing to take the risk and
trade them. However, to achieve that result, it is necessary to understand
binary options and other market factors and trends which can influence the
outcome.
With the help of this eBook, you can learn to understand:
Binary options and their types
How to use various types of Binary options
What is technical analysis?
How to conduct successful technical analysis?
Use technical analysis with trend analysis to get great results from
your binary options.
This eBook will help you through the world of binary options, starting from
the basics and working your way deeper into the world of binary trading.
Contents
Disclaimer ................................................................................................... 2
Summary .................................................................................................... 3
Introduction ................................................................................................. 9
Why Choose Binary Options? ................................................................ 10
Understanding Binary Options .................................................................. 12
Different Types of Binary Options .......................................................... 13
High/Low ............................................................................................. 13
Range High Low .................................................................................. 13
One Touch .......................................................................................... 14
Common Terms when Dealing with Binary Options (Dictionary) ............... 16
How to Start Making Money with Binary Options ...................................... 20
Risk Management .................................................................................. 21
Making Room for Market Change .......................................................... 22
Strategies for Money Managing ................................................................ 24
The 30% Strategy .................................................................................. 25
Selling Out before Expiry ....................................................................... 26
Trading Basics: Binary Options ................................................................. 28
Selecting Between Put or Call ................................................................ 28
Strangle & Straddle ................................................................................ 30
10 Rules to Follow to Trade Successfully ................................................. 32
Rule No.1: Use a Trading Plan............................................................... 32
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Introduction
There is something exhilarating about closing a winning trade. It makes you
feel like you are on top of the world. However, in an ironic twist of fate, this
winning high can be the downfall for many traders. The addictive feelings
may make one become more reckless in trading, moving from one trade to
another as soon as possible.
This trade jumping can make one mess up various requirements for entry,
all so one can experience that sweet high once again. It makes you feel like
your dreams are within reach and you can start envisioning quitting your
job, getting a lovely house and buying a luxury yacht with a private dock.
On the other hand, if you end up with a losing trade, it can bring you
crashing down, making you feel melancholic and depressed. All your little
dreams seem to pop like a bubble.
However, one thing which separates successful traders from the rest of the
crowd is the fact they are able to curb these feelings. Whether they win or
lose, they do not let their emotions govern their trading abilities. What they
are really concerned with is their equity keeps growing at a steady pace in
a certain timeframe.
Trading for them is not like gambling. It is a business transaction and
whether they face losses or net a neat profit, they consider it all as pitfalls
and necessary evils which have to be borne to get to the end result.
Starting trading with such an attitude is one of the responsibilities one must
shoulder, regardless of the type of trading they are indulging in. With the
help of this eBook, you can understand the importance of trading right and
trading profitably with binary options.
Utilized in a profitable manner, they can be doorways to financial stability
and freedom. This eBook also contains plenty of strategies which can help
you when trading binary options and also allows you to make the most of
position sizing as well.
In short, this eBook is chockfull of useful advice but how you use it and the
end results lies largely on your shoulders. Moreover, you will also learn to
practice detachment while trading, avoiding becoming emotionally attached
or invested in the outcome of a particular trade or wager.
With these useful tips, tricks and strategies, you will soon be able to
experience financial security which will actually help to make your dreams
come true.
trade, it will be easy to make changes which allow you to repeat the same
performance with better results.
However, while the risks involved are small in the beginning, working with
binary trading options also gives you the opportunity to develop, hone and
practice good trading practices that can yield maximum results for you.
With attention to risk control, you can easily achieve that too.
With the help of this eBook, you can start making winning financial trading
decisions as well as follow a basic roadmap which will help you reach the
end result when you only have a limited amount of capital to start out with.
While trading in binary options does differ from futures, currency and stock
options, the main principles of trading remain the same. Therefore, a binary
trading option can be the perfect stepping stone if you are looking to trade
in bigger things in the future.
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At expiration, will the market price be lower or higher than the price
which is offered currently?
Pondering the answer to this question can provide you with all the data you
know to make the right decision. Moreover, the details and payout options
for each trade is prearranged and clear for the benefit of the trader.
When trading in High Low binary options, it is even possible to sell your
option at any time, regardless of the fact it is not near its expiry date. The
return will be partial but it can still be beneficial if this option is used wisely.
Range High Low
This binary option is similar in nature to the High Low option. However,
trading in Range High Low options provides the trader a more simplistic
trading process which allows more freedom. Nonetheless, it is still an
uncommon mode of trading binary options, largely owing to there being
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more risk when trading in these options. On the other hand, while the risks
may be higher, the payoff is greater too.
Trading in Range High Low options is based on two main decisions.
The trader has the freedom to choose the high or the low in the
option. This, in turn, determines the expiration rate and whether it
will end up being lower or higher than the current price of the
options.
When choosing the range of the high or the low, attention must be
paid. If the rate, at expiration rate, falls within the suggested range,
the trade can be profitable and incur higher returns. If it falls below
the range, the trade will be a loss and will not incur any profits.
Range High Low binary options are also known as In and Out options in the
market owing to the fact you are either opting for a bet inside the given
range or outside the range.
One Touch
This form of binary option is also exceedingly popular, more than the
Range High Low option. The one touch option only has one barrier to it and
the trader is only concerned with predicting whether the price will reach the
predetermined barrier or not.
The One Touch trading option differs from the other trading options in that
the trader is required to agree or disagree with the prediction only. The
price and the direction it will take have already been decided. The trader
will only be concerned with the boundary based on the current rate and
whether the market price will be above or below the boundary.
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Moreover, the One Touch is more feasible and less expensive because it
only has one barrier level. There are also good chances of a higher payout
because it is possible to get a full payout once the price meets the barrier
before the end of the predetermined time period.
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assets price will be lower or higher at expiry as compared to its price at the
time of purchase.
Commodity A form of assets consisting of raw materials which come
from different economic sectors, such as energy, metals, and food.
Currency pair The value of one currency as compared to another
currency. The first currency in the pair is referred to as the base currency
while the second one is referred to as the quote currency.
Contract - The basic unit of a trade for one lot. You will need a new
contract every time you trade an option.
Day trade Short-term trading that usually opens and closes within the
duration of a day.
Deep-out-of-the-money Also known as Deep-in-the-money - They are
the outer strike boundary of most price ladders. A way to define the
deepness from the point of view of price is when the spot price shows a
10% probability for out-of-the-money and 90% probability for in-the-money.
Downtrend When the assets price rate is showing a decreasing trend.
Early closure Also known as Sell - The ability to exit or sell out of an
option before it reaches its expiration.
Expiration The date and time at which the option expires and on which
the outcome of a trade is largely determined.
Graph Graphic representation of movement of price of certain assets.
In the money The term which shows a binary options trade is showing a
profit.
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Indices An asset which represents the average value of the total stock
price of various corporations.
Investment The revenue or amount which has been invested in a
specific trading option.
Near-the-money When the binary option shows it is near the agreed
upon strike price.
Out of the money When the results of a binary options trade show that it
is going to be a loss.
Payout The profit amount a trader will receive once the option expires on
its given date of expiration.
Pip The smallest value which allows a Forex quote to be moved.
Put option A contract for an option where the trader predicts the price of
an asset will be lower at the time as compared to its price at the time of
purchase.
Risk The possibility of experiencing financial loss from the investment
made in an option.
ROI - Return of Investment
Rollover Also known as Extend The process of prolonging the
expiration date of a trading option in order to increase its chance of expiring
at a profit or in-the-money.
Sell - The ability to exit or sell an option before it reaches expiration.
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Set-and-let - When a trader takes a position and does not trade in the
same market until the expiry and the bet is settled. Traders largely sit and
wait to find out whether they win or lose.
Spread - The difference between a bid and ask. The spread tends to be
narrower in new markets and has to be interpreted in terms of total returns.
Stock An asset which reflects the share or ownership a trader has of a
particular company.
Strike price The price of an asset or option at the time of purchase.
Target price The price of an asset or option that needs to be surpassed
in order for the trade to be considered as in-the-money or profitable.
Touch option A type of binary option where a trader has to guess if the
assets price will be able to reach a specific target price or not.
Uptrend When the assets price rate is showing an increasing trend.
Settlement Value - The value of the option once it expires, which is often
fixed or predetermined.
Underlying Market Price - The actual market price of a contract.
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Similarly, if you feel the price for gold will fall, all you have to do is to place
a put binary option. The same two steps will also follow this call, i.e.
choosing the trend for the asset and the amount you want to invest in it.
Then, if your prediction comes true, you will again earn money through it.
The entire process could take mere minutes or hours, depending on the
expiry time you have chosen.
Nonetheless, as an investor and trader, it is better to practice caution every
step of the way since there is the risk of loss and you might lose all your
investment. While trading binary options is one of the most effective
methods for making money online, you need the help of a trustworthy
broker who can increase the percentage of profit you earn with their wide
knowledge in binary option strategies.
You can also find plenty of brokerages online who offer their services on a
wide scale.
Risk Management
Risk management in binary trading is minor at best. Nonetheless, you will
have to consider two different modes of risk management when you are
dealing in binary options.
The main thing to look for here is that a trade in binary options is not
always based on set-and-let decisions. Therefore, opting for risk
management strategy according to it can be risky.
Many binary options are for short time periods, taking mere minutes, hours
and sometimes, days. The shorter the time period is, the less you are able
to manage the risk in the trade, even though the risk is definitely higher.
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In the end, they tend to be more of a gamble and if you are just starting out,
it would be better to opt for long-term trading options. The risks are lower
and if things do not look favorable for you, you still have time to alter your
position into a more beneficial position.
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Moreover, it is better to jump ship when you see your options going in an
unfavorable direction rather than waiting till the last minute to see if your
hunch will pull you up in the last minute.
The following are some tips and strategies which can help you to develop
and implement your own strategies to trade successfully in binary options
and to manage money properly when trading:
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2. Choose a put or call option (i.e. predict the fall or rise in the price of the
selected asset) and enter an amount with which you can purchase the
option (such as $200).
After opening the transaction, you monitor the asset and you can see it has
gained the maximum value possible, even though it has not hit the
expiration time. Nonetheless, market trends indicate the market will start
declining after this high.
To avoid a loss, you can ask the broker if he is willing to buy the option
back from you. The broker will offer you a price, lets say $240, and you
can walk away with a small profit.
For beginners and professionals who want to minimize their risks and seek
easy profits, this trading option is one of the best modes they can turn to.
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A good binary option trader will be able to gain a profit from both these
conditions. This is also one of the reasons binary trading is extremely
popular.
Moreover, apart from having the ability to comprehend and read market
conditions, proper technical analysis will also be needed. By studying the
price performance of previous assets, it is possible to gain proper
knowledge regarding binary options which can help one choose between
put and call.
Strong movement trends in price can help to make it an easy choice. In
certain cases, there may not be a distinct trend which can get rather
confusing. In this case, though, the latest movement in price may be
considered a deciding factor.
The time of expiry should also be considered when you are conducting
technical analysis. With short expiry times, the last performance regarding
the price may be enough to give you proper results. On the other hand,
with longer expiry times, it is necessary to acquire a wider picture which
showcases the basic price performance of an asset, before any decision
can be made.
In some cases, the price of the asset may move outside high and low
boundaries but in many cases, it is likely to fluctuate between these two
points. If the strike or target price of the asset lies close to the boundary, it
can be considered the price will not move lower or higher before a reversal
appears.
This factor is another element which should be taking into consideration as
it is also possible to put or call and earn a profit if a reversal can be
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predicted in advance. Sometimes, the basic price of an asset will break out
of the set boundaries predicted for it. These breakout points can also be
quite profitable but they are harder to predict.
The main thing to keep in mind here is that the put or call option should not
be chosen on the basis of guesswork only. To make it easier to study
binary options, there are plenty of tools which can be used to study the
previous performance of various asset prices.
Staying updated with the latest market news is also a good option since it
can often be the best indicator of the present market conditions. When both
forms of analysis are taken into consideration, the decision of having to
choose between put or call for a binary option should be an easy one.
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trends also makes it possible to learn and gain instinct and get a feel for the
market as well.
Simple things in the world around us like politics, global events, different
economies and even sudden changes in weather can create an impact on
trading markets.
Since the environment of the market is always fluctuating, it is the traders
who understand past trends and can connect them with current market
practices who are the ones, truly prepared to face the risks of the future.
Keep your trading account separate and your personal account separate.
Naturally, one should not stake 100% of their capital in a trade but even if
they are investing about 20%, there will still a stop loss amount of 10% or
15%. Any trade that causes a loss higher than this predetermined amount
should not be undertaken.
The stop loss is a useful way to limit the exposure faced by a trader in any
trade. A stop loss also takes out a certain amount of emotion that might be
unconsciously instilled in trading decisions, since once a trader is aware
that he will only lose a certain amount on a trade, its less like gambling.
Never choose to ignore a stop loss, even if doing so results in producing a
profit with a winning trade. It is bad trading practice and can easily cause
you to overlook many of the rules you set for yourself.
Leaving a trade at a stop loss is good trading since it allows you to follow
the rules you set according to your trading plan. While it is preferred that all
trades should close with a profit, it is not always a realistic expectation.
With a stop loss, you have a buffer which provides protection, ensuring that
all losses and risks are minimal and according to your limitations.
If it is possible, starting from scratch with a new trading plan can be a better
idea. A trading plan which is performing unsuccessfully is a problem which
should be solved immediately. It should not be looked at as the end of your
trading business.
On the other hand, a poor trader is one who is incapable of following their
own trading plan. Poor trading habits, stress and other factors can also
contribute to make their skills weak.
A trader who does not feel that they can handle the responsibilities of
trading can take a break to resolve those personal problems, which are
affecting their skills. Once they have worked out their difficulties, it is
possible to resume trading once again.
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trading plan. If you berate yourself over the loss, you are only punishing
yourself for following your plan.
If you faced a loss, it is possible to analyze that trade and figure out ways
which could make your trade profitable. But every time you make a profit
through poor trading decisions and dont stop yourself from doing that
again, it will be become harder to break your bad habits.
This will also make it easier for you to indulge in reckless trading practices
that push your trading plan to the back seat. This will slowly begin to cause
your trading to spiral out of control and it will be harder to adhere to all the
rules you set to safeguard your capital. You will create a lot of unnecessary
risk that could seriously harm your trading potential.
This is why; you need to push away from undisciplined trades regardless of
the fact that they may look more profitable. Moreover, even if jumping in
and out of the market worked out once, it should not be considered to work
every single time. Earning on a bad trade basis is the worst habit a trader
can have. Trading like this also destroys the traders capacity to judge well.
By trading in this manner, a trader can develop a warped perspective of the
risks they face in a trade. A bad position will not be evident to them until it
suddenly wipes out their account which could come as a huge shock.
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from a trade. The rewards earned through your success should encourage
you to carry on establishing good trading practices.
It is possible to break your bad habits but only if you are truly honest with
yourself. Do not lie to yourself and think that if you got lucky once or twice,
your luck will hold out. Trading has no room for luck.
Always try to stick to facts and craft a trading plan. Define your success as
following your trading plan and reward yourself whether the trading plan
produced a profit or a loss for you.
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same psychological drive which is similar to traders who are faders. They
are on the lookout for fast profits as quickly as possible.
While it isnt always the proper way to predict which trend you showcase,
choosing one option shows that you have an inherent style which just
needs the proper tools to bring it out to your benefit.
Trading Timelines
The identification of trends can make you consider some more important
questions such as When trading, do you prefer short-term or long-term
time frames?
This question also ties in with the trends. Traders who are trend based are
usually willing to work on timelines which are longer. They have the
patience of the fisherman and they will not mind baiting their hook and
letting their line dangle until it gets a bite.
Traders who are counter trend based will be more likely to work as faders.
They will look for shorter time periods to trade in and for quick profits as
well.
Unfortunately, many of the trends which develop in the FX market can take
up to months or even weeks. The shortest time frames are only when one
is trading in the currency market. The market has changes on an hourly
basis and the average risk/reward from their targets have total of 30 points,
at least.
The Analysis
Once you decide on the perfect frame which suits you, the next question to
ask yourself is, what type of analysis can help me make proper selections
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in trade? Even then you will be faced with two choices that belong to two
different groups, namely:
Group A: The Fundamentalists: They keep an ear to the ground and rely
on economic reports, news, press releases and other commentaries from
various monetary.
Group B: The Technicians: They rely on careful market and technical
analysis and rely on various tools to help gauge their profits, losses and
other market changes.
There is a never ending debate between the two groups. The
fundamentalist scorn at the attempts made by technicians to predict future
prices by relying on the hints and trends visible in the present charts while
the technicians consider that the data that fundamentalists rely upon is
contradictory at best and rather inconclusive.
In this fiery debate, who is right? The truth is, neither party. Trading based
on technical data or fundamental data is like boxing yourself into a corner.
The best option is the perfect use of both this data. When used together,
the data is coherent, reasonable and can provide insightful data into the
market.
Fundamentalists are ill prepared for sudden changes that the market might
make with regard to the price action that is shown in the charts. On the
other hand, technicians are also ill prepared for when a sudden piece of
economic news can create changes in the market. Both occasions cause a
loss for one group or the other.
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Candlesticks
The term candlesticks in trading generally refer to the activity of price. The
expression candlesticks originally comes from Japan where it applied to
trading in rice. It is almost a hundred years old.
Colored Candlesticks Two
The most common feature about candlesticks is the difference in color. The
color scheme it shows can often be an indicator of the activity it is
experiencing. The two common color schemes found in candlesticks are is
black & white and red & green.
Usually the white and green portions of the candles represent bullish
activity. Bullish activity is an indicator that the price has increased. The
black and red portions of the candles represent the bearish activity. Bearish
activity is an indicator that the price has decreased.
In more simple terms:
A bullish candle has a close price right above the opening price.
A bearish candle has a close price right below the opening price.
The Wicks are at both ends and indicate the highest and the
lowest points reached.
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The body is made up of two parts. The top and the bottoms. These
are known as the Open and Close prices.
These four parts are in the DNA of any price action. A candlestick is
capable of representing price activity for any time given frame.
Even when a trader picks their own time period, the candle is used to
represents that time frame. For example: 100 candles for a time period of
10 minutes will be shown as 100 x 10min or show 1000 minutes of the
price activity.
Candle Patterns
Based on the markets activity and the price movement, it is possible for
candles to form different patterns based on their color and their actual
placement. To carefully read and use these patterns to your advantage,
you need to understand them. Out of these various patterns, the following
are the easiest and the most common candle patterns to be found:
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Hammer
Hammer candle patterns are called hammers because the pattern
resembles a hammer. It is largely recognizable by the fact that it has a long
wick.
It is also normal for the wick to be twice the size of the body as well so it is
a distinct pattern which cannot be missed. The hammer also usually
appears to indicate a reversal in the market.
Dojis
Dojis are important candle patterns because they can help determine when
the market is beginning to show indecision or hesitation. Looking more like
stick figures or letters, a doji does not have a typical candle body owing to
the fact that the price for opening and closing is almost always the same or
remains the same in most scenarios.
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Spinning Tops
Spinning tops are similar to the doji candle patterns. Apart from having
rather small bodies, they are also used as indicators of market hesitation or
indecision.
Tweezer
Tweezer candles often showcase strong support and resistance in the
market. When the tweezer pattern is towards the bottom of a candle, the
market has failed to reduce or push the price lower than it is. When the
tweezer pattern is towards the top of a candle, the market has failed to
push the price higher than it is.
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Mood Candles
While candlesticks are a great indicator of the current market mood, it
should be noted that their accuracy in predicting the markets emotion is
significantly impacted by the timeframe related to that particular
candlestick. Owing to this factor, it can be considered that one-minute
candles are less accurate in prediction as compared to one-hour candles.
In binary options, it is preferable to use four-hour candles and one-day
candles to truly gauge an accurate picture of the market mood. You should
also pay attention to the timeframe which is doable for you and which you
prefer using. It would not be feasible to study four-hour candles for market
moods when you are actually trading in 60 seconds or by the hour.
Concealing Baby
Swallow
Engulfing
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Hammer/
Dragonfly Doji
Harami
Harami Cross
Homing Pigeon
Inverted
Hammer/
Kicking
Gravestone Doji
Ladder Bottom
Matching Low
Morning Star
Meeting Lines
Piercing Line
Stick Sandwich
Tri Star
Unique
Three
Doji Star
River Bottom
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Rising
Methods
Three
Three
Side By Side Soldiers
White Lines
White
Mat Hold
Separating Lines
Upside
Gap
Three Methods
Upside
Gap
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Tasuki
Belt Hold
Engulfing
Deliberation
Evening Star
Hanging
Man/
Dragonfly Doji
Harami
Harami Cross
Three Kicking
Meeting Lines
Identical
Crows
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Inside Three
Down
Three
Shooting
Star/
Down
Gravestone Doji
Tri Star
Two Crows
Doji Star
Falling
Methods
Outside
Downside
Gap Downside Tasuki
Three Methods Gap
Three
Separating Lines
In Neck
On Neck
Side By
White Lines
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Three
Side Crows
Black
Thrusting
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2.
After that, look for a higher low, coming after the lowest low.
3.
1.
2.
3.
looking at the number of times the price has tested the support and
resistance lines and come back. The stronger the trend, the less likely it is
that the price will break through it.
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Support
Support shows the point at which the price has stopped falling in the
market is at a temporary rest.
Resistance
Resistance shows the point at which the price has stopped rising in the
market and has taken a temporary break.
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Bollinger Bands
Devised by John Bollinger, Bollinger Bands are a map of the price volatility.
The Bollinger Bands has three parts in their charts. The first part is
indicated by a curved line in the middle called the Moving Average line. The
second part is indicated by a lower band and the third part is indicated by
an upper band.
The lower and upper Bollinger Bands create a statistical curve which is
used on the price. In fact, the upper and lower bands represent a bell curve
around a moving average. Bollinger Bands are used as indicators in
several markets. The bands allow a trader to verify whether the price is in
resistance or whether it is in support. Prices which are close to Bollinger
Bands can pause or reverse its direction.
The strike price for a binary option may also be within this band. You need
to be aware of where the binary strike price is in relation to the band in
order to successfully estimate the degree of resistance or support it might
face in the future.
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candles are located on the lower or upper band, it can show that the
market is undecided regarding the direction it should take.
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2.
The objective of most technical analysis is to predict the direction price will
take in the future. By focusing on price only, the technical analysis can take
a more direct approach.
Technicians believe it is best to concentrate on what and ignore the why
while the fundamentalists focus more on the why. However, when all one
needs to know is the value of an asset and what someone is willing to pay
for that, it becomes easier to ignore the why.
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predict changes in the market, focusing on the price can provide certain
hints which allow one to be better prepared for those sudden changes.
Supply, Demand and the Action of Price
The action, the present, and the future price can be greatly influenced by
the supply and demand of a certain commodity in the market. Moreover, it
is also possible to predict whether the price will decrease or increase in
action. In the most basic reading, high prices can be considered an
indication of an increase in the demand for that commodity. Similarly, a
decrease in the price can be looked at as an increase in the supply of the
commodity.
Support and Resistance
Simple analysis can help identify the levels of support and resistance in the
market. These are normally marked by periods where the prices usually
show movement, only within a certain range for an extended period, and
can easily predict that supply and demand are deadlocked.
When prices are out of the defined trading range, it shows that either
demand or supply is rising. If the prices start to move above trading ranges,
upper band, demand is in the lead. If the prices move below trading ranges,
lower band, supply is in the lead.
Price History Pictorial
Pictorial price history is present in the form of a price chart which can offer
one plenty of valuable insight and information. The price chart is a pictorial
account of the movement of price during a certain period of time. It is far
easier to read as compared to trying to read a table of numbers. Price
charts make it easy to identify and find out more about the following:
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Open Interpretation
The findings or results one gets from a technical analysis are often open to
the interpretation of the analyst. Even though there are some standards, it
is possible for two technicians to look at the same chart and yet read two
different meanings or see different patterns based on what they think it
means.
While this is frustrating and can make one wary of trusting the findings of a
technical analysis, it should be noted that technical analysis is treated more
like an art than a science. Its like one of those trick questions where the
cup is either half-empty or half-full.
Always Something More
Even when a trend has been identified, there will always be another level of
importance nearby. With an open interpretation approach, it is possible for
one to always find another level, to always look for another level and never
really be completely satisfied with the results.
Late Predictions
Another flaw in technical analysis is that the traders run the risk of being
too late. By the time a trend has been identified with the help of technical
analysis, it is possible for a large part of the move to have taken place
already.
Remorse of the Trader
Not all the signals and patterns of technical analysis work. While you will
have various rules and indicators and patterns which match, it is still not
possible the pattern will not change because it is subject to change and is
influenced by other factors, like momentum and volume. On this basis,
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what works for a particular trader may not suit another even though most
principles in technical analyses are universal.
Conclusions of the Analysis
Even though there are some principles and rules which can be applied to
technical analysis on a universal level, it is best to treat technical analysis
more like a form of art than a science. Even as a science, it is largely
subject to open interpretation.
Nonetheless, it is flexible in approach and each trader should develop and
use one which suits their style and answers to their needs. Developing a
style can take time, dedication and effort but the rewards are worth it.
Daily
Weekly
Monthly
Quarterly
Annually
Intraday charts note the movement of price within a single day. This
means, their timescale can range from 60 seconds, five minutes or it could
also cover the whole day, from the opening bell to the closing bell.
Moreover, shorter timeframes also have more detailed charts. Each point of
data represents the closing price at that time or showcases the open, high,
low and close points depending on the chart.
Daily charts note the movement of price on the chart for a full day's trading.
Again, if the data represents the closing price at that time or showcases the
open, high, low and close points depends on the chart.
Weekly, monthly, quarterly and annually charts are used for long-term
trends to study the movement of price of a particular stock. Each point of
data will indicate what happened in that specified time period.
The Price Scale and Properties of Price Points
The price scale is located on the chart towards the right-hand side. It shows
the current price of the stock and draws comparisons to its data points in
the past. This seems like a simplistic concept, the price scale moves from
lower to higher prices as the scale moves from the bottom to the top.
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Bar Charts
The bar chart is a chart which is an upgrade of the line chart owing to the
fact it has more information regarding each data point. The chart has a
series of vertical lines which represent the data points. The vertical line is
used to represent the high and low of that trading period, as well as the
closing price.
The open and close are on the vertical line and are represented as a
horizontal dash. The opening price on a bar chart is showcased by a dash
on the left side of the vertical bar. The close is showcased as a dash on the
right.
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Candlestick Charts
The candlestick chart is similar to the bar chart, but the main difference lies
largely in how it is constructed. The candlestick chart also has a vertical
line which shows the trading range for a certain time period.
A wide bar on the vertical line highlights the difference between the open
and close. Like bar charts, these candlestick charts rely on colors to
highlight important events in certain trading periods.
However, a huge problem of the candlestick chart color configuration is that
different sites use different colors according to their standards. Therefore, it
is best to take the time to understand the color configuration used by the
chart site you are working with for your candlestick chart.
There are largely two colors to show up and one for days when price falls.
When the price is up and closes above, the candlestick can be clear or
white. If the stock is down, the candlestick can be black or red.
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The pattern is created by price movement tests which support or resist the
levels and are unable to break it twice. This pattern is used to signal longterm reversals in trends.
Triangles
Triangles are also among the well-known chart patterns of technical
analysis. There are three types of triangles and are known as the
symmetrical, ascending and descending triangles. These chart patterns
can appear and last from a few weeks to a few months.
The symmetrical triangle has a pattern wherein two trend lines turn towards
each other. This pattern shows a breakout to the downside or upside of a
trend in that direction.
In the ascending triangle, the upper trend line is flat, and the bottom trend
line slopes upwards. This is a bullish pattern which shows an upside
breakout. In the descending triangle, the lower trend line is flat and the
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The flag shows a channel with no convergence among the trend lines. In
both cases, the trend continues when the price has moved above the upper
trend line.
Wedge
The wedge pattern can be a reversal or a continuation pattern. It resembles
the pattern of a symmetrical triangle except that the wedge slants in a
downward or upward direction. The other difference lies in the fact that
wedges form for long periods, usually around three or six months.
Since wedges are continuation and reversal patterns, they can be rather
confusing to read. Luckily, a falling wedge is bullish and a rising wedge is
bearish. If the price rises above the upper trend line, it forms a continuation
pattern, while if it moves below the lower trend line, it forms a reversal
pattern.
Gaps
Gaps are used to signify when something important occurs, like betterthan-expected earnings. There are three main types of gaps:
Breakaway This gap forms at the start of a trend
Runaway This gap forms during the middle of a trend
Exhaustion This gap forms near the end of a trend.
A gap shows an empty space in a chart, usually to mark one experienced
between a trading period and the next trading period. This happens
because the prices have a large difference
Gap price movements are generally shown on bar charts and candlestick
charts but are omitted from point and figure or basic line charts.
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Rounding Bottom
A rounding bottom, also known as a saucer bottom, is a long-term reversal
pattern. It signals a move from a downward to an upward trend. This
pattern can last from several months to several years.
A rounding bottom pattern looks like the cup and handle pattern but it lacks
the handle. Its long-term nature and lack of any confirmation trigger, like
the handle in the cup and handle pattern, make it a rather tough pattern to
trade on.
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Define its Objectives These should be the basis for your motivation to
trade, giving you a tangible end goal. All you have to do is consider what
you hope to achieve with the help of your trading account. Keep the
expectations realistic and achievable so that you will stay motivated and
not get disheartened if you face any setbacks.
Think on a Long Term Basis Dont stress over day to day results. Think
of your trading account as something meant for a long-term basis so try to
opt for trading options based on weekly or monthly targets. Day to day
trading options only provide small payoffs which may look significant at that
time but they are nothing compared to the profits gained by meticulously
planned, long-term trading options.
Keep Track Keep track of all the market changes or other changes in
your trading routine so that you do not get completely thrown or bowled
over when things take a sour note. Therefore, keep a notebook of all
withdrawals, deposits and profits you incur. This will also allow you to see if
your trading plan is yielding solid returns for you or not. You can then tweak
your plan or strategize more comfortably based on your findings.
Once you have made your trading plan, remember to stick to it. Do not
jump over it or opt for impulsive trading since it can lead to you developing
more negative qualities. It is best if you develop the habit of reviewing your
plans before you start setting up or searching for a trade. This will ensure
you will be more secure emotionally and mentally should you face a loss or
gain a profit. This will also help instill the importance of treating trading
options like a business.
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Apart from the trading options plan, remember to keep up with the technical
research and fundamental research as well. It is important to be aware of
market happenings as they allow you to prepare trading strategies
according to them. Moreover, before any change happens, there are
certain warning signs which, if picked up early enough, can be considered
as guidelines to upcoming market changes.
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Conclusion
While binary trading does happen to be among the easiest in the trade
markets, it still has certain hidden tips and tricks that can greatly assist
anyone who is just starting out.
Moreover, sometimes, things might look too tough or too difficult and you
may be unable to make a successful trade but remember to keep your
emotions out of the mix. Think smart and think with a clear head and you
will soon be on your way trading successfully.
However, while the risks involved are small in the beginning, working with
binary trading options also gives you the opportunity to develop, hone and
practice good trading practices which can yield maximum results for you.
With attention to risk control, you can easily achieve this too.
With this eBook, you can start making winning financial trading decisions
as well as follow a basic roadmap which will help you reach the end result
when you only have a limited amount of capital to start out with.
We hope you learnt many of the strategies and patterns which make up a
huge part of binary trading. Moreover, with the help of this eBook, you can
develop proper trading habits which can assist you when you want to move
on from trading binary options to trading other assets.
We wish you all the best.
Good Luck!
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