The word trend has come into general use long time ago. In other words, it means direction. This word is also used in the work with financial tools. It defines movement of the market in the certain direction. Determining the trend on a chart is pretty simple. In order to do this, you have to find maximums and minimums and draw lines on it. If maximums and minimums constantly grow, then the trend is ascending. If they decline, then the trend is descending.
How to determine trend for trading?
On the one hand, everything really looks pretty simple, and after the determination of a trend, you can buy an option. For example, if the trend is ascending, you have to buy the Call option. If the trend is bearish, it is necessary to buy the Put option. But, if you look at the chart, you will see that a trend doesn’t last forever. Indeed, when using volatile tools, it frequently progresses in waves. For example, when the movement is ascending, frequent price’s bounce offs from maximum to minimum can be observed. But in order of the trend’s continuation and for the trader’s assurance of the ascending movement, the price on a chart doesn’t have to touch the previous minimum, but has to be higher.
Lines of support and resistance are the key tools in the Trend strategy. Support’s line is drawn on the price’s minimum. It determines the level of price which can’t be lowered by sellers and bears. If the trend is ascending, support’s level will be directed up. At the same time, the price chart may touch the support’s level, as well as to exceed it in the number of cases. But if the ascending trend continues, then the price sort of rebounds from the support’s level and goes up to the update of maximum.
The same can be applied towards the resistance’s level. When the price faces this line on a chart, it rebounds from it and goes down. At the same time, we can consider the ascending trend only when the resistance’s level is directed up. If the sideways movement is observed in the market, both support and resistance levels will move horizontally (such situation is called flat). If the both lines are directed down, then there is the bearish trend in the market.
Strength and reliability of a trend can be indicated by the fact that support and resistance lines stay in the same stance for the prolonged period. In addition, trend’s reliability can be determined by the amount of times when the price has touched lines (in other words, when it has tested levels).
How to trade with trend?
In order to use the binary options’ trend strategy, it is primarily necessary to determine this trend. As mentioned above, it is determined by the lines of support and resistance. Once the trend is detected, you can start trading. Many beginners try to trade with the trend and, at the same time, against the trend. For example, if the trend is ascending, the buy the Call options up to the support level. After this, when the touch occurs, they buy the Put option. Such approach may bring high profits, but it is riskier too. For this reason, trading in one direction will be the best variant.
Efforts to earn on the price’s bounce off are fraught with possibility to get the loss. This is because a trend can become stronger at any time. For example, the ascending trend can move up from the defined channel. And it means that the price is unlikely to return down until the expiration time. The exception can be the situation when a trader doesn’t conduct the long-term trading and doesn’t assume that the ascending trend will change to the descending in the nearest time.
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