Three Indian binary options strategy is a fairly effective method of working in the market. This method is described in the book of the famous trader Linda Raschke. This binary options’ strategy is frequently called by other names, including the Three touches. Many beginners in trading confuse this strategy with the work according to the Elliot and Gartley method because of their inexperience.
But, unlike the notable professional of the technical analysis, the creator of this strategy did everything in a simple and intuitive way. By the way, the Three Indian binary options’ strategy can be applied in combination with different underlying assets that can be used by a trader in binary options.
Three Indian pattern strategy (123 pattern) belongs to the reversal type. Trading using it is pretty simple. A trader who has managed to determine it on the chart can have almost absolute confidence on what the market’s movement will be in the nearest time.
Trading using Three Indian pattern strategy
Chart pattern Three Indians can appear on both growing and declining markets. In order to determine the pattern correctly, it is necessary to know the certain rules. When the bulls have the advantage in the market, the pattern is determined by the minimums. When the Three Indian pattern appears on a chart, the following situation can be seen. Three consequent minimums have to form in the growing market, and each of them has to be higher than the previous one. The third minimum will be the signal to buy the Call option. On the picture above, you can see that the pattern has worked off fully, and the option’s purchase in the third point was righteous.
If the market is bearish, you have to look for the points for the Put option’s purchase. It is necessary to determine three consequent maximums, each of which has to be lower than the previous one. This option can be bought at the third point.
In order to work with the Three Indian binary options’ strategy, you may build the trend line on a chart, and it will cross either maximums (in case of descending trend) or minimums if the trend is ascending. In this case, the third chart’s touch to the line will be a signal to buy binary options. In the bearish market, this touch has to be above. The trend line will act as the resistance level. The Put option can be bought after the third touch.
The opposite can be said about the growing market. Signals for the Call options’ purchase can searched when chart touches line, which is drawn on three minimums. After the price touches the support line the third time (trend line acts as the support in this case), you can buy the Call option.
It is important to choose the graphical model on a chart correctly. If a trader makes a mistake, it can lead to sustaining losses. Instead of the Three Indian pattern, the traders find the Head and shoulders pattern most frequently. It is clear that if a trader has confused between two models, he will take losses because the Head and shoulders model is the reversal model that is based on either top or bottom of the market.
When you trade using the 123 pattern binary options’ strategy, you don’t have to forget about the money management. Even if a trader is absolutely confident that he has found that particular chart pattern, it is important to abide the money management rules and not risk with the deposit’s funds. The same rules have to be also abided in other binary options strategies.