Trend reversal is another strategy binary options’ strategy in which the indicators are not used. This trading strategy was developed for the daily time scale. It is needed to mention that this strategy is not the breakout one, but the reversal one. The essence of this trading system is to track down the trend’s reversal and to earn profit.
It is necessary to note that the Trend reversal binary options’ strategy is really simple in usage. It can be used not only by the professionals in trading, but also by those who have only begun to work in the market and don’t know many intricacies. Absence of indicators within this strategy makes it even simpler.
Usage of Trend reversal strategy
Situations when the current market’s movement runs short usually occur in the market. Of course, the price can still update minimums or maximums, but it occurs by inertia and is not backed by the market player’s attitudes. This is the time to expect the approaching reverse of the main trend. The essence of this trend is that a trader will not trade according to the daily trend, but will wait until its reverse. There is only one condition that has to be abided. Option’s purchase can be conducted only if the daily candlestick overcomes the minimum or the maximum of the previous daily candlestick.
On the picture you can the formation of two consequent bullish candlesticks on the daily chart. The third candlestick is the bearish one. It shows that a trader can earn on it if he buys the Put binary option. Screenshot explains the Trend reversal binary options’ strategy perfectly. All conditions for the purchase of the binary option against the market movement were abided. Within the formation of the last candlestick, it can be seen that the buyers’ efficacy was used up. Despite this, there was an effort to update the current maximum. But this effort did not turn out to be successful. After this, sellers have taken almost full possession of the market. As a result, the price has overcome almost three hundred points. It is pretty simple to earn on a such candlestick for traders. For this, it is only needed to buy options to the direction of the trend’s reversal.
Application of trend reversal
So, if there were one or several bullish candlesticks on the chart, it can be expected that the bearish candlestick will soon appear. At the same time, buying the Put option is recommended only when the bearish candlestick will exceed the bottom border of the previous bullish candlestick. The breakout down of the previous low day will be the signal for the purchase. As for the expiration time, it can be set as from several minutes to the end of the current day.
The same can be applied to the situations when there were few subsequent bearish candlesticks on a chart. In this case, you can expect that the market will reverse soon. Buying the Call option is recommended only when the current candlestick exceeds the maximum of the previous one candlestick. The breakout of the top level of the previous candlestick will be the trading signal for a purchase of the Call binary option.
If you know these simple aspects, you can trade binary options pretty profitable. There are no other secrets in this strategy. As you can see, it is really simple, but very effective. The main thing is not to forget that the money management conditions have to be abided.