The Wedge binary options’ strategy is based on the Wedge chart analysis’ pattern which is in some way similar to the triangle pattern. The main wedge’s difference from the triangle is in the fact that the wedge has more elongated form, and its top has the inclination up or down. The chart analysis’s pattern wedge occurs on different time scales.
How does the Wedge pattern form?
It is important to understand that the longer the time interval for the wedge’s formation is, the more significance has to be attached to it. The chart’s pattern wedge is formed when the increase or decrease rates in the market become slower. In other words, both maximums and minimums continue to update. But the price is not able to grow or decline substantially. In other words, sellers’ or buyers’ strength (depending up which exact wedge is forming) tapers gradually.
Bearish (descending) Wedge pattern in binary options trading
Sellers dominate the market during the bearish wedge, and buyers dominate the market during the bullish wedge. When the bearish wedge chart pattern is forming in the market, it is necessary to follow attentively, whether the price breaks the bottom border of this pattern, which is, at the same time, the support line. After the support line is broken, we can say that the descending movement in the market is beginning. At that time, a trader may buy the Put binary option. But it is recommended to wait until the price not only breaks the bottom border of the wedge chart pattern, but also settles under it. It will indicate that the pattern has finally formed and its work off has begun.
Bullish (ascending) Wedge pattern in binary options trading
The same can be said about the formation of the chart analysis’s pattern that is called ascending or bullish wedge. During its formation it is necessary to attentively follow when the price breaks the top border, which, at the same time, turns out to be the resistance line. In this case, it is possible to say that the bulls (buyers) start to take the dominant position in the market. And the ascending movement is starting in the market. At this time, a trader can buy the Call binary option. Nevertheless, in order to be fully confident that the ascending movement starts in the market and that the Call option can be bought, it is the best for a trader to wait until the moment when the candlestick will close over the resistance line.
It is important to understand that if the wedge chart analysis model forms within the trend’s continuation, there will be no change of the current trend. In other words, if the ascending bullish wedge forms within the ascending trend, it would not lead to the change of the current trend and would indicate that the ascending trend will continue. The same can be said about the formation of the bearish wedge within the descending trend. It would not signalize about the change of the current descending movement, but would indicate that the bearish trend continues.
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