Identifying Trends in Binary Options

Trends in Binary Options

If you having a hard time to decipher the technical charts and that candlesticks confuse you, this article is without any doubts made for you. Trend lines are the lines you absolutely need to master if you want to give a boost to your trades. At BinaryOnline we decided to help you understand how to identify trends in binary options!

If technical charts have always been a nightmare and that you have always been willing to learn how to read and understand the charts, trend lines will definitely help. But first of all, let’s understand what are trends. Defined as a pattern which gradually changes according to some external factors, a trend can help traders to accurately predict the future direction of the price of an asset over a period of time. Usually represented in the form of a curve or a line, trends are usually represented on graphs.

Being one of the basic tools available in the binary options industry, a trend line is the term given to the lines that are present on the technical charts. Trend lines help traders to identify how an asset is currently trending and also help the latter to have an idea on the future trend of this specific asset. Being a straight line which acts as a connection between two or several price points, trend lines have the same function as a line of resistance. It is good to know that the name given to the study of these trend lines is known as the trend analysis.

 

Trend Analysis

As stated earlier, it is the term given to the study of trend lines on charts. Principally used in technical strategies, this analysis helps traders to predict the future direction of a specific asset by assessing past data. The essence of this strategy is that past events will always have an impact on what will happen to the asset in the future. Trends usually move in two directions, either it is an upward trend or a downward trend. In case you come across an upward trend, you will immediately know that the market is bullish. On the other side, when the trend goes downward, this means that the market is bearish.

Moreover, traders should know that there is no minimum time required for a direction to be defined as a trend. That is, even if the prices went up for a very short period of time, it is still considered as an upward trend. There are 3 types of trends which are usually identified on a chart, the Short term trend, the Intermediate trend and finally the Long term trend. Event if trend analysis is widely used and appreciated by many traders, it does not guarantee that all the trades will be won. That is, trend analysis does increase your winning chances but does not promise that all the trades you placed will be in the money.

 

Trend lines in Binary options trading

In order to make an optimum use of trend analysis, you will first have to draw the trend lines. These lines will help you to have a clearer picture of the direction the price of your asset. Drawing the line is very easy and can be done in only a few steps. Nevertheless, you should be able to differentiate between a bullish line and a bearish line.

The Bearish line

The bearish line is the one which will illustrate the downward trend. That is while drawing the line if you notice that the trend is downward then you should place a Put option.

 

 

Step One: Identify the highest point on the chart.

Step Two: Once you have the highest point, look for the second highest point.

Step Three: Connect the dots and extend the line to the right hand side of the chart.

Step Four: Analyse your line, if all the candlesticks lie under the line you drew. Hence the trend is bearish.

The Bullish line

The Bullish line is the line which represents an upward trend. Therefore, if you notice that the line you drew goes upwards, then you are advised to place a Call option.

 

 

Step One: You will have to identify the lowest point on the chart.

Step Two: Once you have the lowest point, look for the second lowest point.

Step Three: Connect the dots and extend the line to the right hand side of the chart.

Step Four: Analyse your line, if all the candlesticks lie above the line. You know that the trend is bullish.

The Support & the Resistance lines

Once you understood the bearish and the bullish lines, you will be able to move to the next step of the trend analysis which is the support and the resistance lines. These two lines are important because they will help you to use the different trend lines strategies available.

 

 

The Support line: Use a representation of lowest trends of the asset you selected, the support line is drawn by considering only the peak values for a specific period of time. Besides, if your trend lies below this line, it means that your asset is trending downwards.

The Resistance line: The resistance line will always be used to represent the highest values of the price of the asset you chose. That is, if your trend rise above this line, it means that your asset is trending upwards.

 

Binary Trading: Trend Lines Strategy

Now that you master the drawings of the trend lines, you are ready to start using the binary options strategies which involve trend analysis. While navigating the internet, you will find a lot of complex strategies involving the use of trend lines. However, as part of a plan to help you in your trades, BinaryOnline has selected the strategy that is the less complicated and that will help you to level up your game.

The strategy that we have selected is known as the price movement corridor. Use to spot the general situation of the market, this strategy will help you to project the future direction of the asset you chose. You will notice that for this strategy, you will need to draw a support line and resistance line so as to determine the corridor. In the case the corridor line goes beyond the resistance line, you are kindly advised to place a Call option.

 

Get set, Ready, Draw!

At BinaryOnline, we always encourage our traders to make the right choices. This is why we warmly recommend traders to make use of trend lines in their trading journey. It is important to know that trend lines are an essential part of binary options trading and that it should be implemented in your trading strategy as soon as possible. Besides helping you to have a better grasp of the trend of your favourite assets, this feature will give a boost to your trades. If you want to test the effectiveness of trend lines, start here.