Binary Options & Predicting Price Moves
Binary options trading involves predicting the movements in the financial markets and it can be quite hard to predict the direction in which the markets will move in a predetermined time frame. Sometimes the predictability comes down to zero because of the false signals that are generated continuously and the volatile nature of the market.
But, there are a number of factors that have an influence on the market and smart traders usually make use of these factors to get an advantage when placing trades.
One of the ways in which you can be successful when trading binary options is to hedge uncertainty so you can predict the movement in price and decide whether to place a trade or not.
Price and Time Symmetry
There are times when the markets move in no direction for a long period of time. All of a sudden when a breakout occurs, the markets can reach new highs and lows. If you are a serious trader, you must know how to study the trend to figure out when it will start to slow down. The market usually moves in two or three steps. It is difficult to predict where the price will go because it all depends on market data. Traders must be watchful of the trends and patterns and they must exit the market at the right time to prevent making losses.
The 200 Bar Moving
Traders have to keep in mind the 200 bar moving average when trading binary options. This can be done by keeping track of the 1 hour charts. After the price has cleared the 1 hour 200 bar moving average, the price will continue sideways or in the same direction. Sometimes, the 200 bar moving average may not seem to work and there is a lot of uncertainty involved. But, smart traders know what moves they must make to prevent losing trades.
Traders must also be mindful of divergences which tend to occur in momentum indicators. Traders must keep an eye on the market. for example, if the market tends to move too fast or too much and it is not confirmed on the RSI which is a momentum indicator, then traders must know that the market can soon make a steep move. Many traders find it tricky to use divergences.
They must be used only by those who can interpret additional indicators correctly.
If you want to get a good insight into the market, you must use two or more momentum indicators. Using a single indicator will not give correct results and this is the reason traders must employ at least two.
Day of the Week
The financial markets are influenced by a large number of factors and one of the most common ones is the day of the week. For example, the stock market can rally on the starting few days of the week such as Monday and Tuesday. They tend to decline towards of the end of the week such as Thursday. Daily patterns are also followed by currencies. Traders must carry out a research if they want to trade currencies.
However, it can be quite difficult to identify trends. Trends mean daily trends which traders must look out for. To get the best results, trader must look at the one hour trend and daily trend.