Support Resistance Strategy – Binary Options
November 28, 2015
You have to strategise with your investment if you want to enjoy any kind of success with binary options trading. To have minimal financial risk, and to also simplify the entire trading process, knowing the right strategies provides more probability that your trade will be successful. Support / resistance strategy is important trading concepts and need to be considered as complementary to a strategy. In fact one of the first things a forex trader learns is support and resistance levels, how to trade them and how binary options can be used to take advantage of them.
Support and Resistance Strategy – Which Direction are Asset Prices Headed?
Support resistance strategy is used for short- and long-term binary trading. Support and resistance levels are plotted on a chart to help work out the direction in which asset prices are headed. Levels of support and resistance are established when there are small price movements. You need to make quick decisions and enter trades at the right time which is right after the support resistance has been tested and when the price is in the opposite direction. If its tested the support, place a call trade as it is likely to go up, and if its tested the resistance, place a put because it’s likely to go down.
Support Resistance Strategy – Identify Price Patterns
Once you understand support and resistance lines, you have a powerful and useful tool for profitable binary options trades. A support line is the level below which the price of an asset hasn’t been able to fall, and each time the price nears this line, it slows and reverses direction. The resistance line is the level above which the price of an asset has been unable to rise – the opposite of a support line.
Support and resistance lines are important because traders use them to identify price patterns and to see which direction they are moving in, and then with these signals, traders can carry into effect calls and puts with more confidence.
Support Resistance Strategy – Identify Support and Resistance Levels
To be able to use support and resistance levels, you need to be able to identify them. To come up with price levels that offer support or resistance is to chart an asset’s price action.
As the asset’s price moves upward, note the high points reached before it reverses direction, and as the asset’s price moves downward, take note of the low point reached before it reverses direction. Soon, you’ll see support and resistance levels forming, and each time the price hits the high or low level and recovers, the levels grow stronger. This is the development of support resistance strategy.
There are one or two support resistance strategies for getting the most out of support and resistance lines –
● check your charts – as you trade an asset, you’ll know how its price will move but checking charts and gathering reliable data is important. Get familiar with the charts your broker uses which could be the candlestick and bar charts as they provide lots of information and make it easy to establish a support and resistance level.
● when charting a price action for an asset, expect 2 price bounces before considering a high or low to be a resistance or support level.
Many binary traders don’t know how to identify a strong level of support and resistance. If you have any questions about the support resistance strategy, there are many brokers who can show you how to identify indicators so as to formulate your own profitable support resistance strategy.
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All info was correct at time of publishing