Trend Line Trading – Binary Options Education
The strategy for trend line trading is deceptively simple but yet profitable. The strategy is essentially a short term trading strategy calling for the use of the popular Call/Put (Up/Down) option and Touch/No Touch option trade. To employ this strategy, you will need the use charts based on hourly and 4 hours charts. There is also an additional technical tool called the “Price Channel” that you will need for trend line trading with binary options.
Using The Price Channel
The price channel is basically two parallel lines which are used to indicate regions where the prices are contained within those lines. In other words, these two lines represent the resistance and support lines of a trend. As most binary trading platforms lack the above mentioned tools, you can derive the charts and price channel that you need with any MT4 trading platform downloaded from any reputable forex broker website. With the superimposition of the price channel into the charts, we will then be able to derive the basis for our trend line trading strategy.
In order for the price channel to accurately depict the market scenario, you have make sure that each of the lines touches a minimum of two points for the highs and lows. Only after this is done can we proceed on how to implement our trading decision. The main objective of the price channel is to show the areas in between where the price ceiling and floor are at. By inferences, the price channel also shows areas where prices are not expected to reach. This mean our main trading strategy should be based on using the Touch/No Touch options trade.
Touch/No Touch Options Trade
With the price channel in place, we can see what the boundaries are for our Touch/No Touch Options trade. Any price that is set between the price channel will be the target price for an option Touch trade. For a No Touch trade, target prices should be set in the region outside the price channel. As a precaution, target the region below the lower line in the case of an ascending price channel. For a descending price channel, you should only target the region above the upper line.
Ascending Trend Line Price Channel
Call/Put Options Trade
Before entering into a Call/Put trade, we first need to determine the short term trend of the underlying asset. To do this, we just need to see if the price channel is ascending, descending or horizontal. An ascending price channel would mean the underlying asset is on an uptrend. A descending price channel would depict a downtrend scenario for the asset while a horizontal price channel would indicate that the asset is ranging.
As we can see, the strategy for trading a trending market is quite simple. With proper observations and analysis, there are always opportunities to profit handsomely from the market through binary options trades.