Binary options and the levels is a separate set of strategies, the use of which in combination with the simplest technical indicators gives almost 90% of the performance. The only difficulty is determining the exact levels of support and resistance on different time frames. Error can lead to incorrect prediction so the trading strategy are complemented by indicators. Based on the boundary lines separate tools are composed — the “iron” levels, Fibonacci levels and other individual programmable indicator strategy. About the strategies based on them read more.
Rules for constructing levels in binary options
The principle of trading by binary options levels is that the trader analyzes the market on various time frames — large (full-temporal) and small (5-15 minutes). The period in the daily chart — year to minute — at least a month. On both charts the lines of support and resistance are drawn. Tactics are built on the following principles:
- with high probability the price will stay within a narrow corridor bounded by borders. Possible small sample and the correction, because the system is based on placing a long timeframe. If the price runs from one border to the other in 15 minutes, the optimal expiration time — 8-10 minutes;
- sooner or later there is a break. The task is to feel it and capitalize on the strong emerging trend.
To determine the breakdown of the iron levels the Line tool and confirming oscillators are used.
Strategies based on levels of support and resistance
Building a trading system based on the patterns. And if may seem that there are no regularities in the construction of lines of support and resistance, the mathematicians believe otherwise. Technical analysis is all built on mathematical models and formulas. And even if they do not always work, they are definitely more effective than probability theory.
It has long been observed that many natural phenomena evolve with a certain dependence. The proportions of the parts of the human body or plants formed in accordance with the ratio of 0.618. The numbers are not quite round, but rounding them is not recommended. The study of such ratios and proportions allowed mathematicians to create a sequence of numbers that in part reflect this dependence.
The Fibonacci sequence is a sequence of numbers, which reflects the price levels. Transcript of the boundaries is the following:
- 23.6% — the first price value for which price may slow down or show local correction. Most often this value is not an obstacle for the trend, but may signal a potential change in direction. It is better not to open the trade, since the direction is difficult to predict;
- 38.2% — area, in which you can open trades. Is a strong value in determining resistance and support. Once price direction will be clear, open a binary option with an expiration period of 1-3 hours;
- 50% resistance line. Here is likely to be a rollback. Pending orders are the major players, the closure of which will turn quotes in the opposite direction. Here you can take the risk to open a non-standard option for touch (bounce);
- 61.8% — the reduced target point. As practice shows, this way reach only the strongest players. The growth rate decays, and a breakdown means the beginning of a new strong trend. The use of this information allows you to adjust the trading system towards the direction of the price. If the rollback does not happen, we can safely open a binary option for purchase;
- 76.4% of these put the safety stop-loss. If this price limit is breached, the binary option for purchase should be put with an expiration period to a value of 100%;
- 100% — round target point, which will likely be a complete rollback of the trend. You can trade for a reversal.
Using these values, you can construct separate indicators for binary options working no worse than moving averages and other technical analysis tools. Fibonacci retracement levels show you possible turning points and potential magnitude of correction. The larger the timeframe, the greater the resistance these levels have. And now about how to use these levels.
Principles of trading on Fibonacci levels:
- waiting for the appearance of a new trend after the correction and wait when price increase strikes a value of 50%. Mentally we put a bound on the value of 61.8% (iron level);
- border of 61.8% means more probability of a reversal. If it happened, you can open a binary option on the slide and use the power of the movement;
- a perfect level – line, which was tested a few times, but not broken.
Basic errors when trading on Fibonacci levels:
- binary turbo options trading. No tactics, built on the patterns will be working over short time intervals. Expiration — at least 3-4 bars of working timeframe. The less time analyzed chart, the less accurate signals to win back the price momentum instead of rolling back;
- on short trading intervals brokers set low profit margins (70%), if the strikes are close to Fibonacci levels. Since the probability of error is also present, optimal from the point of view of risk, yield — 80% and above;
- do not open trades on the reversal from the 23.6% level. This is likely a correction, in this sense, the market is in uncertainty and movement in the direction of 50% will mean the stabilization of the market. The only exception is a long test line, but appears very rare.
To use the Fibonacci tools can anyone who is willing all year round to spend at the computer, tracking the correction of the trend. This is probably the only drawback of the strategy. To build the levels is possible on a demo account to determine a convenient time interval and to select a currency pair that best fulfills the mathematical pattern of trade.
Summary. Levels of support and resistance is a tool which can be used as the main tactic with confirming oscillators. Trade through the levels allows you to build a strategy to determine a strong trend and rebound in the potential reversal points. Once the reversal happens, from tested level, you can confidently open binary options in the direction of the turn. Strategies work well in volatile pairs, and also at the time of the news release, in a flat they can give the wrong signals. Flat recommend you to build levels using the Line tool and open transaction on the principle of channel tactics. If someone has comments and opinions, I invite to discussion after the article!