Binary options are booming and more and more traders start out with binary options trading. At the major brokers, minimu trading amounts are rather low, starting from a few dollars per trade, so that the entry barriers for beginners are really low. The partially very short option periods allow for a variety of trades within a short timeframe. For successful trading, it is therefore all the more important to rely on binary options trading signals that are as reliable as possible. Let us therefore present a few basic approaches in binary options trading, which can be used as binary options signals for entering trades.
Approach 1: Support and Resistance
Support and resistance are important indications in trading and should be of consideration in any trading strategy. Support and resistance zones are easy to identify and function as reference in any chart. The chart from anyoption below shows a classic resistance zone in EUR/USD with several tests of 1.2900. Support and resistance often develop around psychologically important values such as integers or round lots. In the case below, the bullish market participants have tried several times to break through the resistance zone without success. This represents a possible entry level for betting on falling prices, which is implemented by purchasing a put option on EUR/USD.
Approach 2: breakouts (momentum trade)
The momentum-approach focuses on fast, explosive movements in the market at high volume. For this approach, even very short-dated options are suitable. Traders may trade breakouts of trading ranges or explosive market reactions to major news announcements. In the chart from 24option below, a breakout from a trading range in EUR/USD is displayed. In addition, a longer-term uptrend in EUR/USD was detected in a longer timeframe. Therefore, this breakout can be traded with a call option, expecting rising prices. As it is a trade with the trend, the odds for a successful trade are pretty good. Nevertheless, timing and speed are of crucial importance. Breakouts may prove to be extremely profitable as binary options signals when executed properly, whilst keeping risk manageable and predictable.
Approach 3: Trend reversal
In contrast to the trend-following strategy, trend reversals are usually traded against the major trend in the overall market. With this strategy, one pays attention to possible trend reversal formations, such as the popular head-and-shoulders formation, which can be see in the chart below. First, a new interim high is formed (left shoulder), followed by a higher high (head). Finally, a lower intermediate high, the so-called right shoulder is formed. The approach of the neckline after the first downward movement from the right shoulder represents an opportunity to enter the market by purchasing a put option in order to bet on falling prices. Often the head&shoulders formation signals a major price movement opposite to the direction of the existing trend. The identification of chart patterns requires some experience in the markets, as the formations do not always occur in a completely clean way.
The presented binary options trading signals can serve as a starting point for the development of sophisticated trading strategies. Traders should be aware that these binary options signals must be applied according to the prevailing market situation and are not a guarantee for success. Successful binary options trading also requires disciplined risk management and choosing a reliable Binary Options Broker.
Additional binary options trading strategies
Additional binary options trading strategies for different market situations are presented in detail in the following posts: