The Using of Fibonacci Retracements in Binary Options Trading
We see that Fibonacci Retracements have become a common method among investors to help develop a strategy towards trading binary options. Despite the name, Fibonacci Retracements, may sound complicated, it can be easy to understand, provided you can have the ability to remember a few important numbers.
What does the Fibonacci Retracement Tool mean?
Let’s see, in any commodity, stock, or, in this case binary option, conveniently, you can track its price by a price versus time chart. Here, it is easy for you to see the high and low points that the option has reached in any given amount of time.
Fibonacci Retracements honestly use the high and low points of each option in order to trace horizontal lines over top of the chart. 100% and 0% lines, respectively, traced at the high and the low points. Three additional lines are added in between at 61.8%, 50% and 38.2%. Mathematically, these percentages have been determined and are of course the same for all Fibonacci Retracements.
It has been historically displayed that as the price of a stock or option moves, the support and resistance points are typically at or very close to these lines. Thus, this allows investors to understand clearly how an investment is likely to react to the changes in the market.
What ways does Fibonacci Retracement Help with Binary Option Trading?
As the percentage lines drawn on the chart support to predict where changes will happen, thus, it can help you to predict when is the right time to buy or sell your binary option. For instance, in a downward trend option after the low point, according to Fibonacci Retracement, we expect the option will have an upswing, however, just as far as one of the Fibonacci percentages. So, buying this option with the prediction that the price will drop before reaching either the 38.2 or 50th percentile has a tendency to be in line with past trends in the market.
Alternatively, a prediction that the option would rise above the 61.8th percentile would go against the Fibonacci Retracement and thus be less likely to happen, that results in a potential loss.
Is Using Fibonacci Retracement for Binary Options Foolproof?
In short, although Fibonacci Retracement is seen as a good indicator of past trends that can be utilized to predict future trends, there are a lot of factors making it inconsistent. A novice trader will tend to use Fibonacci Retracements directly as they are plotted on their chart, for example. This contrasts with an experienced trader knowing how to adjust the percentiles to better match the layout of the specific asset’s chart, thus giving a better prediction when the retracements will happen.
Becoming more experienced in using Fibonacci Retracements with binary options, you will start to obtain an understanding of whether the Fibonacci lines are right or need adjustment. Secondly, as the market itself is volatile, it is impossible for the prediction with 100% certainty that an event will occur at a certain point in time, therefore, it is very crucial to be prepared for a certain degree of risk in case of dealing with binary options.
What Type of Binary Options Can Fibonacci Retracements Help With?
Fibonacci Retracements just simply overview trends that are likely to happen in the market, thus, they can be used with any type of binary options. With any investment, before using Fibonacci Retracements with more complex binary options, for instance, double touch options, you should consider using a demo account to trial what you have learnt.
With tried and tested mathematical tools, for instance, the Fibonacci Retracement at your disposal, it allows you to make educated decisions on how and when in trading binary options. You should take the time to deeply understand the process and talk to those having experience to gain a better understanding of different investors’ strategies for using them. Before you know it, you will be trading with the best. See Push Button Influence