It is known as a business of risk; however, it doesn’t have to be a total gamble. You can apply technical or fundamental analysis in order to help you to make trading decisions. Still, there is one great method sometimes failed to notice that is price action.
What is price action?
Price action is known as a way of theorizing in which price is headed based on what it is already doing. With technical analysis relies on indicators that are a step removed from price and fundamental analysis, it relies on interpreting events surrounding the market. In case of price action, it takes you straight to the source.
As price is what you’re trading, doesn’t it make sense of letting the price itself tell you what to do?
Using Price Action For Trading Binary Options
When using price action in order to plan a trade, you have a look at patterns in the price having predictable outcomes. There is one great thing about price action that is the similar patterns occurring in one market may also occur regularly in another market. These patterns have often appeared to repeat themselves as well. When recognizing these patterns forming by observing price action, you can have a trade accordingly.
Let’s have a look at an example of Forex binary options to know how this works. One popular price action pattern that many traders tend to work with is the inside-4-bar. This pattern is quite similar to four small bars being all “inside” the length of a bar directly proceeding them (it means that they may or may not be inside each other).
It is known as a breakout pattern, without a particular direction. Thus, you might place a binary options Double One Touch trade in which you set a specific trigger on either side of the formation at a particular distance where you’ve determined that price will go within a set time period. If either of your triggers is touched during the payment window, it is for sure that you win your trade.
These are just entry rules, and it’s clearly necessary for you to learn to develop the exit rules’ equivalent. With a binary options trade, you’re not in indefinitely until you get out as you would be in a traditional trade. But, you have a set point that you’ll be exiting the trade unless you make up your mind to get out early with a partial win or loss. It is a need for you to decide how you select your expiration date, and also in what way you’ll decide whether to leave a trade at an early time. It will be beneficial if you make these decisions specific and not random.
Price action can be really trustworthy, it works effectively under some market conditions than others, and perhaps some formations are more intuitive to you than others. Factually, you’re going to have to learn how to know the very best setups and also analyze them in a given context. Therefore, it is critical that you back test your method on historical data about the assets that you’re thinking of trading, and then you do the demo test in real with virtual money before going with real money. Check Out Engage Player