The simplest answer to the question “What is a Trend?” is – a helpful tool in binary options trading process.
Yet, to be able to use and benefit from this strategy, South African traders first have to able to understand several elements connected to trend otherwise the outcome might be one nobody want to face – loss of funds.
That is why we shall present key aspects of this strategy in this article and answer the query – what is a trend?
In the most basic terms, is is possible to define trend as a string of higher lows and lower highs.
Additionally, a trend can be characterized as either bearish or bullish.
When bearish trend is concerned, traders are dealing with a downward trend and are looking to buy “put” options.
On the other hand, in bullish trend traders are looking to buy the “call” option due to the upward movement.
One way to follow the trend is via trend line which serves a guiding light when traders have to make the right decision when it comes to price meeting either support or resistance.
Corrective waves put trend in a more powerful position, rather than impulsive moves with fluctuations actually providing fertile grounds for channeling and, accordingly, trending.
However, consolidation areas are where most markets spend quite a lot of time rather than in conditions favorable for trending.
Nonetheless, being able to identify a strong trend could garner healthy profits and sustain traders during periods of consolidation.
Elliott Wave Trend in Binary Options
Elliot Waves trending is in close association with moves which are, in their essence, impulsive as that is the time of market movement.
Yet, being able to understand and interpret those impulsive moves and the direction of market movement is the basis of understanding the trend.
Five waves are needed to form an impulsive mode or, alternatively, five wave structure where a minimum of three waves are impulsive. The remaining two are corrective, so when traders are in the search of a trend this is the moment one ought to start buying.
Elliot Wave Theory states that there are various levels when traders should go for a call option and it is heavily dependent on the forming of a market wave.
Fibonacci tool is ideal to use in case when a market just finished one wave and started with a second one since it is necessary to measure first wave length. Should the first wave be characterized as bullish than the recommended move is to buy the call option, and by analogy, should the wave have all the characteristics of a bearish trend the put option is advised.
Zigzag pattern is the first thing connected with channeling and, accordingly, trending. As mentioned previously, channeling is not possible with impulsive wavers but rather with corrective ones.
Naturally, direct correlation between the expiration date and time frame has to exist on which the technical pattern is forming.
A market which is moving or travelling is described in the terms of trading as ranging is the polar opposite, and is used for a stagnant market.
The key aspect traders have to apply is the ability to alter the trading strategy in accordance with the different concepts and time periods.
It is of little value to explore trends in North America in five-minute chart if that session is just about to end, as the session in, say, Asia is just about to begin.
The reason behind it is simple – session in Asia is marked by ranging hence putting techniques of range trading to use makes much more sense.
Pinpointing the most favorable moment to either sell or buy an option forms the basis of a profitable binary options trading. In order to do that, traders need to find the right expiration date in conjunction to an equally favorable striking price.
Being able to understand and identify a trend can be of immense help in achieving that goal.