BINARY OPTIONS


BINARY OPTIONS
How to Set up a Binary Options Trade:
The ability to trade the different types of binary options can be achieved by understanding certain concepts such as strike price or price barrier, and expiration date. All binary option trades have dates at which the trades expire.
When the trade expires, the behaviour of the price action according to the trade type selected will determine if the trade is in profit (in the money) or in a loss position (out-of-the-money). In addition, the price targets are key levels that the trader sets as benchmarks to determine trade outcomes. We will see the application of price targets when we explain the different trade types.
There are three types of binary options trades. Each of these has different variations. These are:
1) High/Low trade
2) In/Out
3) Touch/No Touch
Let us take them one after the other.
High/Low
Also called the Up/Down binary trade, the essence of this trade is to predict if the market price of the asset being traded will end up higher or lower than the strike price (target price the trader has selected) before the expiration of the trade. If the trader expects the price to go up (the “Up” or “High” trade), he purchases a call option. If he expects the price to head downwards (“Low” or “Down”), he purchases a put option. Expiry times can be as low as 5 minutes.

Please note: some brokers classify Up/Down as a different trade type where a trader purchases a call option if he expects the price to rise beyond the current price, or purchases a put option if he expects the price to fall below current prices. You may see this as a Rise/Fall trade type on some trading platforms.

In/Out
The In/Out binary trade type, also called the tunnel trade or the boundary trade, is used to trade price consolidations (“in”) and breakouts (“out”). How does it work? First, the trader sets two price targets to form a price range. He then purchases an option to predict if the price will stay within the price range/within the price tunnel/within the two price boundaries until expiration (In) or if the price will breakout of the price range in either direction (Out).

The best way to trade the tunnel binaries is to use the pivot points of the asset to be traded. If you are familiar with pivot points in forex, then you should be able to trade this binary option type.
Touch/No Touch
This set of binary options is predicated on the price action touching a price barrier or not. A “Touch” binary option is a trade type where the trader purchases a contract that will deliver profit if the market price of the asset purchased touches the set target price at least once before the expiry of the date. If the price action does not touch the price target (the strike price) before expiry, the trade will end up as a loss and the trader loses the money invested in that trade.
A “No Touch” trade is the exact opposite of the Touch trade. Here the trader is betting on the price action of the underlying asset not touching the strike price before the expiration of the trade. If this trade plays out as the trader wishes, the trade ends up in the money and the trader smiles home with a profit.

There are variations of this trade where we have the Double Touch and Double No Touch. Here the trader can set two price targets and purchase a contract that bets on the price touching both targets before expiration (Double Touch) or not touching both targets before expiration (Double No Touch). Usually, binary options traders employ the Double Touch trade when there is intense market volatility and prices are expected to take out several price levels.
Some brokers offer traders all three types of trades. Some offer two, and there are those that offer only one binary options trade variety. In addition, some brokers also put restrictions on how expiration dates are set. In order to get the best of the different types of trades, traders are advised to shop around for brokers who will give them maximum flexibility in terms of trade types and expiration times that can be set.

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The Best Times to Trade Binary Options
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Lesson 1: The Best Times to Trade Binary Options
Welcome to our new series on binary options trading for beginners, where we will take you by the hand and show you a systematic way to trade binary options. Today we will touch on the best times to trade binary options.
Binary options’ trading involves trading several assets and making money based on the outcome of the price direction. Some of these assets are traded on a 24-hour basis: here we have currencies, commodities and stock indices. Stocks are not usually traded on a 24-hour basis. The trading hours of a stock market determine the times at which a stock listed in that market is traded. When you take the time zones of the trading capitals of the world into consideration, this gives different trading hours for trading stocks on the binary options market.
The binary options market is one where traders make money based on predicting direction, and volatility is what gives price action direction in the market.
Trading works best when the market is bubbling with activity from traders all over the world. When there is good trader activity in the market, it generates the liquidity and volatility needed for the underlying asset to get to its target before the option expires.
Even though assets like currencies and commodities are supposed to be 24-hour markets, there are only certain times of the day when the market activity is at its maximum. This is usually when we have an overlap of the trading zones of the world.
Because not all assets have the same trading hours, we will discuss the various classes of assets as separate entities, taking into account their own peculiar trading hours.
Timing for Stocks
As we mentioned earlier, stocks are usually traded for a maximum of 6 to 8 hours a day. Stocks of most major companies outside the US are traded on the US stock markets as American Depository Receipts (ADR). As such, the US markets are used as the benchmark of checking the trading hours for stocks. US stock markets usually trade from 9.30am EST to 4pm EST.
However, there are other markets in Europe that are just as important, such FTSE (7am GMT to 3.30om GMT) and the Xetra Dax (8am GMT to 4.30pm GMT) in Germany. If you are trading stocks in the binary options market, pay attention to the times at which the stock markets in which they are listed are in operation.
Timing for Currencies
The forex market is most active when there is an overlap of the London/Asian and London/New York time zones. The diagram below gives a perfect illustration of this.

You also need to know that the local currencies of the active time zones will have increased volatility over others. For instance, the Australian Dollar will be more active during the Asian/London time zone overlap than the London/New York time zone overlap.
Timing for Commodities
Commodity markets are most active at the following times:
Crude oil (NYMEX.CL) – 9am EST to 2.30pm EST
Natural gas – 9.30am EST to 5.15pm EST
Corn – 9.30am EST to 1.15pm EST
Gold – 8.20am EST to 5.15pm EST
Silver – 8.25am EST to 5.15pm EST
Another way of studying the trading times would be to group the commodities under the exchanges where they are traded. As such, the agricultural commodities, which are traded in the Chicago Mercantile Exchange, are more actively traded from 9.30am EST to 1.15pm EST and from 6pm EST to 7.15am EST the next day.
Full information on trading hours is available on the CME Group website.
Timing for Index Futures
Stock indices are CFD instruments that measure the movement of the relevant exchanges, As such, the DJ30, NASDAQ100 and S&P500 will conform to the US markets open from 9.30 am EST to 4.30pm EST, and the DAX30 will conform to that of the Xetra Dax’s trading hours.
Once you master the trading hours for each asset, you are one step away from potential profitability in the market.
Tools for Binary Options Trading
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Lesson 2: Tools for Binary Options Trading
Today, we will talk about those tools that a beginner trader must have in order to succeed in binary options trading.
The difference between a binary options trader and a gambler is simple. The binary options trader does his analysis before he goes into the market. The gambler simply makes his move based on a hunch or bases his bet on luck. In trading, there is no room for luck and a trader must acquire the necessary tools in order to succeed in trading.
Here are the tools every binary options trader must have.
Charts
Charts are the bedrock of technical analysis and there is no way a trader can make it in the binary options market without having charts with which to perform technical analysis. Charts tell us a whole lot about what a financial asset is doing. The key to succeeding in the binary options market is being able to make accurate predictions, and charts can go a long way with helping us make predictions.
• Where To Get Charting
Charts are great predictors of market movement. Using a chart patter, you can tell if the price of an asset is headed up or down (which can be used to trade a High/Low trade or Up/Down trade). You can also tell if an asset will move sideways in a consolidation, which can then be used to play the Boundary (In/Out) trade.

In the chart example above, the market stayed in consolidation for about four days before making a southwards move. This chart could be used to make an “IN” trade in the In/Out variety, restricting the expiry to 3 days.

Likewise, this descending triangle chart could be used to trade a “Low” or “Down in a High/Low or Up/Down trade. It could also be used to trade a “Touch” trade, selecting a price barrier between the S1 and S2 support lines, or could be used to trade a “No Touch”, using a price barrier between the Daily Pivot and R1. There are so many possibilities.
Without charts, forget about making money in binary options. It will not happen.
Signals
Signals are trades analyzed either from real people or automatically generated tools or strategies. Indicators are tools which help you analyze data yourself. Signals can be useful for beginners, click here for reviews of some binary option signal providers.
Technical Indicators
When you combine technical indicators with charts, then you have increased the probability of making winning trades, and doing that consistently.
The chart below is an example of how I use a strategy based on the MACD technical indicator, as well as the moving average trend indicator to determine what the price action of an asset will be. Once more, this can be used to trade all manner of possibilities. This particular strategy correctly showed that the price action of the AUDUSD would breakout in an upward direction following the cross of the moving averages as well as the MACD crossover from negative to positive. I could place the following trades in the market using this strategy:
1) A “High” option in a High/Low trade
2) A “Touch” option using a price barrier between 1.0200 and 1.0300.
3) A “No Touch” option using a strike price below the stop loss of 0.9700.
4) An “Out” trade setting a range between the stop loss and the resistance level of 1.0170.

If you get the analysis right, you will score winners on all the option types and instead of an 85% payout, you quadruple your earnings!
A word of caution: you get this wrong, and your losses will quadruple as well.
However, with charts and technical indicators, you will win and not lose.
Knowledge of Technical Analysis
Knowing how to combine charts and technical indicators to predict price action is known as technical analysis. It is not enough to have these tools. You need to know how to use them. In subsequent lessons, we will show you how.
Further reading:
• Lotz of Botz’s outlines the tools he uses to trade and explains why he finds them useful
Risk Management for Binary Options Trades
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Risk Management for Binary Options Trades
Binary options, just like any other form of financial trading, has an element of risk involved. You could lose all or most of your money in an instant if you are careless or greedy. As such, the concept of risk management is one that every binary options trader should take very seriously.
• Is Binary Options Trading Gambling?
• Mifune on Money Management
• Mifune on Money Management II
• Mifune on using a hedging strategy when trading binary options
• Lotz of Botz on how to protect yourself from going bust
The generally accepted risk management rule adopted universally by professional traders is that no more than 5% of the account size should be exposed to the market at any given point in time. What this simply means, is that if you have a $1000 binary options account, you should not have more than $50 in the market at any given time. Trading anything more than this is extremely risky, especially as binary options is an “all or none” type of market.
It is not like forex where you can cut your losses early if you see that you are probably in a bad trade. In binary options, unless your broker is the type that gives back 15% of invested capital in trades that are out of the money, or you have the opportunity to sell off the contract before expiry (variable options), then you are out of luck if your trade goes bad. So you need to be sure that you properly utilize the only means of controlling risk available to you.
Calculating your risk in binary options is actually very easy. For every $1000 in your account, you can only afford to expose $50 at any single time. So your first step is to identify and sign up with a broker that will allow you to place trades within the confines of your acceptable risk appetite.
Binary options brokers have made this very easy, because the moment a trader pushes the button to purchase a contract, the trader is immediately shown the cost of purchasing that contract. He cannot lose more than what he spent purchasing the binary options contract, so for every contract purchased, the amount at risk is known and the potential reward is also known. This enables the trader to do what is necessary in order to keep his risk within acceptable limits.

This is a typical trade for a $5,000 account. The expected payout for the Rise/Fall trade is $500. In binary options, payouts are made up of your invested capital and your profit. So for a payout of $500, this trade will cost the trader either $267.67 or $268.70, which is approximately 5% of the account size.
However, this is for a single trade. If you want to take 2 trades, then you need to split your payout into two, and then select a trade that will reflect a 50% investment of the expected payouts from both trades.
The essence of all this is to protect your account from the devastating effects of losses in a single trade where too much capital was invested. Imagine a situation where a trader with a $5,000 account tries to hit a $2,000 payout and invests $1000 into a trade. If that trade is out of the money, then he has lost 20% of his account in just ONE trade!
You may think this is over the top but you will be surprised at how often many retail traders succumb to the destructive emotion of greed and try to dare the market in this manner. Do not fall prey to this.
We all hope to win but the truth is that there will be times when we make bad trade calls. It has happened to everyone; even the great Warren Buffett lost millions in October 2008. But what separates those who re-emerge as successful traders from the rest is the ability to control their risk. Control yours too.
How Variable Binary Options Can Work in Your Favour
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How Variable Binary Options Can Work in Your Favour
While it is true that binary options has many advantages that make it an appealing prospect for traders, there is one big disadvantage with binary options. Once a trade has been placed, you have to wait for the trade to expire to know the trade outcome.
I have found myself in a situation where I opened a Rise/Fall trade which was immediately in the money within 5 minutes. However I got my expiry dates all wrong and I watched helplessly as a contrarian effect hit my underlying asset and my position eventually reversed and ended up out of the money. This is a huge problem faced by many binary option traders.
However, a solution has hit the markets. A few brokers have now made a departure from offering strict fixed odds in binary options to offering variable or flexible odds in the market. This feature allows a trader to either take profits before the expiry date, or cut losses before expiry. Let us use a practical example to illustrate this point.
Let us assume that a trader purchased a binary options contract on an underlying asset such as the EURUSD. Perhaps the trader may have betted on a bearish move on the EURUSD, selecting a “Fall” trade on the Rise/Fall binary options variety on a Friday before market close. A possible factor that the trader may have considered is all the bad news from the Eurozone; the credit rating downgrades, threat of Greek default, sovereign debt issues in Italy or Spain, etc. He places the trade with extreme confidence, only to wake up on Monday morning to discover that events over the weekend have conspired against his trade. Perhaps the Eurozone financial ministers met in Brussels and took some far-reaching decisions that the markets interpreted as being Euro – positive. Seeing that his expiry was set at Monday close, the trader may realize that his trade may just end up on the losing side and cause him to lose his money.
This is where the Take Profit feature comes to the rescue. If the trader wakes up on Monday and sees that his profit has dwindled from 45% on Friday close to just 13% two hours after market open on Monday, he can decide to lock in the remaining profits before the Monday close expiry.
Usually, there is a cost to using this feature, and the trader may have to pay a fee to be able to lock in profits before time. In addition, traders must remember that underlying assets may not be available for lock-in of profits all the time or the process would be severely abused. Usually, there are specific times during which profits can be locked in. There are also restrictions on how often a trader can lock in profits in a day, and usually lock-in of profits may only be available for some underlying assets and not for others. We may also see restrictions that allow a trade to lock-in profits only if he has been in that trade for a specific amount of time.
Whatever the restriction, we have to applaud the benevolence of some brokers like AnyOption that allow traders to use this feature. It is a lot better to be able to conserve profits some of the time rather than not being able to do it at all.
So if you are interested in adding this feature as one of the things you would desire to see in your trading platform, consider searching the internet for a suitable broker.
How Postponing Binary Option Expiry Times Can Work in Your Favour
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How Postponing Binary Option Expiry Times Can Work in Your Favour
In the last lesson, we talked about how a new feature known as variable options could help traders to lock-in profits or cut losses. In today’s lesson, we shall talk about another feature that can work in a trader’s favour, which is the use of a feature we shall call the binary options roll forward feature.
So what exactly is the binary options roll forward feature?
This is a feature that allows the trader to postpone the expiry dates of the binary options contracts he has purchased. This is a trade preservation feature which attempts not to lock-in profits or control losses, but to give the trade more room to breathe in order to allow a trade otherwise destined for loss to recover.
Let us illustrate this with the same example that we used in Lesson 7. The trader placed a Rise/Fall trade with a bullish sentiment on the EURUSD, but the trade takes a wrong turn on Monday after a resuce mission by the Eurozone finance ministers over the weekend. Worse still, the expiry is set to Monday market close. Now if this trade is already in a loss position, there is no profit to rescue. Rather, the trader can decide to give the trade room to recover by extending the expiry date from Monday market close to a comfortable future date when he feels the bad news from the Eurozone would take hold of the market once more.
For this feature to work out well in your favour, you need to study the market and do some analysis to see if the trade truly has any chance to recover. The truth is that it actually works. For instance, I have just come out of 2 trades in the forex market; one for the EURAUD and the other for the AUDUSD. I was bullish on the AUD, but one of the trades was negative to -75 pips at a point, while the other was -30 pips at a point. Some traders would panic on seeing the red colour of negative pips everywhere, but knowing fully well that the AUD was soon to be on a bullish roll as a result of some positive market data, the trades were allowed to run and they recovered to 73 pips and breakeven respectively.
When you need some time to let your well analyzed but probably ill-timed trades to recover, the roll forward feature is what you need.
Using the Roll Forward feature will cost the trader some money, just as we have in the variable option feature. But this is a small price to pay to have your trade rescued from ruin.
Once again, it is not recommended to use the Roll Forward at the slightest opportunity; abusing this feature could get you penalized by your broker. It is very important that trades are analyzed carefully and expiry times planned properly so that you will not have recourse to using the Roll Forward tool every single time your trade runs into trouble. Do not succumb to the tendency to get careless with your trade planning just because you have a Roll Forward feature. It is only available on few broker platforms anyway, so many traders will not have the opportunity to use it. But if you are lucky enough to have an account with a broker that offers it, then use it carefully.
Where Not to Trade Binary Options
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Where Not to Trade Binary Options
Binary options trading may be exciting and have great prospects, but the question must be asked: is it supposed to be traded on any underlying asset?
Binary options is a trade type that is based on correctly predicting price direction as related to targets and deadlines. If you attempt to trade binary options where it becomes difficult or impossible to predict price directions, then you are in for a money-draining spree. Here are the few situations where you should not trade binary options if you do not want to lose money.
1) During News Trades
Much has been said about trading the news and the extreme volatility that could follow these events. No one can tell for sure what the market response to a news item will ultimately be. There have been occasions when the news seemed to point one way, only for traders to come up and send the underlying asset in such a strong reversal. I remember a trade I took on the USDCAD in 2008 when the news sent the USDCAD soaring, only for traders to sell the USD long and hard, prompted by a hefty trade volume from a trader in the middle East who bought Euros and sold the USD in very massive amounts, thus completely obliterating whatever gains that those who purchased the USD against the CAD had made. Such is the nature of news trading and it is simply not advised to try purchasing a binary options contract when a news event is playing out in the market.
2) On the CHF Pairs
Many binary brokers have taken away the CHF pairs from their trading platforms, but a few have left them there as a snare for traders wishing to dare the EURCHF minimum exchange rate peg set by the Swiss National Bank (SNB) on September 6, 2011. There have been rumours floating in the markets on several occasions that the SNB intends to raise the peg from 1.2000 to 1.2500. If such a move plays out, the peg will drag the CHF along with it wherever that currency is found. Even without the actual move by the SNB, the rumours have always triggered a frenzy of CHF selling. So it is really risky taking positions in the CHF pairs as the risk of the trade disintegrating before the trader’s eyes are very real. Interventions are surprise events and can be very nasty if you are caught on the wrong side.
3) The Yen Crosses
The Japanese economy depends on a weak Yen to sell its products cheaply to its trade partners. A strong Yen certainly does not give the Bank of Japan much joy, and even though they have been more conservative with interventions, they have wielded the big stick twice in 2011. The USDJPY has been range trading for a long time, which is not the usual pattern for this currency pair. There is nothing ruling out interventions in 2012 and so traders are better off looking for some other underlying asset to trade binary options on.
Trading involves some bit of common sense. There is no wisdom in putting money in trades that pose greater risk and where there is more uncertainty. There are many other assets that can be traded comfortably; traders are advised to trade those assets, and under the right conditions.
How to Perform a Binary Options Analysis
Binary options analysis is the practice of analysing a binary options trade prior to execution. Before taking on a trade in any market, it is necessary to carry out technical and fundamental analysis of the asset you intend to trade in order to increase the chances of success. The binary options market is no different. Without binary options analysis, trade would be more of guesswork and nothing would distinguish it from the roulettes and other stuff that belong to the casinos of Las Vegas. In binary options, there is no place for gambling or guesswork in trades; leave that to the guys in Vegas.
Sometimes, binary options trades are referred to as bets. I really do not like this terminology, because trading is not something you pick up from the street. If one has decided to trade binary options, it has to be taken seriously and learning to perform binary options analysis is an integral part of the learning process.
Binary options’ trading is all about predicting the directions and behaviour of assets. Since the same assets that are traded in their respective markets are the same ones we will encounter in binary options, it is necessary to know how to analyse these assets technically and fundamentally. When the trader has mastered this, he will be able to carry out solid binary options analysis.
Let us take an actual trade example. This trade was a Touch/No Touch trade for the EURUSD taken on October 25, 2011, with a 24-hour expiry. We placed a No Touch binary option trade for the EURUSD, predicting that the EURUSD would not touch the price barrier of 1.4031 before expiry.

The trade was successful, as the EURUSD did not reach the price barrier before the expiration date. A total of $55.65 was staked in the trade, with a profit of $44.35, giving us a total payout of $100.
Now was this a product of guesswork or a trading hunch? No. This was a product of technical and fundamental analysis carried out on this pair prior to the execution of this trade.
The Binary Option Analysis for this Trade
The first step in performing a binary options analysis for this trade was to locate a chart for the EURUSD to analyse. Since most binary options brokers do not offer charting tools, we had to locate a forex broker whose trading platform had charts or us to use. We located one and started the analysis.

Fundamental Analysis
In the financial markets, the fundamentals of an asset always supersede the technicals. This is why we did a fundamental analysis first. At the time of analysis, there was a meeting of the Eurozone financial ministers to determine how to put together a rescue package for Greece, which was groaning under a sovereign debt crisis. At the same time, Italy was also on the radar as its debt reached a staggering 600billion Euros. These were indeed bad times for the Euro and the markets had responded accordingly. The meeting was due to end later that week with the issuing of a communiqué to announce measures to help these countries out. We knew that the markets would be range-bound as traders looked to the outcome of that meeting for direction. Thus, we did not see the Euro climbing past the 1.4000 psychological barrier before the end of the meeting.
Technical Analysis
We headed over to the charts to see what the price action was saying, and we got the confirmation we needed. A strong resistance had capped the EURUSD at 1.39605 for three days straight. Thus, we were able to set an appropriate price barrier that we felt that the EURUSD would not achieve in 24 hours.

The trade was then setup on the binary options platform, with a price barrier of 1.4031 and a 24-hour expiry. As at the expiration of the trade on October 26, 2011, the resistance cap was yet to be breached, putting us in the money.
Binary options analysis is not about guesswork, or trading on a hunch. You must be able to perform the appropriate analysis of the fundamentals of the asset you want to trade, look for confirmation on the charts and then execute the trade accordingly.

Trading Binaries with the Fibonacci Tool
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A Sure-fire Way of Trading Binaries with the Fibonacci Tool
In my experience dealing with retail traders, I have come to discover that the Fibonacci retracement tool is one of those lesser used technical indicators in market analysis. Mention the MACD or moving average indicators and traders will immediately brighten up with recognition. But talk about Fibonacci and everyone just draws blank.
Retracements are a normal part of trading. They occur all the time and a trader needs to know how to use retracements to his advantage. This is what the Fibonacci retracement tool does for you. The tool plots five horizontal lines on the charts which correspond to 5 possible areas to which prices may retrace, with the distances expressed in terms of percentage of the original move:
– 100%
– 61.8%
– 50%
– 38.2%
– 0%
Prices can retrace to any of these points. So how would you use the retracement tool to trade binary options?

If I were to trade binary options using retracement, this is what I would do:
1) I would select a strongly trending financial instrument, such as gold, EURJPY, GBPJPY or EURUSD.
2) I would select a time frame that will confirm that what is playing out in the market is actually a retracement and not something else. I would therefore choose the Daily chart.
3) I would purchase a “Touch” option in the Touch/No Touch trade type as my preferred trading option, picking a point between current prices and the 23.6% retracement point.
Trade Technique

Take a look at the Daily chart for the EURUSD. Note that by selecting this chart, I have already fulfilled my first two trade conditions. It is a daily chart, showing me when a retracement is actually occurring, and the EURUSD trends well, being the most actively traded currency pair in the market.
I am now looking for how to fulfil my third condition, which is actually my trade objective. I want to pick a strike price at a point along the course of the price retracement, between the market price and the 23.6% Fibo level. To do this successfully, I must be sure that a retracement is actually in progress. How do I confirm this?
Look at the area where a blue arrow points to “drag Fibo tool here” on the left side of the chart. The bullish momentum of the EURUSD has actually been checkmated by the formation of a reversal candlestick pattern, a bearish harami. An expanded version of that point is shown below:

Occurring at the peak of a bullish momentum is a clear reversal signal. The retracement followed soon after, and went all the way to the 50% retracement point.
Trading binary options is not rocket science. It just takes a trader knowing what to do and when to do it. But it also requires that the trader must be quite knowledgeable about topics such as candlesticks, chart patterns, etc. A trader has to be thoroughly at home with the candlestick patterns. If there is any topic in the financial markets that deserves attention, this is it. With candlesticks, you can determine price direction easily, and then add other tools to increase the success rate of your trade calls.
This has been a lesson on how to use the Fibo retracement tool to trade in the binary options market. Next time, we will treat another interesting topic right here on BinaryOptions.net.
Breakout Trades
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Binary Options Breakout Trades Using Pivot Points
Binary options trading success is based on making the right calls on price direction. If a trader can correctly predict where price will go, then it is very likely he will make a trade that will be in the money.
One of the ways this can be achieved is by being able to predict price breakouts. This leads us to ask the question: what really is price action, and what determines the behaviour of price action at any given point in time?
The concept of price action is simply a depiction of the activity of traders in a particular market. Traders are in the market to make money. If they see something that will present itself as a market opportunity, they will put their money in the market to make the trade. At this time, we will see prices moving in one direction or in the opposite direction. If traders see nothing to convince them of an opportunity, they will sit on the fence and do nothing. At this time, the price action will hardly go anywhere except just trend sideways.
Fortunately, the binary options market helps us to trade the price action, whatever that may be. Unlike in forex trading or other markets where you need the market to be in motion to make money, you can actually make money in the binary options market even if the prices of the underlying asset stay still.
In today’s lesson, we will explain a scenario that occurs when the market is in motion; the breakout. Breakouts occur after periods of price inactivity. They occur when traders get a hint of an impending market event that will affect the value of an underlying asset, so they take position in order to make money from such movements. One way of determining this is to look at the behaviour of the price action at the key levels of support and resistance.
Before we get an upward break, prices may have tested the resistance level multiple times, with the points of retracement getting progressively higher. This indicates buying pressure. When we see this, this is a signal that prices will breakout upwards.
The reverse is also the case for downward breakouts. Support levels will be tested repeatedly with points of retracement getting progressively lower, signifying selling pressure.
At other times, the buying or selling pressure may already be in such forceful effect, that the price action just rams through the key levels. Look at the chart below:

The pivot points show the support and resistance levels. We can see that R1 has been tested several times, and prices do not get back to where they started for the day at S1 before going back up. This indicates buying pressure which eventually breached R1. Price then tested R2 several times, but retracements never get back to the central pivot (marked purple) which was the previous retracement point. This shows increased buying pressure and we see this manifest as a bullish candle that eventually breached R2 all the way to R3.
If I was to trade this on the binary options market, I will do this in three ways.
Trade 1
I would trade the In/Out binary options trade, betting that the trade would end outside the S1 – R1 range, with a one week expiry.
Trade 2
I would also trade the Rise/Fall variety, betting that the price of the EUR/USD will rise above the R1 point, setting a 72-hour expiry.
Trade 3
I would trade the Touch/No Touch trade, betting that prices would touch a point somewhere between R1 and R2, for a one week expiry.
The lesson here is that pivot points are an indispensable tool for binary options trading and if you can use them to watch price action at key levels of support and resistance, you will make good trade calls most of the time.

19 responses

  1. Binary options are good for you to go from nowhere to somewhere. It involves risks but is worth taking one…Both Forex trading and Binary options are like gambling but a sensible one.. You invest your money on currencies, indices, commodities and expect to get good returns. If you really want to play safe then hold your option for some time. When you see there is an increase in the value of commodity then only sell it… In my opinion, commodity market is one of the best options you can invest your money in…Especially in Silver and Gold. Both give heavy returns….You won’t regret….

  2. A binary choice industry requires an agent and a broker. The broker gives a strike price for an agreement on an asset and then decides which course he thinks the price of the asset will go in a fixed time period.

  3. Wow, those are some interesting strategies you’ve got there! I’ll make sure to think through and try out some of those.
    With all the fishy ways to make money online, I’m so glad that binary option trading is getting more popular and accessible to just about everyone. It’s seriously a great way to make some extra cash, or even make a living if continue to improve at it.

  4. HI, my name is Neal I searched binary options markets trade, and found your page, I see you are interested in BINARY OPTIONS – hyattractions | WHERE KNOWLEDGE MEET WEALTH!, so let me show you my page- Binary Options Software | 100% Auto Trading Signals , please visit my website and you will learn how you can generate 30$-60$ every five – ten minutes, HOUNDREDS of dollars a day, watsh proof video, Greeting Neal

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  6. The key profit connected with making utilization of twofold choice signs is that you don’t need to concentrate on breaking down the businesses without anyone else’s input. A further profit is that computerized contracts are ‘situated and overlook’. As should be obvious this sets aside a few minutes productive route in which to exchange a paired record.

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