Websites and training courses on binary options for newbie’s from the first pages begin to talk about the study of technical and fundamental analysis, the rules of money management, the right psychological attitude, etc. There is a sense of an “it’s very complicated” and the first profit is still very far away. However, some strategies allow you to start trading with a minimum of knowledge on a small deposit.
What do you need to start?
All binary options platform have the necessary tools for trading:
- Candlestick chart. The most common option for displaying the movement of any trading assets: stocks, currency pairs and futures. The methodology was developed by the Japanese trade in rice Munehisa Homma in 1755 and has not changed significantly to date.
Bullish Candle indicates an increase in the value of the asset, Bearish Candle at its decline. We will be interested only in Open / Close prices at which options will be opened.
- Time period (timeframes). The amount of time that binary options signals appear and then opens options. The candle shows the price movement for the “unit” of the timeframe: 1 minute, 5 minutes, hour, etc. Remember the rule “the larger (older) the timeframe, the more reliable the signal on it».
- Trade assets. Each asset has its characteristics, but the general principle of trading at round price levels does not change. Beginners should start with assets of a group of “majors” such as currency pairs EUR / USD (euro/dollar), GBP / USD (pound/dollar), USD / JPY (dollar/yen), Australian and Canadian dollars. Strategy does not work on cryptocurrencies!
- Price levels. A mandatory element of any trading strategy, the second name is “support/resistance”. Important price levels, except “round” include max/min past (day, week, month) price or mathematically calculated (Fibonacci, Pivot Point, Murray and others). They are built in the form of lines on the graph.
As you can see, our binary options strategy does not contain complex tools. Let’s move on to its detailed description.
Psychological price levels on binary options
Psychology is of the utmost importance in any every area of human endeavour. The study of the psychology of crowds in financial markets has been the subject of many studies and books. No exceptions are the price levels, which can become significant due only to psychological attitudes.
Psychological levels can be used in classic “CALL/PUT” trades and range options, where the condition of profit will be the price going beyond or staying within a certain price range until the expiration time.
So, two basic price stereotypes:
1. People subconsciously round prices.
It happens every day. When we see a price tag of $3.95, whether it is expensive or not in the process of reflection, the subconscious still compares the amount at $4.00. Traders also like to simplify things.
2. Levels of increased activity.
In all trading sessions and assets, you can periodically observe seemingly illogical price fluctuations around this level. If these are zero prices, it is clear why this is happening, but in addition to them, there are other levels and psychological attitudes.
The most active price levels for short and medium-term binary options trading signals will be the levels ending at 20.50 and 80. Example: 1.10720, 1.31550, 0.7580.
What is the reason for active trading and accumulation of orders there? The answer lies again in the field of psychology. Level 50 is subconsciously associated with half of the range travelled between zero levels. And when half has already passed, it begins to seem that price will move faster.
At levels 20 and 80 situation is similar. If we see that the price has not yet broken through, for example, the level of 1.4300 and is at the level of 1.4220, then for a large number of traders it may seem that the market has not gone far from 1.4200 and nothing needs to do anything waiting for the start of the rollback. But when the price moves further, psychologically it begins to be perceived as a confirmation of the trend.
The 1.4280 level is also working. Once the price reaches it, the brain sets the setting: “Well, now we’ll get to 1.4300.”
Binary options strategy on round levels
All levels with increased market activity and a large accumulation of orders are always visible to the market maker and major market participants. Often there is such an effect – the price does not reach such levels or, conversely, overcomes them by a couple of points, and then there is a sharp market turn. And the profit after the expiration is not fixed or, even worse, we get a loss on several options.
It is therefore recommended to choose price entry/exit points not less than 2-3 candles higher or lower (depending on the current situation), but never exactly at the levels themselves. To simplify the analysis and drawing round levels on the chart, indicators for all popular trading terminals have been developed.
Thinking how to make money on binary options it is easy to get excited from the first profit and start entering the market at every opportunity. Start only with clear breakouts of levels, they are more reliable than rebounds – after 1-2 candles a trend can recover and get a loss. Range options only after training on a demo account!
Recommendations about use …
- Psychological stereotypes at round levels are a very strong factor that can cause both further continuation of the movement, as well as a sharp correction or a complete reversal of the trend. But, for its simplicity, it is recommended to additionally confirm their breakdown / rebound with other indicators: trending (Moving Average) and oscillators (RSI, Stochastic, Momentum and others).
- Open a deal on the next candle after binary signals. The expiration time of the options should be at least 5-7 candles, even if the minute time frame is selected as the working timeframe
- Watch how round levels are combined with other tools and levels. If they are close to the historical max/min, Fibonacci correction and expansion levels, own constructions and strategies, the signal is reliable and you can open an option.
- During the publication of important fundamental news and statistics, we do not open options 30 minutes before the news and 30 minutes after the publication; cautious traders can close current deals. To control the events, we use the economic calendar included in the all popular binary trading platform!