Technical analysis is the reason why most of the retail traders come to trade. This is true both in the case of binary options and Forex traders.
As such, any technical analysis subject deserves a lot of attention. It addresses the core of the binary options business.
Think of the market participants. Or, the parties that move a financial product.
In the Forex market, various entities influence prices. Commercial and central banks, liquidity providers, treasury departments, other financial institutions…they all buy and sell a currency pair for a reason.
It’s not the same in the binary options industry. There’s no treasury department of a commercial bank that buys a binary option. Or, other financial institution that invests in binary options.
There are you and the broker. And then, there’s the market you must master.
Dynamic Support/Resistance in Binary Trading
This is the most important concept in binary trading. It is not like in any other financial market.
In binary trading, traders consider two things: the striking price (entry place in the market) and the expiration date.
As such, traders “play” with the striking price if the expiration date is set according to the time frame.
Support and Resistance Levels That Don’t Form on the Horizontal
Classical support and resistance levels form on the horizontal. It means traders spot an area where the price hesitates, and buy a put or call option when the price reaches it.
The same is with dynamic ones. With one big difference: they do NOT form on the horizontal.
As such, dynamic support and resistance levels are more powerful. They give better striking prices as the market reacts more aggressive.
Traders use various tools to find them. Channels, trend lines, moving averages, etc.
One of the best tools is the Andrew’s Pitchfork. It considers three pivots (mainly three market swings) after the market broke above the highest swing (in a bullish trend).
Easy Binary Options
Take the chart above. It shows the recent EURUSD price action on the four-hour time frame.
By the time the highs in the previous swing were broken, traders use the next dip as the third pivot point. The technical tool does the rest: it projects the Pitchfork.
Dynamic support and resistance levels appear on the screen. Smart traders use Fibonacci dynamic levels derived from the golden ratio. The blue lines show them.
Binary options with the end of day/week expiration date around those Fibo lines represent great trading opportunities.
More Binary Options with the Projected Schiff Line
The Schiff line appears when drawing a trend line from the start of the Pitchfork through the end of the last pivot/swing. And then, project it forward on the right side of the chart.
Easy Binary Options
Finally, copy and paste in on the second pivot/swing that makes the original Pitchfork. The result? Great dynamic support and resistance levels that give other important striking prices.
Conclusion
Keep in mind the time frame the trading setup occurs. The expiration date must be adjusted accordingly.
Otherwise, you’ll end up having a great technical setup, but lose because the expiration date wasn’t appropriate.
