Trading with the trend on binary options. Trend strategy for binary options. Entering a trading position when the price extremum is broken

A novice trader needs to learn to clearly determine the direction of price movement within the framework of the prevailing trend or local trend. Understanding the mood of market participants, you can promote your deposit within a short period of time, minimizing risks.

Trend is a directional price movement with progressive updating of minimums and maximums. There are 3 types of trends:

downward – bearish market, characterized by updating lows;
ascending – a bullish market, identified by the formation of new highs;
neutral – classic sideways consolidations, determined by the movement of quotes without creating new peaks or updating the bottom.

An upward and downward trend is built using 2 points. I’ll show you with an example how to carry out an operation on the chart of the Meta Trader 4 platform. Let’s take the most volatile instrument GBP/USD as a guide. Here you can trade intraday on the H-1 timeframe, earning 50 - 150 points during the trading session. To begin with, I advise you to open trades with the Alpari broker, which allows you to trade on a Nano type deposit with an account replenishment of $5 and a volume of 0.01.

Trading in a bull market

Let's begin our work by constructing diagonal levels that are transformed into equidistant channels, allowing us to determine the range of price movement, the limits of profit taking and the location of a protective order.

Identifying the trend

Red ticks on the chart mark 2 points that allow you to identify an emerging new trend. The trader’s main task is to wait for the third touch of the line, which serves as a signal to open a position. In this case, I had to wait a long time for this event, so I entered the trade on the H-4 time frame.

Figure 1. Trend identification

After waiting for the third contact with the line, you need to open a buy deal, having previously set a stop loss. I place a protective order behind the previous horizontal support level. I would like to focus your attention on the second diagonal line I drew - it turned out to be a trend channel. It is when I touch the upper limit that I will record part of my profit.

Fig 2. Entering a trade

Fig 3. Setting stop loss and take profit

Important! Notice the long shadow extending beyond the bottom line. A false breakout was formed here, designed to disrupt the protective orders of private small traders. By placing my stop loss wisely, I was able to avoid these losses.

We set take profits and stop losses

Now I will explain why I recorded only part of the profit at the top point and how I did it. The trade was entered with two orders with a volume of 0.5. When the price touched the upper border of the channel, a take profit was triggered for one of the orders. The second deal was left without a take profit at all. Here I simply dragged the stop loss to the border of the broken horizontal resistance level.

Fig 4. Accompanying the transaction - stop loss 2

The idea is to try to join a global trend at the nascent stage. The price continues to bounce off the trend line, and I simply move the stop loss. accompanying the transaction. Take profit is not set for this strategy. When the trend is broken, the transaction will be closed using a protective order. Here I was not able to catch such a movement, since on the next touch the line was broken and my stop loss was knocked down. The profit on the first transaction was 265 points, on the second 90.

Trading with a trend is taking a trading position that coincides with the mood of the market. The trader’s task is to be able to determine the beginning of a trend and the tendency towards its end.

For trend trading, if your trading system involves studying the hourly charts, you will also need to pay attention to the four-hour and daily charts in order for the market to clearly know what the general direction of movement of your currency pair is.

Trend trading is not only based on charts for specific time frames, it must also include analysis of charts with longer time frames to create an effective strategy. Many traders still do not know Forex because they use exclusively other people’s strategies that do not suit their temperament and understanding of the processes in the currency market. Are you still underestimating the large time frame charts when opening a long position? Perhaps it's time to change your perspective on this issue.

How to profit from trend corrections

Naturally, you can make money on trend corrections. If a currency pair is approaching a resistance line and its overall trend direction suggests it is moving higher, then you will likely want to short the pair when it hits the line and profit from its reversal. But you need to remember some points:

This could be a breakthrough.
Perhaps the pair currently has enough momentum to cross one line or another. If the general direction is trending upward, then you don't want to be on the opposite side of that trend or you will lose.
Corrections may be minor.
Breakouts of levels in the Forex market are usually stronger than corrections. Many traders use Fibonacci lines to gauge the potential for a correction. Based on this theory, the correction could be 38.2%, 50% or even 61.2% of the swing, while the breakout has significant potential to cover 100% of the previous range, as the same theory suggests.

Breakouts can also be false, which is why they will not lead you to the desired profit results. There are many ways to deal with false breakouts and in many cases, the vast majority of false breakouts are in preparation for the next big swing. The wider the range of the general trend in the Forex market, the greater the chance of a long-term trend becoming winning.

Trying to outsmart the foreign exchange market is extremely unwise and may impress your friends, but you won't be as likely to tout your winnings if your strategy ends up losing.

How to trade sideways

Trading with the trend in the Forex market can become slightly more difficult when your chosen currency pair is moving sideways. In this case, theoretically there is no trend, and both trading directions can work. Therefore, it is best not to trade at this time, but to start predicting under what conditions and in which direction a breakdown of the price level will occur.

In a sideways trend (flat) situation, it is very important to look at what is happening from the other side and try to determine whether any upward or downward trend movement is brewing. In what direction has your pair been trending recently: in a rising or falling trend channel within the current range? What news releases regarding currencies are on the agenda? In some cases, you will be able to predict the potential direction of your currency pair in advance and reap significant benefits from it.

Let's look at one of the simplest trend strategies that can be used for intraday trading. Despite its simplicity, this is one of the most effective ways of trading.

In fact, it can be used on any timeframe, since the setups on the minute, hourly and daily charts look the same. It is not difficult to understand how this strategy works: we make money when there is a trend movement; when it is not there, we remain outside the market. The best way to learn this is .

Practice shows that using this strategy for intraday trading can produce 3-4 correct trades per day (sometimes it can be more or less depending on market conditions). Sometimes there are range days. In this case, we will not receive signals to open positions (or there will be very few of them), since the intraday reversal High and Low will not break through, which is evidence of the absence of a trend movement. You need to remain patient and collected. Trade only when the market really offers such an opportunity.

Trading with the trend in the first half of the trading session

Let's look at what the beginning of a trading session and the first transactions using this strategy might look like:

The day starts, as usual, with jerky movements, but after about an hour, the High or Low of today breaks through.

Now that the Low has been broken, a downward trend line can be drawn. We will look for an opportunity to open a short trade.

After this, we wait for a rollback to the trend line

Please note that the trend line is speculative and has no physical meaning. The main thing in this situation is that during the downward movement, all subsequent reversal Highs are formed below the previous Highs, and the Lows are updated. If these conditions are met, then we have a correct downward trend. For an uptrend, everything should be the other way around.

We go short when the pullback ends. The signal is the breaking of the Low green bar or cluster of bars (i.e. the price falls below the Low of the green bar or cluster of green bars after it has approached the trend line).

After breaking through Low, a downward trend begins.

Enter short on a pullback - on breaking through the Low green bar

Second arrow - similar

The stop is quite short - we place it directly above the last reversal High (in a downward trend). In the first trade (first red arrow on the chart), the High is 117.05. If the price pulls back above this level, you need to exit. The entry point is at 116.91-116.90, that is, immediately below the Low level of the rising bar that approached the trend line. There is no need to wait for the bar to close, because it depends only on the selected timeframe. You only need to look at the real-time price. So we ended up with a stop of about 15 cents.

The target is the last Low minus stop for a downward trend or the last Low plus stop for an uptrend. In this case, the previous Low was at 116.66. Since we have a downward trend on the chart, we can assume that this Low will be broken to some depth. With this strategy, we assume that it will be broken by an amount (at least) of our stop. Therefore, our goal in this case is: 116.66-0.15=116.51. We place a limit order to take profit at this level. As we can see, it works. The profit exceeded the risk by 2.5 times.

The price sets another reversal Low, then rolls back up to the trend line. We do the same thing again, opening a second deal. High - at 116.42, put a stop loss immediately behind it. Entry point is 116.27. The target is 116.11-0.15 = 115.96 (the stop will not necessarily be 15 cents, in this case it is just a coincidence). This time, the reward to risk ratio is 2:1.

Typically, you can take 2-3 trades on an intraday trend. If the trend is strong, then more. When the market continues to form declining Lows and Highs, you can open a couple of additional positions. But this rarely happens; more often the trend is broken by a deep correction.

If the movement looks too jerky, it is better not to enter. This often happens between 11 and 13 New York time. This does not mean that there are no good movements, but the probability of making the described transactions is reduced.

Trading with the trend in the second half of the trading session

Now let's look at working on this strategy in the afternoon. The horizontal line on the chart marks the Low of the current day. After lunch, this Low breaks through (around 115.50). Let's repeat the process:

Now, after breaking through the main Low, you can draw a trend line (before this, the market was moving in a horizontal corridor - range).

We expect a rollback to the already drawn trend line. Be patient: it is better to miss a trade than to enter too early and have a stop loss that is too large.

We enter short using the criteria described above.

Green arrow - optional trade.

Risk too great due to large reversal bar

The chart shows an “optional” long trade. The price formed a rising Low and a rising High, which allowed us to draw an uptrend line. At the next correction, a rising Low appears, giving us a potential entry opportunity. But at the reversal point the bars are too big. If you look closely at the chart, you can see that the stop would have been between 25 and 35 cents (it is difficult to determine the exact entry point). Such a stop is unacceptably large, and the entry point is “dirty”, so it is better to refuse such a transaction. Moreover, at that time such a deal would have been contrary to the general “mood” of the day. If the risk is too great in relation to the expected profit, you should not open a position either.

And indeed, the market does not go up, but again draws a falling High and a falling Low. Another potential short entry is marked on the chart with a red arrow. The target level has been reached. But in reality, this deal does not fit the strategy in question. The fact is that during this period of time the market is not in a trend movement, but in a transitional state. Try to find the difference between this transaction and previous ones. If you succeed, then you understand the concept of this strategy. Our correct entry appears on the next wave, but it results in a loss. We had to enter on the pullback between the second red and first green arrows, but we would have been knocked out by the stop.

After this, SPY forms a series of rising Lows and Highs, which gives us 4 points to enter a long position with a stop of about 15 cents and an acceptable profit potential. It is rare when a movement allows you to complete 4 trades. So you shouldn't count on it. After just two transactions, the chances of success begin to decline. The likelihood of experiencing a loss increases as the trend develops. But if the market gives, you need to trade..

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Trend trading is one of the most effective trading systems in the Forex market. However, the popular and tired expression “Trend is your friend,” which theoretically does not raise any objections, is not always possible to implement in trading practice, especially for novice traders, and these trading strategies, especially identifying signals to enter a position, require a certain level of knowledge.

What should be the approach to trend trading?

First and most importantly, it is necessary to timely and correctly identify directional movement on the chart. It is advisable to use a comprehensive market analysis and a certain set of technical analysis tools (graphical analysis, data from technical indicators).

It is not enough to simply draw a trend line. You must not only state the presence of directional movement in the market, but determine the nature (long, medium, short-term trend), phase, direction, strength, nature of interaction with the most important support/resistance levels, the presence of graphic figures, and so on. It is very important to determine the directional movement at different time intervals and their relationships.

After identifying a directional movement, the trader needs to focus on the signals to enter a trading position. Entry signals can be very different, depending on the trading system used. It is necessary to clearly understand that directional movement is always determined on longer time frames, and trading is carried out on smaller time periods, but always in the direction of the prevailing directional movement. That is, if you trade intraday, the trend on the daily charts should be taken as a basis.

Basic trading systems, signals and market entry points

Trading on pullbacks of directional movement. It is the most commonly used method of trend trading. However, trading with a trend does not mean at all that a trader can enter the market in the direction of market movement at any arbitrarily chosen point. As you know, a trend never develops in a straight line, but is accompanied by frequent rollbacks (corrections).

Therefore, when trading based on market movement, the best option is to enter the market after a correction, provided there are signs of a restoration of directional movement, since in practice it is very difficult to determine and distinguish a correction from a trend reversal.

The most effective and simple strategy for trading on pullbacks is to buy or sell a financial instrument near the support/resistance level. Moreover, the best option for entering a position is the third touch of the resistance/support lines.

Such a line can be either trend lines drawn by the trader or moving average lines, which are selected individually for a specific trading time interval. For these purposes, you can use either one moving average line or several, receiving additional signals at their location in relation to each other, as well as at their intersections.

Both average moving lines and support/resistance levels work well in this strategy, so there is no fundamental difference when using them. The only important point is the selection of the moving average period, and they must be selected individually for each currency pair.

When using such strategies, and there are many of them, it is highly desirable to use various technical indicators (RSI, MCAD, oscillators), which allow you to additionally see the end of the trend rollback and the beginning of the restoration of price movement in the original direction. Experienced traders also use Fibonacci levels, Price Action patterns and candlestick patterns.

After entering a trading position, a Stop-loss order is set, which allows the trader to control potential losses. If the directional movement is correctly determined and entered into the market, the position can be maintained for a long time. Or, the trader can partially take profit and leave the rest of the position on the market in anticipation of a long-term strong movement.

Entering a trading position when the price extremum is broken

A signal to enter a trading position appears after the rollback is complete when the price reaches and breaks through the level of the previous maximum/minimum price (extremum). It is preferable to enter with a pending order with the obligatory installation of stop-loss orders at a distance in accordance with the risk management system you use.

Additionally, it is also recommended to use in the trading system technical analysis tools – moving averages, various technical indicators that provide the trader with important information about the strength and direction of the trend.

Trading with the trend based on the formed graphic figures of continuation of the directional movement

The trend movement of the price of a financial instrument in the Forex market periodically loses and receives a new impulse of movement, and the directional movement periodically, for some time, is in a state of market consolidation, while forming various patterns of continuation of the directional movement. Such figures include flags, rectangles, wedges, and differently oriented triangles.

Each of the listed figures for the continuation of a directional movement is strictly specific, both in the process of its formation and the rules for entering a trend based on it. Therefore, novice traders are required to carefully study these patterns and apply them in their trading.

Thus, a trader can successfully trade with the trend using various systems for entering directional movements, as well as combining them, thereby reducing the risk of losses. In practice, the basis of trading should be a trading system developed by the trader, configured for a certain time period and a specific financial instrument.

It should also be noted that long-medium-short-term trends may be present in the market at the same time, and the trader needs to decide which of them he is trading on. It is very important for successful trading to maintain strict discipline and the ability to wait for a favorable situation to form in the market and clear, confirmed signals to enter a position.

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The goal of every trader is to increase capital and achieve stable income. The key to successful trading in binary options is a properly selected strategy and trading tools. Beginners and professionals very often prefer to analyze market entry points along a trend line. How does a trend form and work? What signals does the trend provide to the investor and what does it affect? This is a broad topic, which we will explore in this article.

Concept and types of trend

A trend line is a vector that displays the movement of a quote over a certain time period. This concept is figurative, since the exchange rate of a currency or financial asset does not constantly move towards growth or decline. Due to the constant influence of external factors, the quote at a certain stage moves up, then down. The depth and frequency of fluctuations in the price line are directly influenced by news, events in the global economy, and the play of large investors. Therefore, a trend is schematically depicted as a line connecting extreme highs or lows.

Basic rules that are directly related to the trend:

exchange rate activity is unstable, the trend line will change;
at any point on the graph there is a high probability of the course continuing to move in a given direction;
The greatest income is received by investors who take into account the strength of the trend;
playing against the rules is very risky, it is better to accept the situation as a fact.

In the foreign exchange industry, there are two main categories of trends: direction and duration. The first group is classified into three types: upward, downward, sideways trend. A growing or bullish trend is a stable growth in the price of an asset, each subsequent point of the chart is higher than all previous ones. At this moment, it is profitable to open contracts for the purchase of assets.

The downward (bearish) vector is formed directly opposite to the upward one. Each subsequent stage of the trend turns out to be significantly lower than the previous one. At this stage, traders prefer to sell options. The price movement along a specific horizontal corridor in trading is called a side trend or flat, consolidation. The quote fluctuates, but with low frequency and within a narrow framework.

An important indicator in trend trading is the selected timeframe. The speed of trend change or its constancy directly depends on what interval the trader will trade. For example, on a five-minute interval there is a bearish trend, on a half-hour interval it actively turns into a bullish one, and after twenty minutes it turns into a flat.

If you trade options according to a short-term scheme, the probability of a change in the direction of the quote movement is very small. When an investor plans a long-term trade, a variety of price changes are observed on the chart. It is worth noting here that in terms of the strength of the trend on the weekly chart there is a predominance in comparison with the hourly and even more so the minute.

Education mechanism

The schedule is formed under the influence of a complex of factors, according to a certain pattern. Almost every trend goes through four phases during its existence: origin, development, saturation, completion.

The formation stage is the moment when active investors enter the market. They open many deals to acquire financial assets. Horizontal fluctuations with numerous breakouts are formed on the chart. Trading at this time is dangerous due to countless false signals. After buyers become saturated and the trading situation stabilizes, an active trend begins to form. It enters the stage of development or accumulation.

The distribution and saturation phase is characterized by active dynamics of the quote. It will move in an upward or downward trend. The main feature is that the rate is constantly changing, gradually increasing or falling. The chart is formed by a set of impulsive or short correctional waves. Some active players freeze positions, while others begin aggressive trading.

The final stage is the phase of completion, the end of the trend. This period is characterized by a peak price position. Most traders set stop losses at breakeven and begin withdrawing money. The graph is presented in the form of various figures, the frequency of which is associated with user activity.

Beginners mistakenly think that after the end of a trend, a new one, diametrically opposite in direction, must certainly open. This is not entirely true. After the peak moment is overcome, the quote enters a wide trading range. It is very difficult to predict her behavior.

Trend Determination

How to determine and correctly depict a trend in binary options? Trend lines are actively used in technical analysis. To teach how to accurately and correctly determine the direction of price movement, it is worth acquiring minimal knowledge of the market situation. Each trader builds a chart according to his own principles, but based on the advice of professionals.

Most often, two or three peak maximum or minimum points are used to construct a vector. It is important to understand that the trend line will not be alone in the figure; next to it there will be smaller trends with different directions. The drawn main line often crosses support and resistance levels, which indicates the end of the trend.

An upward movement represents a support level, which is indicated by the line of the minimum values of an uptrend. The resistance limit will be the wave connecting the tops of the bearish trend. A successive combination of lows and highs will form a horizontal price corridor.

Options trend trading is based on four fundamental principles:

The accuracy of trading signals directly depends on the size of the time scale. The larger the selected segment on the chart, the more reliable information the trader will receive from the analysis. A line constructed with a daily forecast will be more accurate than the dynamics in a few minutes or an hour.
The duration of the analyzed trait is also very important. The further the trend goes, the more informative the graph. If we take a period of fifteen minutes, the investor will not be able to clearly predict the situation for the next hours. Such a picture will be one-sided, with false signals.
When constructing a trend line, it is recommended to use a large number of touches. The more often the price comes into contact with the trend, the more stable it is. When the quote bounces off the chart three or more times, the investor confidently opens a trade in the given direction.
The strength of the trend is visually determined by the angle of inclination. The faster the trend moves in comparison with the base horizontal, the stronger it is. A large tilt angle is always an indicator for opening a obviously successful transaction. A flat trend will show weak impulses; it is advisable to wait for brighter dynamics and only then enter the market.

Trading Rules

Trend trading on binary options is like a financial pyramid. Traders who are the first to open positions on the market receive good profits due to the activity of subsequent users. The trend line shows the direction of movement of the exchange rate and serves as the basis for predicting the success of the contract and the percentage of profitability.

To build a trend line, it is advisable to choose the most accurate support points. Peaks and troughs are the basis of the indicator-less method of constructing a trend. Indicators installed on the broker's trading platform also come to the aid of the trader. The most commonly used moving averages are MACD.

It is necessary to clearly define the time frame. You should not analyze weekly charts if you plan to trade intraday. The user will waste effort and time because the analyzer works differently for short and long periods.

The second important point is the choice of financial asset and trading session. On popular currency pairs the trend of exchange rate changes is most pronounced, but on rarely used trading instruments it is somewhat more difficult to predict the movement. It's better to trade options that are clear than to risk losing everything because of one wrong move.

Let us describe step by step the investor's algorithm for trading binary options based on the trend:

selection of a trading session, financial asset;
determining the direction of the trend (upward, downward, flat);
calculating the duration of correctional waves by analogy with the previous trend;
the transaction is opened after a clear formation of a trend line following the passage of a correction for an expiration period equal to the duration of the correction;
The duration of the contract depends on the trader's expectations and the activity of the quote; it is always advisable to advance the stop loss when approaching the take profit.

Professionals advise to beware of opening trades if there are no pullbacks on the chart for a long time. There is a 90% chance that this phenomenon will occur in the near future. You cannot trade without being sure of the strength of the trend. It’s better to double-check ten times and calculate your moves than to lose everything at once. It is advisable to avoid trading if the chart shows abnormal, unpredictable movements in the exchange rate.

Trend trading strategies for binary options

Strategic decisions on conducting trading operations with binary options are made according to the individual tactics of the investor. Important selection criteria will be the size of the starting capital, free time for trading, and expected profit. Beginners prefer to play on a strong trend, while professionals actively use reversals and rollbacks to multiply their finances due to increased risks.

A popular trend trading strategy for binary options is popular among traders, based on opening trades in anticipation of pullbacks. It is obvious that the quote does not always clearly and unconditionally follow the given direction; there are minor fluctuations in the opposite direction.

First, the user forms support and resistance levels on the chart. The signal for options trading will be the third touch of the support line rate in an upward trend. A similar principle is used in a downtrend. Since the probability of the price returning to its previous position after a rollback is quite high, the client receives a decent profit.

The simplest tactic for trading binary options is to follow the direction of the trend. If the trend is upward, contracts are opened for an increase, and if the trend is downward, for a fall. Everything here is logical and simple. It is important to avoid opening trades when the price is moving along a narrow corridor. The only option for obtaining benefits through the price channel is to fix the points of contact between the support and resistance levels.

Very often, professionals use strategies based on the Moving Average indicator. If two or three moving averages on the chart intersect and move upward in the same direction, it is recommended to open a trade at this rate. The trader will take a similar action when the price line breaks through the chart from the bottom up, touches it again and moves up. Often, investors trade on rebounds, when the price periodically touches the moving average or bounces off it.

According to statistics, trading on takeovers brings quite high profits to traders. It is important to continuously monitor the live chart and eliminate all minor fluctuations in the quote. You should not trade on news releases, since the risk percentage increases many times over. Only professionals with a very clear and reliable strategy can cope with such psychological pressure.

The main mistakes of novice traders are impulsiveness. Immediately after detecting a pair of candles in the expected direction of the rate movement, the user draws a trend line and enters the market. Due to haste, the contract will close at a loss in most cases. Therefore, it is important to wait for at least two more figures to appear, confirm the trend with other indicators, and only then start trading.

Trading binary options along a trend line is one of the simple, straightforward methods. It is ideal for beginners and professionals. It is important to be subjective about the picture displayed on the charts, to deeply and in detail study the behavior of the asset in the market environment. It is advisable to exclude emotionality, passion, and impulsiveness, then trading will move forward with confident steps. An additional percentage of success will be added by strict adherence to the rules of the chosen strategy.

During the experiments, we came across the fact that the “Trend Trading” strategy does not work on all trading platforms. In particular, we were unable to implement it on the Olymptrade and Dukascopy platforms. We don’t know why this happened; we attribute it to the technical features of charting. At the same time, “Trend Trading” works great for brokers

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