Wednesday, September 12th, 2013 by James Franklen
To ensure longer term accurate decision making for constant long term profits, it is always important to learn tactics of the binary trading and find an opportunity to be in-the-money by understanding and practicing binary options trading patterns. Because the underlying profit dynamics are same, many of the trading patterns used in vanilla options are also applied in exotic options, such as binary options. So, if you have been involved in trading vanilla options, it would not be hard for you to strategize your positions in binary options market. There are mainly four different popular trading patterns used by the traders:
A Bullish Binary Options Trading Pattern is utilized when the trader gets the signal that the price of an asset is set to assume an upward trend and gain value. For example, when a trader obtains signals from signal providers, from his own set tools and forecasts that the rate of EUR/USD pair is about to climb, the trader will choose a call option.
A Bearish Binary Options Trading Pattern is utilized when a trader believes that the price of a specific asset will follow a downward trend. Taking the same example of EUR/USD pair, if the trader gets the signals that rate of the pair is set to go down; the trader will choose a put option.
*Note that the above trading patterns are trend following ones. You need to have very strong indications that the trend will set in to the respective motion. The difference that will arise in binary and vanilla trading is subtle. in vanilla option trading usually long-term trends are seen and positions set likewise. in binary options scene, the profit taking is usually approach in very short periods of time, and hence the analysis and forecasts are for minute time frames, i.e. minutes or many minutes at max.
Range Trading Trading Pattern allows the investor to predict (based on past trend) that whether the asset to be traded will stay or cross the particular range (the upper and lower limit) of price. In case if the asset prices have been stable in the past, the buyer chooses to with the option of ‘In’ range for a specified period of time (e.g. the asset will remain between certain range for next hour / days). If the nature of the asset is volatile, the buyer opts for ‘out’ of range option (i.e. the price of asset will not stay within the specified range).
Fence Trading Trading Pattern is securing oneself by buying both, a put option and a call option over a span of short time for the same asset. It is used when market is unpredictable and moves between what a trader expects to be profitable position and what he considers to be a loss making one. It is a rather complex tool to secure one’s minimum profit from a given position.
More suitable trading patternsfor binary trading would be those that give a signal over a shorter period. This includes Fence and Range Trading. Asset prices tend to move quicker over resistance or under support when volatility hits markets, and periods of volatility are quite recurrent around major news or events. Therefore, a successful binary options trader needs to quickly master such trading patterns and make more money out quick in-and-out entries.
Learn how to trade using Binary Options Trading Patterns