Make big profits on trend recognition
There are simple and complex strategies, risky and minimizing risks used by beginners or only by experienced traders. The trend trading strategy for binary options is a classic, but, as a rule, only experienced players who prefer an aggressive investment style resort to it.
And all because it is not so easy to recognize a trend and even more difficult to conclude profitable deals on its wave. Nevertheless, if the investor succeeds, then he can make big profits in a short time.
As a rule, the price of options fluctuates within the well-known currency corridor, which is taken into account by the vast majority of investors, but such an approach can lead to the fact that the trend will not be recognized on time and the trader will miss a good profit.
You do not need any indicators to recognize a trend. You just need to draw one line, which will act as a level of support or resistance. The trend line is the basis of technical analysis and without this knowledge you will not go far.
First we need to open a live chart and draw one line
Drawing trend lines is quite simple, for this you need to find two peaks on the charts and connect them.
Let’s analyze in detail the situation that arose on the 5-minute chart on the AUDNZD currency pair.
- After two peaks have formed, it is necessary to draw a line through them.
- Now you should wait for the moment when the price returns to this line again. It is at this moment that we have the opportunity to trade.
- The numbers 3 and 4 mark the points at which we could purchase Put options with an expiration period of 10-15 minutes.
Unfortunately, trends do not last forever in one direction. As soon as the candle breaks the line and closes behind it, breakdown occurs and the price goes the other way, as indicated by 5 in the figure.
- In an uptrend, you need to look for the minimum points below and draw a line along them from bottom to top.
- In a downtrend, you need to look for the minimum points at the top and draw on them from top to bottom.
When an uptrend is forming, you need to buy an option. When downward – to sell. When the market is calm, flat – you should not trade.
Pros and cons of the trading system
The strategy for trading on the trend to Olymp Trade has both advantages and some disadvantages. Its main advantage is considered to be the opportunity to make big profits in a short time, and this is, if not the goal, then the dream of many traders. Therefore, it attracts many market participants. However, the vehicle also has its drawbacks, which are important to consider.
The first of them is rare “entry signals”. Despite the apparent simplicity of the strategy that makes it available to many market participants, real situations that could be considered signals for acquiring a binary option do not develop so often. Extraordinary patience is required from the trader to constantly monitor the currency situation according to several charts. In this case, the chances of detecting a trend and its correct use are not significant, but still grow. This makes the described TS used as a tool for additional earnings, while the main ones usually become more conservative.
The second drawback is high risk. Unfortunately, even if a market participant is sure that he has correctly determined the trend and found the best moment to enter, the volatility of the foreign exchange market always implies a certain risk of losing. As the practice and experience of many investors shows, really “catching” a trend is a rather difficult task, requiring the executor to have strategic skills and an analytical mindset.
Nevertheless, the trend trading strategy for binary options remains attractive, and it is used by many (both experienced and inexperienced) market participants. However, it is recommended to use it simultaneously with other TS, which allow you to establish tight control over the risks of losses. In this case, the investor will be able to extract its benefits and get around the pitfalls, receiving a steady profit from the implementation of options for other strategies.
A trending strategy is used on any timeframes (but do not forget about the reliability of high timeframes!), So if you train properly, you will get successful deals.
And here is a video from the company Olymp Trade about trend trading. Interesting and useful material for traders.