BO203 Lesson – Learn how to use Trend Lines for Binary Options Trading – Video & Transcript
Welcome to the third video in our Binary Options 200 course. This is Binary Options 203, Trend Lines. In this video, I’m going to teach trend support and resistance. And to do so, I have split trend support and resistance into trend support and resistance, and channel support and resistance. And we will look at both.
In our previous video, Binary Options 202, I taught horizontal support and resistance and dynamic support and resistance. If you combine this video and the previous video, you will have a vast knowledge of the variety of support and resistance in financial markets.
Trend support and resistance is the support and resistance that reverses price, pushes, and pullbacks of a trend, or rallies and retracements of a trend. If we look at this demonstration of an uptrend, we have our high highs and high lows, a series of pushes and pull backs, or rallies and retracements. When price pushes, at some point, it’s going to retrace. And this area where price reverses creates resistance. Price pulls back, and once again, reverses from a pullback to a push, or a retracement to a rally. And this acts as resistance.
Price then pushes and pulls back. Another resistance. But what’s interesting is our previous resistance can now act as support. In the previous video, Binary Options 202, I taught the principal of ceilings and floors– ceilings becoming floors and floors becoming ceilings. And this principle can work with trends– that the support and resistance, at the reversal of pushes and pullbacks, can act as supports or resistance at a future time on the same trend, as demonstrated in this uptrend.
We have the same concept with this downtrend demonstration. Price pushes and pulls back. This reversal acts as supports. When that support is broken, it can act as resistance for the reversal of a pullback into a push. Let me demonstrate this with a real price chart. This is the pound against the dollar. It’s a daily chart. And we have a clear uptrend. We have a push, a pullback. We go for another push, a pullback, and a push. As price reverses from this push to a pullback, this area will now act as resistance. And we can mark that with a horizontal trend line.
When this resistance is broken, this area can now act as support. So price pushes, and when it pulls back, we reach this area, and price is rejected and goes for another push.
As with all trading tools, concepts, and indicators, we look for a confirmation signal. So as price pulls back to this area, we have a number of pin bars, which could act as our confirmation signal to place calls, and pricing rallies, and goes for another push. And we have the same thing similar here. We have a pin bar, and price goes on the upside.
Let’s now look at channel support and resistance. Channel support and resistance is a concept when price moves repeatedly between a support and resistance area. If you’re familiar with the range in markets, this is a type of channel support and resistance where price is balancing continually off of support and resistance area.
But the channel support and resistance I want to demonstrate in this video is trend channel support and resistance. It’s the same concept as a range in markets, but price moves continually between a support and resistance, but is trending– either in an uptrend or a downtrend. And to best demonstrate this, let’s look at another price chart. Once again, this is the pound against the dollar. This is a four hourly chart. And on my screen, I have a clear uptrend and a clear downtrend.
Let’s start with the downtrend. You’ll notice we have a push, a pullback, a push, a push, a pullback, and another push. If we were to join these two lows, we could create a channel downtrend. I’ve joined these two lows with a trend line, and you’ll notice that price also bounces off this line at a future time.
If we were to duplicate this line and use it as a potential resistance, we would create a channel. I’ve duplicated the line. If we use this line on our first high, you’ll notice this resistance is reached here and could have acted as a great opportunity to place puts. We have a pin bar, a [INAUDIBLE]. And either of these signals would have been ideal to place puts options as price went on the downside.
Let’s create a channel for this uptrend. We have a push, a pullback, a push, a pullback, a push, a pullback, and a push. Let’s join these lows. These lows are now joined. And you’ll notice this line now acts as a trend support. When price reaches this support at a future time, we have an engulfing candle, and price moves on the upside.
This channel is not as clear as our downtrend channel, but if we duplicate our line, you’ll notice our first push here and the push here join, and we have our channel.