Technical Analysis

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Without technical analysis we can’t speak about trading the financial markets and, specifically, about trading binary options.

Basing the binary options trading on technical analysis is a must as if applied on the shorter time frames, certain things like trendlines, triangles, wedges, inversed head and shoulders, pennants, double bottoms/tops, etc, are extremely important for successfully trading such a product.

For example, if one is looking at an uptrend, but, regardless of the reason, he/she is a bear and wants to express that interest on the binary options market by buying a put option. Well, the first thing to look for is that the trendline for the upward move to be broken, look for the retest of it (which is not mandatory but usually it is happening) and only then to buy the put interested to trade.

Other patterns to be met when trading financial markets based on your technical analysis are: breaking of necklines when spotting head and shoulders/inversed head and shoulders patterns, an then looking for the measured move which should be the distance from the potential neckline to the head applied to the moment when the neckline is broken; breaking of contracting triangles, and in this case the measured move should be the length of the longest wave, usually wave a, applied at the moment the triangle is broken; the fifty percent retracement in the case of wedges, and this retracement level should come in less than the time taken for the whole wedge to form in the first place, etc.

Last but not least, one should rely on oscillators when trading binary options because these types of indicators work best on short term time frames (ideal for binary options) and they tend to work best in terms of diverging with price and/or reaching different overbought/oversold levels.

In theses chapters we will take a look a contracting triangles, wedges, basic trendlines, and we will interpret two of the most famous oscillators: relative strength index and Williams regression.

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