Using Contracting Triangles to Trade Binary Options

Starting with the one hour chart and moving to the lower time frames, to the five minutes chart, contracting triangles can be used in trading binary options.

There are two ways in which a contracting triangle can be used in trading binary options, depending on the time frame the pattern is forming. On the higher time frames, like one hour chart for example, and sometimes even on the four hours chart, one way to deal with a triangle is to wait for price to break out of the triangle and then look for the measured move to come. This would suit options with intraday expiration time because by the moment price breaks out of a triangle it is usually traveling quite fast and volatility rises.

Other way would be, also depending on the time frame the triangle is forming, to look for the relationships between the inner waves of a contracting triangle and to take into consideration their structure. For that, after a retracement level on a time frame like the one hour chart is reached, go on a shorter time frame and look for even lower degree waves to form specific patterns/structures: elongated flats, wedges, smaller triangles of a lower degree, pennants, etc.

Depending on the phase a contracting triangle is finding at a specific moment of time, different types of binary options can be used. For a triangle in the incipient phases, buying a one touch binary option for a retracement level of 50% of the previous wave (just to be conservative, because retracement normally goes above the 61.8% level) would be one way to go.

The recordings that will come with this chapter will show you plenty of examples on how to treat contracting triangles and how to use them.

 

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