There are many ways to treat wedges when trading binary options, and the recording that will come with this chapter will show you that.
One way, and the most important one, is to look for a wedge to break and then go for the measured move of it. A good question would be how to avoid false breaks, and the solution is given by the characteristics of the waves that form a wedge.
For example, in a rising wedge, it is typical for the fifth wave of a rising wedge/ending diagonal to pierce the trendline that connects the end of the first wave with the end of the third wave and it is projected forward. So, what a trader should do, is to look for that trendline to be pierced to the upside, then wait for the lower trendline of the wedge to be broken (the trendline drawn from the end of the second wave to the end of the fourth wave) to the downside this time. In this way we know the break is not fake as the piercing of the upper trendline comes to confirm this.
Next, we should look for the measured move, and this is 50% of the whole distance the wedge travels. However, when trading binary options we should take time into consideration, and here is the moment we are doing exactly that. Wedges wave the tendency to retrace to the fifty percent level in less then the time taken for the whole wedge to form. So what we need to do is to measure the time taken for the wedge to form, project it forward, and then engage in a binary option, preferably a one touch binary option, with the target to be the fifty percent level, and the expiration date of the option should be higher than the time taken for the wedge to consolidate because we are expecting for the fifty level, the measured move for the wedge to be touched before that expiration date for the binary option to come. In this case, once the level is touched, the option’s potential payout is bankable.
Another way is to look for the end of the fifth wave in a wedge in relations with the length of the third wave, taking into account the fact that the third wave cannot be the shortest one. This case too will be illustrated on the recording that come with this chapter.