Our next project on the Trading Strategies That Work educational series we’re building here on www.binaryoptions.education is about one of the most trickiest pattern ever to be traded: the irregular flat.
It is valuable information when trading binary options because this one, like any other flat actually, allows one to take the time element into consideration and this is a great competitive advantage one has in front of the market.
An irregular flat is just a special type of flat pattern and, like any other flat it has three different legs, labeled a-b-c. It is important to remember that the structure of such a pattern is a 3-3-5 one, meaning the first to waves, namely wave a and b should be corrective and the last one, the c wave, should be impulsive.
Irregular flats are coming with one important characteristic: the b wave there retraces more than 100% when compared with previous wave a (meaning it will take the highs/lows of the previous wave a) and it does so in a corrective manner.
Moreover, like the recordings that are coming with this project show, it is all about the retracement level the b wave is making: if the b wave goes and retraces between 100%-and 123.6%, then price action virtually guaranteess that the c wave to come ( the five waves structure) will break the end of the previous b wave.
If, on the other hand,, the b wave goes and retraces more than 138.2% when compared with the previous wave a, then there is still a slight chance price will come in the c wave and retrace all the previous b wave.
The last situation for the b wave will be when it goes and exceeds the 161.8% level when compared with the previous wave a and this virtually says that the b wave will never be completely retraced by the upcoming c wave.
There is also one important thing to consider here and this relates to the time element price will have to respect after the irregular flat is completed. This rule states that price should retrace the whole c wave in less than the time taken for the c wave to form.
So the thing to do is to go and measure the time taken for the c wave to form by taking two vertical lines and project that time on the right side of the chart. If the irregular flat if coming after a bullish trend, then by call options with the expiration date given by the time element explained earlier is the thing to do.
On the other hand, if the irregular flat is coming after a bearish trend, then buying put options will be the thing to do as price should retrace the whole c wave in less than the time taken for it to form.
All of theses plus a classical example on the eurusd are to be found on the four video recordings about this subject that are also to be found on the official Youtube channel of binaryoptions.education.