Trend Trading

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Word “trend” came into general use long ago. It means “direction” being translated from English. The term “trend” also exists in the operation with financial tools. It defines a market movement in one direction. It is easy enough to determine this movement in the chart. This requires to get the high point and low points and to draw lines through them. If high points and low points are continuing grow so it’s upward trend. If they fall off so the trend is downward vice versa. These notions underline such elements as strategy of trading in trend.

Описание стратегии

Trading in trend is a basic methodology of trading. This is that basis which the market provides itself to derive profit. It is only important to understand the market language to interpret it properly. We’ll discuss it today. So we shall need a real-time chart for operation under this strategy. We’ll receive quotes and perform a market technical analysis by means of this chart.

General idea that we will use is as follows:

  • If a market is growing we’ll bull.
  • If a market is falling we’ll bear.

Everything looks simple on one side really it’s possible to purchase contracts upon trend defining. For example if general move is upward so trade Call is purchased. In the event of price falling for a long time it’s necessary to open a position Put. However you can see the trend never lasts long looking at this chart. Furthermore the trend often develops in waveform on volatile tools. For example when upward moving you can see frequent pullback of price from highpoints to low points . However in order to the trend was go on and the trader had confirmation of upward move , the price shall not be in contact with previous low point- it shall be higher.

Trading rules

Trading in Forex

Trend is the basis of everything in Forex. If the points of trends may be avoided in binary options because the market fluctuations are not important there . We earn namely on trends and number of points within which the price passes off in the Forex. In order to grasp the strategy rules let us study the figure below.

We see the downward trend and some lines are drawn on the chart:

  • Orange lines is a trending channel on which trading is performed. Since the trend is downward so we buy at upper line and goal is a bottom line or a middle line.
  • The blue dashed line is a central line that is drawn in the middle of the channel.

There is a moment of importance at-the- opening of trade you should wait to moment when price would be closed to upper line but it is not able to fix behind it and gets back to the corridor. It is recommended to open trades for rookies with goal on the middle line in this case. More experienced traders can look for access to purchase up to line of resistance with limit of movement by means of stop losses pushing the trade in the black.

As soon as the asset price is fixed for trend channel – the current trend is completed and you should break off the current trading. Then you wait for the trend building and operation within rules.

We consider the trading on down trend above, the rules will be mirror-like for upward trend.

Торговля бинарными опционами

Bull options

Key tools are straight lines and resistance lines in strategy “Trading in trend”. Straight line is drawn on the prices low points. This line defines a level through which sellers or bears cannot reduce the price. Support level will be directed upward with uptrend. At that the price chart may touch the support level as well as to go beyond it in some cases. But if the price goes on its move, so it as if starts from support level and goes up to update of high point.

Red dots are starting points to build support level. If the level is directed upwards so we buy for a rise solely. Resistance level is drawn above for clarity. We don’t use it in this case

Further rules are simple ones – as soon as the price comes up to our support - we open option for a raise. These situations were only three ones, and each time the price starts from level and goes up rapidly. This thing we need. Please note we don’t open a bear trade when the price comes up to the resistance level. It’s related to the fact that the trading in trend occurs, but not against trend. Certainly more experienced traders can trade in both sides but I recommend strongly for rookies not to do it.

Bear options

The same is related to the resistance level. Encountering with this line on the chart the price starts from it and goes down. At that you can say about downward move when resistance level is downward. But if a lateral move is occurred in the market the support level as well as the resistance level will go horizontal (this situation is also called «flat»). If both lines are directed down wards so a bear trend is occurred in the market. We don’t consider the second version because quite other rules are entered in trading in this case.

This is a similar situation but only the market is downward this time. Hence we have a right to trade in trend only down. To do this we already use not the support line (bottom) and resistance line (upper) and when touching this line by the price we open the bear trade.

Важные условия

In order to use strategy “Trading in trend” for binary options it’s required to define it primarily. As previously stated it is defined by means of support line and resistance line. As soon as the trend is identified you can start trading. Lots of rookies try to trade in trend and against it simultaneously. For example the trend is up they purchase options Call up to support level. Then they purchase option Put when the touch occurs. It’s possible such approach will make large profit but it’s more risky. That’s why the trading in one way will be the best version .

 The following prospects are opened before traders:

  • feasibility of trading inside the generating channel buying contracts with price rebounce.
  • waiting for breakout in drawn lines you may buy a contract to sides of resulting breakout.

The fact that support line and resistance line stay in permanent location for prolonged time inform about intensity and reliability of price directed development. The reliability may be defined. The reliability may be defined with number of times wherein the price touched lines (i.e. levels are tested).

Attempts to make money from pullback are fraught with possible loss.

Sure the trend can become more intense. For example, uptrend can go upward from drawn channel. It means that the price unlikely get back down up to the option expiration unless a trader performs long-term trade and suppose the upward move will turn downward move some day. About levels are detailed further in our video.

Practical trading

Let us consider a version of trading in trend based on platform of broker IQ Option. WE cite some examples of these trades .

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