Trend Strategy is a favorite among beginners and professional traders alike. When adopting the Trend Strategy, all you really have to do is monitor and observe trend lines of a certain asset – whether these rise, decline or remain unchanged. From these this trends you can determine if the market sentiment is bullish, bearish or neutral on this specific asset.
Following trends is one of the most common tactics that binary options traders follow. It is one of the key focuses of technical analysis. Basically, you can hold out and wait for a substantial shift in price – regardless of direction – and then decide on whether you wish to place an either a Call or Put trade. Here call refers to a high binary option and a Put refers to a low binary option.
How to monitor assets for the implementation of a trend strategy?
So how are trends monitored in binary options trading? Historical date is important. It is this data – involving a specific asset – that a trader can use in order to view the asset’s pattern throughout a specific period of time. How specific? That’s up to you. Binary option traders tend to focus on short-term trends of up to several days or trend reversals that can represent interesting trade opportunities.
Tracking an asset’s moving averages is also a great way to study a trend and help sharpen your understanding of the trend. Is the trend confirmed by moving averages? When short-term moving averages stand substantially higher or lower than an average recorded for a longer period, it indicates a strong possibility for an emerging trend. Historical data is often readily accessible for all binary traders through most broker platforms. You can change the time horizon of the candlestick chart directly from the platform options and adapt it to the duration of your trend strategy.
How to implement a trend strategy?
When asset prices are trending, many opportunities can present themselves to traders. Short-term trades can potentially prove to be positive where short-lived trends are concerned and binary options are perfect instruments to benefit from them. When recognizing a developing upward trend, or the forming of a downward trend, placing a trade of either Call or Put, might prove to be rewarding. Your trend strategy must be timed to perfectly match the time horizon of the identified trend.
Trends are not 100% consistent and minor price pullbacks aren’t rare. This is something you should definitely follow closely. A diversion here and there shouldn’t deter you, as long as you’ve established a generally steady direction in which the asset has been heading for a certain period of time. If you notice too many price digressions, or if these appear to be too extreme, this trend might not be what you’re looking for. You need to focus on clear trends confirmed by multiple indicators (higher highs, higher lows, upward RSI and upward stochastic indicators for an uptrend).
Trend reversals are the best patterns for a trend strategy
A prevalent trend is one that involves an asset price reversing completely. Quite often you will see an asset reach a certain point after trending in one direction for a while, and then simply make a “U-turn” back to familiar grounds. This level is often materialized by a technical support or a technical resistance. If you can study an asset’s market movement history and typical behaviour, you can predict the formation of a trend and make smarter prediction regarding the future asset price
Lastly, don’t forget to follow market news and current macro events as they are also part of the larger trend strategy you could be employing. This is what traders call the fundamental backdrop of the asset.
Broker Indicators for Trend Strategies
Some binary option brokers like Banc De Binary for instance, propose useful tools to confirm the formation of a trend. These tools are directly integrated in the trading platform. They provide you with the traders’ sentiment on a specific asset and can even analyze technical indicator trends. You should not use these tools to build a new trend strategy but rather to confirm your market scenario.
Don’t hesitate to have a look at our review of Banc De Binary and for more information on these interesting tools and further information on the broker offer.