Trading Channels in Binary Options
Capitalizing on tendencies is what most traders ignore when trading as they focus more on what looks big and bulky rather than what’s simple and easy. I would like to introduce you, binary traders, to chart patterns which you may have heard of, yet never considered them.
Trying multiple forms of technical analysis will be of no help if you cannot manage at least one of them. I have been blogging on different technical analysis, still binary options traders experience ambiguities. So, I am back with another technical charting system, which is simple and easy to grasp. Bear in mind that methods shown should be followed as depicted. Technical analysis is not simple, I understand, but it is a great source of reliable accuracy for trading.
Inside chart trading, is channel trading often referred to as channeling. Let me channel your path of success in binary options trading by taking you deeper into the subject.
Channels form an array of technical analysis which generates trading points with precision and come in handy for quick verifications before, after and during a trading session. These precise points obtained from a proper channeling allow you to place the correct CALL or PUT option. They decipher the exact time to go for a stop loss or a take profit. However, this is not what you are limited to, as traders are entitled to several other such trading elements.
Traits to find in Channels
Channel may be referred to as a specific area along which lies two parallel trendlines. Within the parallel trendlines lies the price trend which can either be an upward trend or a downward trend. The trendlines are the measure of the range of the price ranges. An upper trendline will depict higher peaks while lower peaks will be shown in downward trendline. Any breakout on either trendline signals a bullish (upward trendline) or bearish (downward trendline) trend.
On a short-term trading basis, channeling is a very effective method to adopt to receive short-term gains. This is mainly because channeling works better in a less volatile mode. Here, fundamental analysis plays an important role, as it justifies trading on a short-term basis. Fundamental analysis is essential while gauging short-term opportunities as daily or weekly economic data releases may help create worthwhile trading opportunities. Make sure that the asset you want to trade is available on trading charts and then proceed with the use of these technical indicators.
Ways to use Charting for Channeling purpose
- Make a manual use of charting, for example you can use www.tradingview.com, by manually searching for it on any browser. Also, you will have to look for such charts manually on the website and locate which one is more appropriate for use and which suits your trading demands.
- If ever you have any specific software with which your trading charts are synchronized, look out for software that recognizes your chart patterns for ease of trading.
- Ask for a list of assets with which chart patterns can be used. Ask from your binary options broker or you may also conduct a research on your own.
Channels, charts and explanation
Swing and day trading
Day trading and short-term trading rhymes well. Channel trading is so simple to learn and easy to spot that this technical indicator has been a sought-after technique in binary options trading. Easy to understand, this technical indicator comes in handy when you need precision. This is the way to capitalize on tendencies.
The core of Channel Charts
- Price trend: The price trend refers to candles hanging between the trendlines and can take any direction at a given point. When they change direction, this alteration of the candles is known as breakout point.
- Breakout: As I explained, breakouts are simply the point at which price trend diverts from its actual direction and opts for another direction. Price trend changes, thus forming a breakout.
- Trendlines: are the parallel lines that contain the price trend (candles). They should exactly be parallel or nearly parallel.
Upward & Downward Channel trading
Upward Channel trading
On up-sloping channels, trading channels from the long side is recommended. CALL when price trend bounce from the bottom trendline as shown in the charts. Traders need to properly look for breakouts and verify trends frequently in a short-term position. Only when keeping an eye on the trends that traders will notice how price pierced the channel, as in the figure. Do not open long positions here.
Downward Channel Trading
Down channels should be traded from the short side. What I mean by short here is, when price turns down at the top trendline. As soon as you notice this breakout, it is time for a PUT option. Do not opt for long-term option when the price is inside a down-sloping channel.
FYI If price closes outside channel in an opposite direction, then close the trade. Immediately start a new trade in direction of the new trend.
One of the most accurate technical indicators, Channel trading has yet to provide much more than just getting precision. You can decipher the exact outcome of your trade if you dedicate proper time and research on this technical indicator. While following what I showed above and while conducting your research - do not forget to monitor your charts. On this note, I wish you a safe trading, knowing that it’s time for you to gain!