Strategizing Binary Options Trade: Swing Trades

Strategizing Binary Options Trade: Swing Trades

Submitted by adil on Thu, 03/06/2014 - 23:22

There are a vast number of binary options traders with goal of making daily trades. They start off as day-traders and begin to give more time to their trading activities. Such traders are quite active traders and they often have already used basic techniques and strategies to make good their positions. Often these traders rely on automated trading tools or social trading solutions to keep earning some returns. However, once they start to step out of their newbie shell, and get more active in trading, they need to adopt a relevant strategy for trading binary options.

For traders who wish to get actively involved in trading binary options and give dedicated time to it, a good strategy to follow is swing trading. This strategy tries to generate returns from any movement in the market, and it is essentially a short-term to very short-term strategy of trading. It is called a swing trading strategy because the trader swings between bulls and bears sentiments to make good his profits.

To effectively follow a swing trading strategy the trader needs to adequately understand the momentum indicators involved. These technical indicators are the backbone of swing strategy. The indicators involved describe the momentum of the price action, and point towards a possible price reversal or stall. The momentum is often also described in the jargon of traders as a constant battle between the bulls and the bears to influence the direction of the price action. The momentum indicators include RSI (Relative Strength Index), MACD (Moving Average Convergence/ Divergence) or Stochastic Oscillators.

The momentum indicators place the current price of any given asset on spectrum of oversold and overbought levels. Markets constantly touch resistance and support levels, and by looking at the momentum indicators, the trader determine whether the movement happening is strong or weak. If there is a divergence between the price action and momentum indicators, it means that the price is most likely to reverse. This is illustrated when, for example, the price rises for two consecutive times, whilst on the contrary the EMA (Exponential Moving Average) rises more slowly, and lags behind.

The trader in a swing trading mode, tries to take benefit of the reversals in the price. If the reversals happen more than once, the trader has to catch that too to maximize his gains. That is why the swing trader needs to show certain abilities such as quick response and keen eye. Therefore, when the indicators represent the bullish situation, the trader needs to buy the up binary option and wait until the end of his session or until the situation start indicate a reversal. When the situation shows a reversal in price action, the trader needs to close his up position and enter in to the down binary option.

Mastering swing trades strategy does not guarantee a perfect result always. There are a lot of variables and indicators involved each with a slightly different connotation and one need to watch out for all of them.