Surfing through Symmetrical Triangles

Surfing through Symmetrical Triangles

Submitted by adil on Mon, 03/31/2014 - 16:38

There is no asset that continues to throw simplistic price action to the binary options trader. The price action continues to change rapidly, sometimes staying straightforward to read and interpret other times turning in to a bad-ass, not to be taken lightly. When patterns form, the price action can be used to trade the candle bars in strategic ways to churn profits as risk minimally as possible.

Triangles are the patterns that very often occur in the price action. Previous articles have dwelled on two forms of triangles, the rising triangle and the declining triangle. Each of these triangles point to a trend and presents a set of opportunities for the trader to benefit from. These patterns are relatively easier to understand and utilize, compared to a third form of triangle known as symmetrical triangle.

A symmetrical triangle is the most complicated of triangles to shake some trades out from. Although it is not very difficult to identify the pattern once it kicks in, the problem lies in how to trade binary options in this pattern. The major reason for this anomaly is that the triangle does not point to any single direction in which the price is showing any bias for near term movement. It rather shows a market mode where the participants are indecisive about where to take the price. If this pattern is not traded carefully, it can very well lead to hefty losses.

The trader can see this triangle taking a shape when two trend lines, the upper trend line and lower trend line converge at a point on the price chart without giving off any directional clue. The lines, better called as resistance and support levels, converge together in a way that a balanced triangle is formed. This triangle leans neither upwards nor downwards. The picture below shows a symmetrical triangle plotted over the price chart.

A symmetrical triangle is drawn by joining at least two highs on upper side and at least two lows on the lower side. The embedded and essential phenomenon that must exist is that on the upper side price highs dip gradually, and on the other end the price lows gradually surge. Carefully observe how the price highs and lows shorten over the chart. The price stays within the trend line and continues to bounce off the either line.

As the triangle approaches its wedge, it nears a breakout in which the price may go up or down. The binary trader can enter touch and no-touch trades rather comfortably. Entering call or put binary trade is only feasible until the trend line forms a wedge. The middle most part of this triangle offer limited and better opportunity to trade call and put binary options. The trend lines define touch and no-touch zones. However, because the price has the tendency to move within the area defined by these trend lines, it is advisable to trade touch trades with price points within the triangle before it reaches the wedge and near any breakout.