Trading Binary Options with Ascending Triangle

Trading Binary Options with Ascending Triangle

Submitted by adil on Mon, 03/24/2014 - 20:26

Here's a pattern you need to know about

For a trader it is imperative to understand various price patterns that occur regularly. Without an adequate understanding of the patterns that often repeat, the trader cannot expect to make good returns on his positions. Traders who lack complete know-how of patterns, their behavior and underlying factors, cannot be expected to strategize their positions.

Ascending triangle is a pattern that recurrently forms in assets. Such a pattern forms due to changes in underlying asset’s demand and supply situation. In this case the demand for the asset gradually strengthens and entrenches itself against sloppy supply. Therefore, the price action starts to form an uptrend bias leading to a situation where breakout is possible in the near future.

An ascending triangle is derived by drawing two lines on the price chart. The first line is drawn horizontally at the stable peaks of the candle bars. At least two highs are joined together to make horizontal resistance level. A second slanted and rising line is drawn at the lows of the candle bars. The rising slant is a result of higher lows. This presents a resilient demand that is bent on pushing the price upwards. The area around which both lines converge to form a wedge is where the price is likely to make a breakout upwards. The diagram below demonstrates how an ascending triangle looks like.

The ascending triangle offers trading opportunities that are similar to that offered by the descending triangle. Where the trader manipulates the downtrend bias in the descending triangle, the trader utilizes uptrend bias to enter in to trades. The trader can go long or short on the binary options or enter touch or no-touch trades.

The ascending triangle shows a strong bias for a price to move upwards. Therefore, whenever the price reaches or touches the lower slanted line, the trader should enter a call trade. Given the fact that bias stays in favor of the uptrend, the trader can enter short expiry call binary option trade safely. The area of active trade starts from the lower line until the price touches the upper line. This is the area where trader can enter trades recurrently to enhance his gains.

Alternatively, the trader can enter put binary option trade whenever the price touches the upper line, betting on the price to go down. In this particular instance, entering put trades is risky because price is constantly bouncing back to upper line.

Patterns like ascending triangles offer traders with another opportunity. The traders can use this pattern to make touch or no-touch entries. The area below the lower slanted line is a no-touch zone because of the bias towards uptrend in price is therefore good area to trade no-touch trades. On the contrary, because there is a bias towards an uptrend, the trader should enter touch trades within the zone which lay around the upper line.

If a trader is skilled and knowledgeable, occurrence of such patterns ensures maximum manipulation of price action to acquire gains. Ascending triangle pattern often result in a breakout above the resistance line which offers the skilled and knowledgeable trader a continued opportunity to trade trend.