Trading Binary Options with Descending Triangle

Trading Binary Options with Descending Triangle

Submitted by adil on Thu, 03/27/2014 - 17:34

Binary options’ trading borrows many things from forex trading. Strategies applied in forex trading are in particular very useful and readily applicable in binary options trading as well. Within the price action arena, whether it is binary options trading or forex trading, things rarely remain constant. The price is always in motion, taking various shapes and patterns. Time and again patterns repeat themselves or price action takes a shape present great trading opportunities for the traders.

One of these patterns is the descending triangle. All kinds of assets face descending triangle pattern when their demand weakens and suppliers continue to support the current price levels. A descending triangle showcases bearish sentiment in the market, and a likely breakout of the price below the support level, followed by a continued price downtrend. The way this triangle is plotted on the price chart clearly shows buildup of a downward momentum.

To derive a descending triangle, two trend lines are drawn. One is a horizontal line that connects the price action’s lows and forms the support level. The other line is a slanted one that goes through lower highs of the price action. The chart below clearly shows how the lines form to make a descending triangle.

A descending triangle offers healthy trading opportunities for a binary options trader. There are quite a few ways in which a descending triangle can be manipulated in conjunction with binary options to churn repetitive gains. The first way to use this triangle is to enter in to simple binary options call or put trade. The trader knows about demand’s weakness and strength of support level.

Therefore, whenever the price touches a maximum peak within the descending triangle, the trader can enter a put trade because the price is likely to bounce back off that level. Similarly, if the price touches the support level at any point before the breakout, the trader knows that price will jump back upwards; hence the trader can enter a call position comfortably.

Alternatively, the trader can use touch and no-touch binary options to make good the gains through descending triangle. The trader can enter touch trades in the area below the upper slanted line. The bias and momentum here is in favor of the downtrend. Therefore, to gain maximum touches the trader should enter touch options within this area of the descending triangle.

Similarly, the trader can also enter no-touch trades. As discussed earlier, the bias and momentum of the price action is for a downtrend to occur, therefore the trader should choose those points for no-touch trade where price is unlikely to move. This area is above the upper line. The chart below clearly states at which points a trader should enter touch or no-touch trades.

An important factor traders tend to overlook is the duration on which this descending triangle occurs. If the descending triangle has occurred on a fairly narrow timeframe, the trader should enter binary options trades that are also narrow in their expiry time, in order to make successful trades. Choosing inappropriate expiry time will lead to losing trades.