Trading Articles

What Time-Frames Work Best for You?

Implementing this strategy to trade binary options on FOREX currency pairs requires the trader to monitor the asset price movement across various time frames. There is no definite rule that connotes how many time frames should be used for optimum results. There are, however, guidelines that indicate three unique time frames are sufficient for determining the best opportunity to trade. The Rule of Four should be kept in mind when selecting appropriate time frames, because less frames will result in insufficient data and too many time frames will complicate technical analysis.

Types of frames:

Medium-term time frame: You must select a medium-term time frame which should be equal to the minutes you will set as your expiry time. Meaning, this time frame will be 360 minutes if you usually hold your trades for 6 hours (6 x 60 = 360 minutes).

Bollinger Bands Help Formulate Your Strategy

With binary option trading, there are always big risks involved in every trade. A successful trader utilizes every resource available to minimize the risks and improve chances for more profits. A Bollinger band is one of many proven indicators that help you formulate a strategy that guarantees success.

How to use Bollinger Bands:

Start by selecting a chart with candle sticks equal to the expiry time of the binary option trades. This means if the expiry time is 15 minutes, the trend chart should contain 15 candles. You must wait until the asset price crosses the center line (which corresponds to the moving average) on the chart with Bollinger Bands. As soon the price crosses this line, enter the market. If the asset price is above the moving average, the price is more likely to go even higher. In this case, it is better to make a PUT trade. Similarly, if the asset price is below the moving average, the price is more likely to plunge even lower, and a CALL trade should be placed.

Technical Analysis is the Key to Successful Trading

Technical analysis refers to calculations and measurement that predicts the future of the assets under analysis, on the basis of its past trends and ups and downs, it has been subjected to in the market. The technical analysis helps the trader to identify when it would be a good time for him to invest in the stocks or other trading forums like binary options etc.

The technical analysis is also fruitful for the small business holders and the stocks and e-mini trading can also be enhanced by the help of the technical analysis.

Charts or graphs for technical analysis:

There are various forms of charts or graphs, that are helpful in technical analysis. The bar, line and candlestick chart is some of them. The most highly recommended and used form of chart by the traders is the candlestick chart.

Using the Fibonacci Time Zones Tool

Fibonacci Time Zone Tool is based on Fibonacci ratios. This tool is based upon reversal strategy, which makes it best suited to be used with Call/Put trading strategy. Following steps are involved in using this strategy for binary option trading:

Correctly draw the Fibonacci Time Zone Chart: This is the first and most important step in this method. A slightest mistake in the chart will cost you everything because all the next steps depend on this chart. The Fibonacci ratios are calculated by adding two consecutive numbers to get the third number.

Understanding Forex Trading and Leverage

Are you thinking about doing a reasonable business that offers you some decent and quick return against your investment? If the response to this is “Yes” then you should try exploring and understanding a specialized form of trading i.e. ‘Forex Trading’. One of the reasons to prefer Forex trading instead of other trading options is that it can provide you with much higher leverage.

What does Leverage Mean?

Leverage means to borrow some for investment purpose. In Forex trading usually an investor or trader borrows this money from the broker. The trader can fulfill initial margin requirements set by the broker in order to get into a trade and thus get a chance to trade and control huge amount.

It's Time to Break Out!

In the absence of concrete information (in the form of financial reports or press releases) to determine what trend an asset price will follow in the future, expert traders resolve to analyzing live charts to help making successful trades. The most popular strategy that ensures maximum profits through chart analysis is ‘break out’ trading. Let us see the fundamentals and how this strategy is put to work.

Chart regions to focus:

No matter what asset you have decided to trade, the trend chart will always contain the following regions. Keep a close eye on them because they will help you in determining the break out point.

Understanding the Basics

The boundary trades or IN/OUT trades are the type of contracts where trader predicts whether the price of an asset will remain within a defined range (IN), or breakout  and end up outside of the range (OUT) at the end of expiry time. Unlike CALL/PUT contracts, this type of binary option trading is not offered by all brokers, sometimes these trades are offered as RANGE trades. You will find such contracts only on few proprietary trading platforms.

With the passage of time, binary options are gaining popularity around the world. However, there are a small number of binary options traders who seem to trade with longer expiries. There is no doubt that short expiry periods and fast earned profits are very appealing for traders, but no one can deny that longer expiry period has its own advantages when you are trading in the binary options market.

Longer expiries or longer expiry periods vary from one trader to another. In today’s market, expiry period that lasts more than a day is considered to be a long binary options trade. So, the question is why a trader would want to trade longer expiries when he can make quick money from short expiry periods. The reason behind this is obvious. It is because fast trading would cause traders to lose money faster due to frequent losses, which occurs when the asset under observation need more time to adjust in the expected direction.

Understanding the Bid-Ask Spread

The price set by the seller for a security is called the ask price, while the price, a buyer is offering to buy it, is called the bid price. The difference between these two prices is known as the bid-ask spread. This spread is directly proportional to the supply and demand of the security. More sellers than buyers mean the bid price will get lower due to high supply, and if there are more buyers than sellers, the bid price will become higher because of soaring demand. The bid-ask price also depends upon the liquidity of the security. Let us see some examples which will help you calculate bid-ask difference is various cases:

Example 1: Consider a stock with a bid price of $9.95 and an offer price of $10.00. These prices are usually written as a fraction $9.95/$10.00. The bid-ask spread in the current scenario is $10.00 - $9.95 = 5 cents ($0.05), as a percentage which is $0.05/$10.00 = 0.50%.

FX Binary Options Trading

Arbitrage is a term used for purchasing financial securities from one exchange and selling it to another exchange for a higher price to earn profits. There is no risk involved in such a transaction because the same security is traded on both the exchanges. However, it enables investors to make profits from the difference in prices. Traders can also do arbitrage trading by selling a security from one exchange and purchasing it at a lower rate on another exchange. Arbitrage trading was very common a long time ago in the regulated exchanges that were trading the same product.

Traders and investors used to execute a transaction by calling their broker in New York and then calling another broker in Boston. But with the passage of time, the trend changed. Most financial securities, nowadays, are only traded in one market or stock exchange.