Graphical models allow traders to predict the behavior of prices in the future. One of such model lies in the basis of binary options trading strategy “Triangle“. There are several types of triangles. Some of them can speak of a price breakthrough upwards, the others – on the future movement downwards. Next, we consider all existing models of this figure, as well as the possibility of buying Put or Call options depending on the situation.
To trade binary options successfully the Triangle strategy recommends buying Call options in case of an uptrend in the market.
In most cases, the ascending triangle is formed in an uptrend. In the graph one can visually draw a line of support and resistance. In this case, the resistance line is horizontal, and the support line, passing on rising lows, will be located at a slight angle to resist. Altogether such graphic element can have three price waves (i.e., serial descents and lifting quotes). With the proper formation of this pattern, the third wave is the final one; afterwards the price breaks the resistance line and is directed upwards. At this point it is recommended to buy the Call option.
The strategy of “Triangle” recommends buying Put options in cases when it comes to the downward trend. This type of graphic pattern is formed in a downtrend. The support line in this figure is horizontal and the resistance line is performed by continuously declining highs. In descending triangle, as well as in the ascending one, there may be about three price waves. Also, as in the case of emerging market, a third wave will be final and should break the support line. At this time, the trader can buy the Put option.
If the formation of symmetrical triangle is observed on the graph (the resistance and support lines in this case are carried out by decreasing highs and rising lows), the strategy of “Triangle” recommends to wait for breaking one of the faces of the figure (as such pattern in the moment of formation does not provide information about the point price can direct after exit). In this case, the trader should buy a Call option during a penetration of the resistance line, i.e., the upper face of the graphic object, and the purchase of a Put option is suitable during the penetration of the support line, that is the bottom.
There are two kinds of triangles that can be used under the given strategy. This is bullish and bearish wedge. The essence of this figure is that its apex (which converge support and resistance lines) is raised either upward (bearish wedge) or downward (bullish wedge). When a bearish wedge takes place a trader should wait for a break of the support line from top to bottom. Then you can buy a Put option. With regard to a bullish wedge, when it appeared on the chart, you must wait until the price breaks through the resistance line, then you can buy the Call option.
It should be noted that the graphic figure of the “Triangle” requires mandatory confirmation that is breaking one of the lines. It is not recommended to buy options, as long as the price is within the triangle, since it is likely that this figure may not work as the trader expected.
In conclusion we can say that the binary option strategy “Triangle” is a great tool for graphical analysis of the market. It provides excellent trading signals.
That’s all for now. Got any questions? Just ask the expert!