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GBP/USD READY TO BREAK ?

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July 30th 2014 9:17am GMT, London UK
 

The S&P dropped slightly again yesterday on mediocre financial results posted by some small to mid-capped companies. However, nothing major has shifted in terms of the overall formation on the index’s chart. The pattern developing is an obvious range channel and binary options trading strategies based on this formation will lead to many traders adopting reversal strategies, despite our explanation yesterday that doing so may cause significant loss. To read our analysis for binary options trading strategies without reversals you can click here.

However, we are well aware of the fact that most binary options trading strategies are at least partially based on a grander reversal strategy. The issue we have with such position taking is that it can lead to tens and sometimes hundreds of trades being taken daily. While this is excellent for us as a broker, who seek volume, it doesn’t always play to the favor of the trader. Creating more volume simply increases the statistical chance for losses, not gains. As such, we regard opening such a large number of unhinged trades as a pure negative. Binary options traders need to first focus on the real pattern the emerges and fine tune the timing to entry to the absolute minimum price tested (for up options) or maximum price tested (for down options).

In terms of the forex pairs, the GBP/USD should have been everyone’s darling yesterday. After breaking below the support we discussed yesterday at 1.6960. The support level didn’t hold up for a moment and the moment it was tested midday yesterday, it broke. As we explained yesterday, reversals were not in the cards and our analysis of the situation was spot-on. The fact is, sometimes trying to take an extra trade is just not anywhere in your interest.

GBPUSD with binary options trading strategies

For the day ahead, the GBP/USD is looking to test the 1.6932 level again. However, due to the formation on the charts and the follow through we’ve seen, anything less than 1 hour expiries will be met with heavy losses for binary options trading strategies of virtually all kinds. Stick to patiently waiting for a break of the support level. If you are bent on trading with reversals, then at least have the patience to wait for a formal test of the support level whilst monitoring the momentum levels in the market with the RSI and MACD. Specifically, if the MACD convergence lines begin to touch, a reversal may really be in the works. But if those lines are widening apart, we recommend steering completely clear of the currency or going with the general trend of the market at the time of the trade.

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Adam Stone
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Adam Stone

As COO of GOptions, my first and foremost goal is to provide traders with the most up to date info from the markets. I have been trading the markets since 2004 and have been involved with stocks, binary options, and forex trading since then. I have had no formal market education and pride myself on a self taught approach to everything related to trading. I try to focus though on both the technical and fundamental aspects related to each trading day and bring forward the most important aspects of risk/reward in the market.
Adam Stone
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