Much is made about following a trend when trading binary options or any financial instrument for that matter. The question though is what good is the trend? After all, what matters most is the time between you execute the trade and the expiry itself. The overall trend then is of no matter, right? Wrong. One of the biggest fallacies in trading is over focusing on the very short term trends on the charts. All to often when reviewing trade ideas on other sites and forums, the analysis leaves out a huge amount of insights and information by passing over the general trend.
Specifically, most analysis is simply focused on the now. For example, you’ll read through an analysis and it will simply get to the point using catch phrases like “a break above 1.32 means a buy” but with no background story, how is this of any real use to a trader? There will be those that simply trust the analyst to have done this. But why then would you trust your hard earned money to any analyst? Sure there are some great ones out there. But even the best aren’t doling out free trades for fun. Most of the time, these analysts are rather testing out there own theories or leaving out some vital information about the rest of their portfolio.
So what we recommend is that each and every trader, prior to entering into any new trade, goes through the entire trading decision making process. And guess what, this undoubtedly includes the complete analysis of the asset. So when looking at a forex trade for example, it’s pivotal that the trader start with the widest scope of information available on the asset. For technical traders, this means pulling up the longest range chart available. We are aware that binary options trading doesn’t focus on such long term trading ideas but again, that’s not the point. The idea here is to get an understanding of how this assets ebbs and flows. How it cycles between up and down trends. A great example of this is the USD/JPY. This is an asset notorious for following classic technical analysis patterns over the long term. The forex pair continuously cycles through head and shoulders patterns.
So how do you make money off the knowledge of this asset following such a pattern with binary options? Very simply indeed. When you know that the asset breaks based on certain inputs available freely in the market, it leaves you as a trader with the ability to follow and repeat the trade over and over again until you’ve made loads of profits.
With a head and shoulders pattern, you have ample time to prepare so if you are simply made aware of the this, then once it becomes apparent that the pattern is available, you can go in and try to make some cash on it. But if you simply are unaware of the way the asset trades, then you are both ignorant of trading ideas available to you and you are also in danger of getting caught out when one of these massive patterns hit the market.
Make sure to keep yourself aware of the market’s long term patterns. Without this knowledge on many trades you will simply be left in the dark. But it’s not just about patterns. The actual trend is just as important. By isolating solely on the minor trend (generally considered the last 3-14 candlesticks on your chart), you are missing the understanding of the actual momentum in the market.
It’s critical to know what the market trends to do over time as this can both eliminate bad trades and increase the number of solid breaks you take when trading. Creating just this type of situation is what you want as a trader. You never want to give up on such information. Furthermore, it takes no more than about 1-2 minutes per asset and once you’ve done it, you really don’t have to refer back to it. So for 2 minutes, why not just take a look and understand the full picture.