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By: Adam Stone
January 21st 2014 7:15am GMT, London UK
The US stock markets return to the fray today after a day’s holiday to honor the late Martin Luther King. The bank holiday didn’t leave much to trade outside of forex pairs as most binary options traders steered clear of EU or Asian assets. The EUR/USD, the most heavily traded asset in binary options, was quite volatile. It is now trading near the local resistance of 1.3555 but was unable to close a full bar above the level in the last 24 hours despite a few momentary breaches. For binary options traders this level should be considered one of elevated risk to be used in any meaningful strategy.

The problem now with the EUR/USD is that it’s not finding viable levels to trade off of. The receding week was delimited by two very clear boundaries, above and below, creating a range capable of providing many reversal and break strategy pivot points. Binary options traders tend to create more profits expressly in those situations whereas a more volatile market creates more opportunities but is rife with risk.

According to the dealing desk manager at Goptions, Daniel Gant, “the market in its current state is a bit more problematic to create consistent profits with. Although we see large spikes which break past key supports and resistances, those same levels are thereafter seen to break right back during retreats and these are the spots where binary traders end up losing. We try to keep our clients clear of such spectacles which is why we are actually contacting clients to get them to pay closer attention to other forex pairs like the USD/JPY which has been creating more steady trending patterns”.

In regards to the USD/JPY, we see a much clearer picture. See the chart below and not how the Fibonacci support at 104.5

USDJPY with binary options 21-01-2014

USDJPY with binary options 21-01-2014

Just note how the support level has held up exactly on cue. The binary options traders who trade this pair will feel more comfortable trading a pair that acts in line with expectations on a technical level. While this decreases the overall number of signals, it increases the probability of success for each and every signal we receive thereafter.

104.67 is the current resistance level and binary options traders can use this level in two distinct strategies. Of course, if the level breaks at any point, a large up option will be the best course of action. It will allow you to take what looks to be the lowest risk trade of the day. The likelihood of this break is currently considered high. The reason we expect this is that the RSI and other momentum indicators are running hotter and higher.

However, we will first see how the market tests the level. Which brings us to strategy two; reversal strategies. If the market tests and begins retreating, then using a small and short term down option would be a good move. Obviously the risk is higher with such trades and we warn that you may need to make numerous trades to turn a profit with this strategy. Nonetheless, with a technical trading asset like the USD/JPY is exhibiting these days, the risk level is lower than in other cases and is certainly worth a look today.

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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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