Dynamic Support and Resistance in Binary Options Trading
Dynamic support and different levels of resistance can change their values over a certain period of time due to many different reasons. One feature that can be used as dynamic support and resistance levels is moving averages. Those kinds of levels of resistances and dynamic support are hugely different from the horizontal support and those resistance levels. These types of support and levels of resistance are constantly changing and they depend on the price movements and changes in the binary options trading market.
Once a trader decides to use the moving averages, he or she does not have any need of keeping a record or keeping track of the horizontal and dynamic supports as well as levels of resistance in order to analyze the behavior of those features in the future. The only problem that a trader that uses moving averages can face is the period of choice.
Dynamic Levels – basic information
When it comes to the support and resistance the crucial word in all of this is, in fact, dynamic. The main reason for that is the fact that dynamic support and resistance levels are different from the traditional and more present horizontal lines. These dynamic levels keep changing very often because they are depending on the most recent price movement. In this regard, many traders from all over the world are considering moving averages as the crucial and most important support and resistance levels. Those trades that use moving averages as support and resistance levels actually buy Call binary options in the situation when the price plummets down while they buy Put binary options when the prices is skyrocketing and when it reaches the levels of moving averages.
However, there is one aspect that traders should always keep in mind. They are very similar to the normal support and the lines of resistance. However, what they need to keep in mind is the fact that the price whose changes starts the process, do not always behave as traders expect. Often they often do not reach the levels of the moving average. Sometimes those prices actually go little high before they actually return to the main trend of the prices. However, from time to time, those prices break such resistance and because of that traders often buy Calls and Puts only in the moments when the prices reach the middle levels of the gap that appear between two resistance lines. This gap is often called zone and it can be seen from a lot of research, the prices often rise only to decline after a short period of time which is totally expected with these kinds of notions.
It often occurs that many traders use different strategies for intraday trading. These strategies are more than often based on the observation that moving averages just like the horizontal support and lines of resistances as well as their intersection should be considered as a zone that requires special attention. The region that appears between these moving averages can actually be used as a support and as an area of resistance.
Moving Averages as Support and Levels of Resistance
It is generally known that these moving averages can in some cases be used as a support or levels of resistance. The traders have the option of combining several moving averages in order to create the comfortable zone for a trader to operate in. However, traders should also be aware that these levels can be dealt with as any other levels of support and resistance.
Using moving averages can have several advantages and one of those advantages is the fact that they change together with the price on the chart. This means that the only thing that you need to do is to look back all the time in order for the traders to identify the potential support and levels of resistance that can be useful for a trader. In that case, the moving average lines create the zone that is very interesting to you as a trader. The only problem that traders might face in this process is the problem of determining the possible parameters of the moving average that could be used for this purpose.
Bollinger Bands – One Type of Dynamic Support and Level of Resistance
When it comes to the dynamic support and levels of resistance, trades have one additional option that they can use as dynamic support and level of resistance and that option is called Bollinger Bands. The strategy of Bollinger Bands is based on Bollinger Bands indicators and in the world of binary options trading, this strategy is considered as one of the most effective strategies. This strategy provides traders with the opportunity of when to buy Call binary options and when to actually buy Put binary options. This strategy is also used in order to predict the trading range in directions up and down as well as the speed in which the price will change.
In binary options trading market, the price corridor is changing constantly and it hardly ever has one and the same value. With the increase in the volatility, the price corridor also expands. This moment is a very dangerous moment for a trader to start trading or to enter the market. On the other hand, the best moment for a trader to enter the market is actually the moment when the price corridor starts to narrow. In that case, that is, in the narrow price corridor if it happens that the price increases that is a signal for a trader to buy Call binary options and if the price actually decreases in the narrow price corridor, that is the sign for a trader to buy Put binary options.
|Min. Invest||Min. Deposit||Max. Returns|
|All brokers >>|
References and Further Reading:
- The Dynamic Relation Between Stock Returns, Trading Volume, and Volatility (Gong-meng Chen, Michael Firth, Oliver M. Rui)
- A neural network with a case based dynamic window for stock trading prediction (Pei-Chann Chang, Chen-Hao Liu, Jun-Lin Lina, Chin-Yuan Fanc, Celeste S.P. Ng)
- A multi-agent decision support system for stock trading (Yuan Luo ; Kecheng Liu ; D.N. Davis)
- Service trading and mediation in distributed computing systems (
- Differential Information and Dynamic Behavior of Stock Trading Volume (Hua He Jiang Wang)