Trading Binary Options Using Pivot Points
Those of you that trade binary options know that reading technical charts is not a very easy thing to do, especially if you are new to binary option trading. Price action is one of the hardest indicators to predict accurately. One method used to see price action more clearly is to take a look at what stock analysts call ‘pivot points’. Let’s take a closer look at these and see how they help make technical asset analysis easier.
Pivot Points are indicators in trading that are a good way of measuring market trends over a set time frame. They are usually calculated by taking daily lows, daily highs, and the daily close of an asset based on a previous trading session. Pivot points can be altered by looking at different previous time frames. An hourly chart uses data from the previous hour; a weekly chart uses data from the previous week, and so forth.
Once you have established your pivot points, you can use them to help you determine price action. It is typically assumed that when an assets price is trading above a pivot point, that the market for that asset is trending toward a bullish sentiment; conversely, when an assets price is trading below a pivot point, then it is said to be trending toward a prevailing bearish sentiment. Understanding how price action is going to move is critically important when trading binary options. Accurate price action forecasts can help you make a lot of money in a short period of time.
Although pivot points are a great tool when it comes to gauging directional trends in the market, it is important to note they are generally considered short term indicators. Because of this it is also important to make sure all of your trades are kept within the same time frame because the following time frame will make price activity far less predictable. If you stick to these rules then pivot points can be great indicators to determine where to place PUTS or CALLS.
So if your binary options trades seem like they are a little off from getting you into the money, then try adding some pivot points to your technical charts or looking at the ones that are already on there a little more closely. They may just be the key indicator that starts to put you consistently in the money and earn you more profit on your binary option trading.
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References and Further Reading:
2. Trading, Investment & Portfolio Management (A Presnal – 2013)
3. Use of non-deliverable forwards to hedge foreign exchange risks (A Khraban, O Kalynovskii, А Храбан, О Калиновський – 2012)
4. Currency Wars Example (J Grover – 2013)
5. Modeling of Currency Trading Markets and Pricing Their Derivatives in a Markov Modulated Environment (M Tertychnyi – 2014)
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