Trading Double Combinations

Trading DivergencesOne of the things that a lot of traders try to identify and then use for making successful binary options trades are corrective waves. One that falls into the category of complex corrective waves is a corrective wave analysis called a Double Combination. It can be a very useful tool to help you know when to place a binary options trade. Let’s take a look at this type of complex corrective wave more closely and see exactly how a double combination is used to determine where to make a trade.

What is a double combination? It is formed, as the name suggests, by actually combining two separate corrective waves. These separate waves can either be a combination of either a flat and a contracting triangle or a flat and a zig-zag. Traders often believe that double combinations do not occur that often, but if you look closely you will find they happen a lot more often than people think.

The two corrective waves are then linked together by another corrective wave. This linking corrective wave will actually appear to move toward the opposite sense when compared to the current correction; this simply means it will go the same way as a previous trend. This new linking wave is classified as a simple corrective wave and is often referred to as the X wave.

The most common double combination that is looked at is the combination of a flat and contracting triangle and the least common is that of the combination of a flat and a zig-zag. These combinations may also be found as part of the entire leg of a contracting triangle; this most likely will occur on a contracting tringle’s first leg.

These patterns, although not the easiest to use, can be extremely important to the decisions you make regarding your binary options trading.

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References and Further Reading:

1. The Weekend Effect: A Trading Robot and Fractional Integration Analysis (GM Caporale, LA Gil-Alana, A Plastun, I Makarenko – 2014)

2. Exchange rate dynamics and Forex hedging strategies (M Dash – 2013)

3. Optimal Portfolio Strategy of Indonesian Government Bond and Foreign Exchange Using Markowitz Efficient Theory (M Malik, IBA Surya – 2006)

4. Is foreign exchange intervention effective? Some microanalytical evidence from the Czech Republic (A Scalia – 2008)

5. The Awesome Trading System (VC Wai-To – 2010)

John Miller
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John Miller

John has worked in investment banking for 10 years and is the main author at 7 Binary Options. He holds a Master's degree in Economics.
John Miller
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