Taking Time into Consideration
Time is one of the most essential aspects when it comes to binary trading, and when you monitor the market from this perspective, you get a wide picture and can trade more successfully. Knowing the timing of the future price direction means to have complete information about a coming trend reversal or a price correction, which is everything you need in binary trading. Sometimes, predicting the time is more important than predicting the price direction, so we hope you will keep this in mind.
Of course, the time is not the single important thing in binary trading – we discussed the importance of the expiry time as well, right? Yet, you cannot ignore it no matter what markets or assets you choose (Forex pairs, stocks, commodities, etc.). Having the skill to anticipate the future price movement is a vital thing, and this is what binary trading is about: integrating the time aspect into any type of analysis. For example, the Elliott waves theory says that there are more methods to integrate the time aspect and a few of them consider trading corrective waves. We mean pattern strategies like flats and zigzags, which show up when the price action on the chart hit particular levels at the right time.
Projecting the Outcomes – Using Vertical Lines and Measuring the Candles
When we speak about time in binary trading, we should consider the vertical lines on the chart and determine the candlesticks. If you know how to watch the right side of the chart and predicting the future movements based on the past performance, then you know how to handle the time. This should also help you easily determine the expiry time. In fact, knowing the future price movement without precisely knowing when it will hit that direction is not sufficient.
It is clear that most of the traders, particularly the beginners, want fast returns, which is why they choose short expiry times and trade on small time-frames. Yet, it doesn’t suggest that short-term expiry times have an advantage, because in most cases the price moves randomly, without particular logic derived from technical or fundamental analysis. If you know that the EUR/USD pair will hit 1.10 but you don’t know when this will happen, then you can’t really benefit from your knowledge. Thus, integrating the time into a particular prediction is the fundamental approach when it comes to binary options trading. This is very difficult to achieve, but it is mandatory.
Elliott Waves Theory
In binary trading, there are a couple of theories that require time to be determined and then the price action has to cover a specific distance in a specific period. In such situations, time shows a confirmation of the formed pattern. As we have already mentioned, such patterns are considered with the Elliott Waves Theory, which is one of the approaches that operates with time.
For instance, when analyzing a basic price correction, the time says it all whether it was confirmed by the market or it is transforming in a trend reversal. When we speak about zigzag, which is a typical corrective wave pattern, you have to draw a line on the trend, which should start from the beginning of the zigzag pattern and continue all the way to the end of the b wave (since the zigzag has an a-b-c wave shape). The next thing to consider after the zigzag pattern is formed is to wait for the price to break that particular line (which was drawn on the trend) in less time than the c wave was formed. Basically, you have to determine the time spent by the c wave to form (in a zigzag, the c wave is generally an impulsive move) and put it on the right side on the chart.
In binary trading, time is about figuring out the candles. One candlestick may represent a minute, an hour, four hours, a day, and so on. As you can guess, one of the most essential things when you trade such patterns is to consider the time-frame. For example, if the zigzag is on the daily chart, then your trading should be more extended and you should place an expiration date at a fair distance – like the end of the month. If the pattern is formed on the hourly chart, then your expiry time should be set at the end of the day or even sooner.
If you find it complicated, then this is not all. When we speak about the time aspect, one of the most debatable theories is the Gann theory.
As outlined by Gann, every price action of any asset is having its specific angle and the secret is to determine that angle. Furthermore, the Gann square theory may be applied in determining Gann numbers that are important when predicting both price and time, particularly in what direction the price will go and how much time it needs or what is the exact date when a particular level will be hit.
The conclusion of the Gann theory says that you can anticipate not only the price levels but also the time. You can forecast where assets will go and when. In fact, this is everything we need, isn’t it?
|Min. Invest||Min. Deposit||Max. Returns|
|All brokers >>|
References and Further Reading:
- Mutual Fund Trading Pressure: Firm-Level Stock Price Impact and Timing of SEOs (MOZAFFAR KHAN, LEONID KOGAN, GEORGE SERAFEIM)
- Investment timing and trading strategies in the sale and purchase market for ships (Amir H. Alizadeh, , Nikos K. Nomikos)
- Market timing ability and volatility implied in investment newsletters’ asset allocation recommendations (John R. Grahama, Campbell R. Harvey)
- Market Timing: Style and Size Rotation Using the VIX (Maggie M. Copeland and Thomas E. Copeland)
- How Widespread is Late Trading in Mutual Funds? (Eric Zitzewitz)