What is a Flat?
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A flat is basically the corrective pattern and when we say that it is the corrective pattern we are actually saying a lot even though it might seem differently. The concept of corrective patterns was first developed by Elliot Waves and just like in the case of the ZigZags patterns, the most important things in this concept is he retracement level of 61.8%. When you actually trader according to the Elliot Waves, that kind of trading actually revolving all around the Fibonacci levels on both the expanding as well as the retracement levels because this is the only way that can be used to get the order in because this field, like the technical analysis is very complicated.
However, a trader should have in mind and consider both the technical as well as the fundamental analysis before actually making a trading decision but it seems that the technical analysis provides analytical pictures that have much more competitive advantage than the fundamental one.
Expiration period & Binary Options
In the world of binary options trading there is nothing more important than the issue of finding the correct and the perfect balance between the analysis and the expiration date of your option. When it happens that the trade has been proven to be perfect, a trader should have taken into account the elements of both the technical as well as the fundamental analysis. However, when it happens with the binary options trading, expiration period or the expiration date has so many times been proven to be the trickiest part of the binary option trading.
In that case, the flat patterns are providing the possibility that the trader can use in order to find the perfect striking price for the options that he is trading with and only then he or she will be able to do the analysis on the basis of the level of retracement for the wave b as well as the time frame for the analysis. Based on this issue, a trader will have the opportunity to determine the expiration date in a way that the option will expire in the money. As it was mentioned earlier and on many different occasions, the 61.8% level of retracement is obligatory in those kinds of patterns and there are different types of flat patterns and those types depend on the length of the reversal or the length of the retracement.
Using Flats to Predict the Future Levels of the Price
This is a very important issue and it depends on the type of the flat pattern that the market is creating and it can be used for predicting the next leg, the next move the market is going to make as well as to predict the future price action. Basically, this is what you might actually find if you look for a definition of trading – predicting the future levels of the price that is on the right side of the screen and that is very much based on the information that the trade already has that was taken from the left side of the screen.
According to the Elliot Waves theory, the flat patterns are the corrective patters and they should always be marked with letters. The flat pattern has three legs, exactly three and it cannot have two or four, it always needs to have three and these legs are marked as a-b-c. When it comes to these waves, it needs to be said that the waves a and b are corrective waves as well and that the wave c is actually the impulsive move and the wave c needs to follow and respect all the rules for the impulsive move. In that case, the waves a and b can be a lower degree or of a simple or a complex correction or precisely the flat or the ZigZag patterns of the lower degree or some other combination of the two. When it comes to the wave c, the theory says that we should be able to find out the length of that wave based on the types of the waves a and b.
Let take, for example, that the wave b has failed to retrace more than 80% when we compare it to the wave a, in that case the wave c will most probably acquire the lows in wave and the main reason for this is the fact that the wave a is not able to retrace more. Here, we are talking about the lows that appear with the bullish flat and in that case both the put and the call options can be considered.
The put options as examined previously should have shorter expiration date when compared to the call options in order to follow as the wave c, that is an impulsive move and it should travel faster than the actual follow move and in addition to all this, since this is a bullish pattern it should be followed by the price action for the bullish pattern.
When we talk about the analysis of the currency markets, it seems that traders have the most difficulties with understanding the issue of complex corrections. In the case when a trader is looking at the correction it does not have to a simple one. When it comes to the flat patterns, the wave a is in all cases a corrective wave and it means that it can be only the flat, however, only the flat with the lower degree of course.
Because of that, the Eliot Waves Theory seems to traders simple as well as very complicated at the same time because the sub-divisions and cycles that this theory deals with are a bit harder to understand. However, once this is understood, predicting the price on the right side of the chart will become really easy.
This educational series is accompanied with two video analyses and their purpose is to show how to actually detect the flat and what is even more important they provide advices on how to trade with such pattern that is based on the Fibonacci retracement as well as on the fact that it is based on the two waves that are corrective and that are followed by the impulsive move.
In addition to the flats and the ZigZags, there is only one another correction that can be considered to be simple and that is the triangle. While working on the projects in Binary Options Academy we will also be dealing with these subjects for a significant period of time and you will have the opportunity to get the entire picture about the corrective waves and how they are functioning and how they are created. More details are available on the video recordings that are accompanying this mini-educational series on the Binary Options Academy.
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