One of the most important tools for our trading here at Binaryoptiontrading.com is the use of support and resistance levels. We use these lines in every trade we take and you can see this in almost every video we make. These lines or areas of price action give so much information for us to take the best trades possible on the binary options market. Without support and resistance we would be lost, not knowing where price might go next. Although it may take some a while to understand this concept, it will be the strongest indicator you have while trading in any market.
Will go over this concept in depth looking at support and resistance individually and how you can create your own areas of S/R for future trades. The first topic we are going to discuss is support levels.
What are Support Levels?
When you are watching the price action it will be up to you to figure out where price might go. If you were to remove every line, indicator, or anything else for that matter on the chart and predict price action, support can help you make the best decision. Trading on the binary options market is just like anything else. We look for certain areas of where price action might go and then enter our trade. Prices have a tendency to move up and down throughout the day. We want to look for areas where price bottoms out and moves back up. This can be based on several different factors. One being a whole number were price might get down to and move back up. Another is where a pivot level is located. As price moves down into this pivot line, price action could bounce off this area. There are many factors of support and you will learn them as you study.
When trading the markets using support, you want to find a trade where the support has a lot of weight. Although price might move down to a certain area, it’s best to wait for the trade to come to an area where you know price has a stronger chance of holding. Any time you see price hold a certain level, you can trade it again knowing that this level has held in the past. Remember, just because price held once, doesn’t mean it will hold again. We also want to look for extended moves past support levels. When we talk about extended moves, we mean price moving past the support level by a small percentage. This means support is still holding, but forming a rubber band scenario. Price will bounce back up after pushing through support and move in the direction you are seeking. Another way to look at support levels is finding old resistance levels. We talk about old resistance becoming new support. This is critical when trading. If you can find an area that was holding very well as a ceiling, and a price finally breaks through it, it now becomes a floor to trade. These are just some aspects of using support levels for your trading. There is a lot more you can learn on our video channel.
What are Resistance Levels?
On the other side, we look at resistance for our put option trades. As price climbs to certain areas of resistance we will enter put options looking for the price to move back down. As price climbs into these areas of resistance you want to make sure you have a couple things working for you. A whole number for example can be used as resistance. We’ve seen this happen numerous times, where price climbs to the whole number and pushes back down soon after. As a binary options trader this can allow you to take good put options.
Also remember, if the support floor is broken, it then becomes a resistance ceiling. This allows you to take trades at all levels of support by using them as resistance. These are strong setups that occur on a daily basis and should be used.
Trading support and resistance together is as good as it gets. We don’t always need a whole number or some particular price to have these numbers set up for us. You can develop your own support and resistance levels as you watch price action throughout the day. If price hits a certain area and pulls back a couple of times, you know that this area is a good potential S/R spot. If price were to push down but not all through several times, then you know price is hitting a strong area of support. It’s up to you to find these areas and trade them the best you can.
There are several other ways to look at support and resistance and you will learn these as you start studying. Once you get a better understanding of these concepts, trading will become a lot easier. You just need to be willing to commit to understanding the facts, and once you do, binary options trading becomes a lot easier.