Trading binary options can be exhilarating if you have a solid strategy behind you. One of the strategies that we follow are pivot points and support and resistance lines. Over the years of trading we have used these lines to help us find solid entries for our long call options and our short put options. The example in this post will show you exactly what we look for in a solid set up for us to take a trade.
The image below shows a 1 min. chart of the EURUSD. This chart was taking during the morning hours of the New York session which is a heavily traded time of day for the binary options markets. We are using the Metatrader account to plot our price action in the markets. The overall trend for the day on April 9, 2012 was to the downside on the EURUSD. On the left-hand side of the chart you can see a solid move down to the South side. We broke support line 1 which is the red line or red checkered line at the top earlier in the day, so this became a much weaker support line. Within 10 min. of passing through the support line we hit support line number two which is the second checkered red line.
This checkered line is where we looked for our call option on the euro USD. Trading Forex binary options can be difficult at certain times of the day, but when you see a setup like this you need to load up and trade a little bit heavier knowing that you have a lot working for you. Once we saw this we jumped on the trade and actually got in at 1.3050 which is exactly where the red line is located. The trade never went against us and only moved up. This was a 15 minute binary option trade and never went against us closing four pips from our strike price.
Whether you are trading a binary option or just a spot Forex trade you can see the move up over the course of the next hour. It had actually moved up over 40 pips from when we spotted this binary option trade. Had you been in this spot trade you could be in this trade right now using a trailing stop or covering half your position and letting the rest ride for the rest of the day or week. The support lines are significant when trading both binary options or any market including stocks, Forex and commodities.
At binaryoptiontrading.com we are constantly looking for trade setups for you to look at. This chart allows you to see what you should be looking for on a daily basis. You’d be surprised how often this occurs in the morning hours during the moving markets like the euro session, US session, or Japanese session. Remember we don’t take every trade that has a pivot line hit, but we do look for the ones that have a big advantage in our favor. Always keep in mind of what the price action is doing at that hour and what is happening with news events or anything else in the world. Trading binary options can make you a lot of money, but without a solid strategy or idea how to trade you are most likely going to lose your account and not have any money left to trade. Working with support and resistance lines could change everything you learn in trading over your years. We recommend you study pivot lines and support and resistance for all future trades whether you use them or not. Just knowing you have these to work with can help you in the long run. Good luck with your trading.