All those who have ever dealt with any sort of trading will be familiar with the notion of “trend” and just how important it is.
Yet, if there are South Africans who are only now venturing into financial trading via binary options, in this strategy article we will attempt to explain the key factors concerning trend and also offer the explanation of what is a trend.
In short, trend is among the most important elements which every binary options trader has to take into consideration before they begin to trade with any underlying asset. Actually, it is possible to view it as a helpful trading tool.
In fact, the importance of trend is so relevant to the point that no matter the strategy or approach being used in the binary options trading process, most of them will also take into consideration the current trend to try and make their estimation of the market situation as exact as possible.
So, one might simply say the definition of the trend is the prevailing direction of the price of the underlying asset. The trend is usually set across several time periods in which short and term trends frequently occur and play their part in much larger trends. The trend can run in a time span which might be days, weeks or even stretch to months or years.
To use the information provided by the current market trend, traders have to monitor the trend during the duration of their trading process and are advised to always take into account the larger trend rather than short term-one.
Yet, for those South African traders who want to use trend to spur their trading success, the deeper knowledge and understanding of several important components connected to trend are an absolute must.
Bearish Vs. Bullish Trend
Terms bearish and bullish are often applied when describing a market trend.
Bearish Trend – the downward trend in which traders are aiming to buy the “put” options.
Bullish Trend – the upward trend in which traders are aiming to buy the “call” options.
Majority of traders monitor the trend by following the trend line which aids traders when it comes to making a decision concerning their trading process. The trend is put in a more powerful position via corrective waves while impulsive moves marked by various fluctuations bring about a solid base for trending.
However, what prospective South African traders need to keep in mind is that most markets spend considerable amount of time in in the so called consolidation areas rather than in trend-friendly conditions.
Yet, what sustains traders in during those prolonged consolidation periods is the ability to spot and identify a strong trend and profit from it.
Elliott Wave Trend in Binary Options South Africa
The Elliot Waves trend can be described in terms of impulsive moves which is, essentially, when the market is moving in a certain direction.
The key is to successfully interpret those moves and the principal market movement in order to use the information to their benefit.
For the impulsive mode to be formed five waves are necessary, or at least a five-wave structure containing the minimum of three impulsive waves. The other two waves in the structure are the corrective ones which makes this instance the right moment to start the buying spree.
So, it is possible to say that the theory behind the Elliot Wave trend claims that various levels exist during which traders ought to select the call option and that is dependent on the market wave formation.
Another useful trading tool South African traders can utilize is the Fibonacci tool.
This tool is most effective during the period when one wave on the market just ended and a next one started. The key is to measure the length of the first wave since that will tell the traders if the trend was bullish or bearish.
In the first instance, South African traders should go for the call option, and in the second one the traders are advised to rather opt for the put options instead.
Utilizing the Trend Strategy
One of the most important skills when it comes to utilizing the trend strategy is knowing when and how to change the trading strategy according to different market situations.
And to develop that skill, traders have to invest time, patience and will to learn and develop their approach to trading binary options constantly.
It makes little sense to study the trends in a five-minute chart in, say North America, if that session is nearing its end and the session in about the begin in Asia.
Hence, to spot the perfect moment to buy or sell an option is the key ingredient of successful binary options trading. By selecting the favorable striking price and by combining that with the right expiration date the successful binary options trading takes place.
In taking time to study and understand what is a trend and how to use it properly, that goal could be attainable for South Africans looking to have a positive binary options trading experience.