Trading Binary Options On The Trend Lines

Trading on trend lines

Graphic elements can be found on all popular trading platforms (trend lines, support and resistance levels, Fibonacci lines, channels, etc.). All of them are specially designed to assist traders in accurate determining the market trend, true signals, which can help to get a guaranteed income.

The trend happens to be a sequence of higher peaks and minimums, which is true for an uptrend and also a sequence of lower maximums and lows typical for a downtrend. Trend lines can be defined as graphic lines drawn at an angle above or below the price, which indicate the development of the trend or the moment of its reversal.

Working with the trend line, you clearly observe its nature and intensity, which can be used to buy CALL and PUT binaries. It’s also customary to consider them as support and resistance levels, enabling traders to open transactions when the price touches the trend line. At the same time, the trend line not only shows the market trends (ascending, descending, flat), but also its slowdown, change of direction and reversal.

 

How to apply trendlines to the graph?

There’s a simple rule for working with trend lines:

  • in case of a downtrend, the lines are drawn at maximums above the price, at the top,
  • on an upward trend, the trend lines are drawn at lows below the price, underneath.

Before you draw a trend line on a price chart, there should be at least two highs or lows on the chart, but ideally it’s drawn when there are three minimums or maximums on the chart. To add it to the chart, you require taking one minimum or maximum value and connecting it to another, after this the line extends further. On an ideal trend line, points 1 and 2 are at a certain distance from each other.

See what the trend line looks like on the graph of the MetaTrader 4 trading platform in the picture below. You’re also free to download the Metatrader 4 platform rapidly and learn more about the tool:

Trading Binary Options On The Trend Lines

 

Features of trend lines

To properly utilize trend lines and have profitable trades, you should pay attention to their behavior and observe them, explore their capabilities, find options when:

  • The trend line acts as a support or resistance;
  • The line acts as a breakdown.

To study these scenarios you will require working with Japanese candlesticks, indicators, technical analysis, and expiration. Additionally, you need hot news affecting the movement of quotations of the market.

 

Ascending trend line

The ascending line is tilted with the right end upwards, the left one faces downwards and it’s formed when the lows are joined. When applying such a line, each late minimum should necessarily be higher than the previous lows. The ascending lines resemble support, they point to the growth in demand notwithstanding the price leap, and the market reacts positively to the share (commodity, bond, etc.) as there’re more buyers than sellers.

If the price stays above the ascending line, then the trend is strong. If there’s a breakdown of the ascending line – the ratio of supply and demand has changed, and there will be a change in the price movement.

 

Descending trend line

The descending line is tilted with the right end downwards, and the left one faces upwards. It’s formed when connecting the highs. In this case, the late highs should be lower than the previous peaks. These lines are compared with resistance lines. They point out that supply is growing despite the diving price.

With an increased supply and a falling price, the market reacts negatively to the asset, sellers outclass buyers. While the price stays under the descending line, this trend will be strong. The breakdown of this line demonstrates a change in demand and supply, which will provoke a change in market dynamics.

 

Do you need to install trend lines on your trading platform?

Trendlines are a standard trading tool included in most broker trading platforms, and it also available in the MetaTrader 4 platform. In order to add lines to the price chart, do the following:

1. Click the “Insert” tab in the upper menu of the platform
2. Select the “Lines” tab – “Trend Line”
3. The tool has been added to the chart, you can work.

How to apply trendlines to the graph?

Descending trend line

 

How to trade using trend lines?

There are two ways of trading with the help of trend lines:

A trend line as support and resistance

Once you have identified a trend line as a support or resistance, you can open a position when the price gets back to it:

  • in a downtrend, the lines act as a resistance, they are drawn at the highs above the price, at the top, it’s the buy signal of the PUT option,
  • with an uptrend, the lines act as support, they are drawn at the minimums below the price, at the bottom, it’s the signal for the purchase of the CALL option.

 

Breakdown of the trend line

In this case, the transaction opens with a breakdown at the price of the trend line. If the price has broken through the trend line, the trend ceases acting as a support or resistance, there is a high probability of changing the trend. There’re two ways to enter a trade in the breakdown:

 

Aggressive entry

The position should be opened when the candle breaks the trend line and closes above it.

Conservative entry

It is necessary to wait until the price breaks the trend line and tests it as a support or resistance. Only after this you can open positions. The strategy suggests the acquisition of an option in the direction of the trend. To enter, you require waiting for the moment when the price touches the trend line:

  • If the candle closes with an uptrend, it’s worth buying a CALL option,
  • If the candle closes below the trend line, it’s a downward trend, it is worth buying a PUT option.

For reliability, when working with trend lines, make use of confirmatory indicators, such as RSI, MA.

 

Transaction rules (screenshots)

Trade with a signal of support and resistance

In a downtrend, the lines act as a resistance, they drawn at the highs above the price, at the top, it’s the buy signal of the PUT option. The image shows a downward trend in the MT4 platform:

Trade with a signal of support and resistance

Take advantage of the trend and stick with a PUT option at the Binomo broker by going to binomo.com and preparing the option, specifying:

  • Option type
  • Expiry date
  • The amount
  • Forecast: down
  • Next, click the “buy” button and expect the results of the forecast:

Transaction rules

In an uptrend, the lines act as a support, they are drawn at the minimums below the price, beneath, it’s the signal to buy the CALL option. The image shows an upward trend in the platform MT4:

A trend line as support and resistance

Take advantage of the trend and place the CALL at the Binomo broker by going to binomo.com and preparing the option, specifying:

  • Option type
  • Expiry date
  • The amount
  • Forecast: up
  • Next, click the “buy” button and expect the results of the forecast:

Take advantage of the trend and place the CALL at the Binomo broker

 

Trading in the breakdown of the trend line

If the candle has closed with an uptrend, it’s worth buying a CALL option. In the image, you can see the uptrend in the MT4 platform (taking advantage of the trend, place the CALL on the site binomo.com, the instruction is listed above):

Trading in the breakdown of the trend line

If the candle closed under the trend line, we have a downward trend, so it’s worth buying a PUT option. In the image, you can see a downtrend in the MT4 platform (taking advantage of the trend, place the PUT on the website binomo.com, the instruction is listed above):

Trading in the breakdown of the trend line

 

Conclusions

In order to make the trend line your successful profitable trading strategy, keep in mind that:

  • Better trade in the direction of the trend line.
  • The trend line acts as a support and resistance, utilize it in the right way.
  • Strong trends precede a sharp change in trend.
  • Confirm the line signals with extra binary option indicators.
  • Test the possibilities of trend lines.
  • Create your own profitable strategy based on trend lines.

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