Support and resistance trading strategy binaryoptionsinvestornet
Support is a price level below which an asset or a currency pair fails to fall. So, in a way Support is the floor and Resistance is the ceiling and the area between the two is the room.
Both the parameters will move between these two levels unless a breakeven is reached in any one of the directions. Support and Resistance offer the traders numerous clues about how to trade in the market and ways to survive losses. Being one of the most popular technical analyses, it is very simple to comprehend.
The rationale behind the Support theory is that as the price becomes closer and closer to Support, it becomes cheaper and cheaper.
Now, from the point of view of sellers, the deal becomes less and less lucrative as the price has fallen so much. Sellers will find that the deal is of no use, thus forcing buyers to outdo sellers and this scenario will prevent the price from falling below the Support. Situations may arise where the price may go below Support and sellers can overcome buyers. This kind of behavior will reveal that inclination towards selling is more than buying.
The rationale behind Resistance theory is that as the price comes closer to Resistance level it tends to be higher and higher making sellers more likely to sell their products.
However, as the prices rise so much buyers will be less inclined to buy and hence another situation where sellers will outdo the buyers will be created. Here, the price will be prohibited from going upwards. Just like Support, Resistance may also not hold its ground in all situations. However most traders do not know how the waves is actually formed.
So I will like to use this post to illustrate to you guys the formation of the waves as it will be very useful for your trading. The waves are the results of repulsion against levels of support and resistance. So What are those Support and Resistance.
There are various types of support and resistance and I am going to highlight them one by one in this post. However I will write a detail blog post on each type of support and resistance binary option indicator in my other post as it will be too lengthy. Personally I find these 5 types of support and resistance levels the most effective.
Whenever the price hits these levels for the first time, it will be repelled by it. Whenever the price breaks through the level, it will form a new level of support and resistance. For example, when you see the price breaking a level of support, the old support will now turn into a new resistance. Now that you know where are those levels of strong support and resistance, you will be able to wait for the price to hit those levels for the first time and then enter a binary trade based on the repulsion.
Note that there will be more risks when the price hits the same level again as there are chance where the price will break through it.