Newcomers to the world of binary options trading are keen to discover simple binary options trading strategies that can be put into action without having to develop complex skills or advanced knowledge of the markets. One of the easiest strategies to grasp is the trend following strategy. Perfect for both novice and experienced investors alike, this strategy uses the simple skills of observing the trend of an asset’s price to make a profit. If a price has been trending either up or down for an extended period, this represents a profitable trade opportunity. Long lastign trends present a multitude of investment opportunities, especially for anyone who prefer to choose short expiry periods.
How to Identify the Market Trend
While the trend following strategy is simple to execute, it relies on the investor being able to actually identify the trend in the first place. This is easy to do by using a simple price chart that demonstrates not just the current price movement of the selected asset, but also the past movement in its prices. The majority of binary options brokers offer these simple charts, although an experienced trader can make use of a more advanced chart to identify price movements.
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When using basic charts, the movement of the asset’s price is depicted with a line that moves up and down the chart in line with the real time price movement. When the line moves primarily down or up over an extended period, this shows that a trend is taking place.
How to Trade the Trend Following Strategy
In the case of an uptrend, a trader can achieve success if they place a put option, although the time selection for the asset is vital, as it is possible that trend will be short lived. In order to take advantage of the trend before its price direction changes, it is possible to go for a short expiry period, for example, a 60 second option, which will help to guard against the trend ceasing before the expiry period is up.
Not every trend is solid however, and this means that there may be small pull backs in the price of the asset along its line. This is not unusual, and this is nothing to worry about as long as the price of the asset has moved in roughly the same direction for an extended time period. When looking at the price chart, it is simple to count the number of pull backs that have taken place over this period and also to see how far the price retractions went. Should the asset’s price appear too erratic, there is no need to execute a trade at this time.
An opportunity frequently presents itself once a price trend comes to an end and reverses. In the same way that the price of the asset moved in one direction over an extended period, it can just as easily move in the opposite direction while trying to push back into its comfort zone. If you trade binary options, you can profit from all types of price movement, as long as you know how to gauge the upcoming movements in the market accurately.
All traders to be trend trading, as when the movement of an asset’s price is relatively predictable, this is the perfect time to profit from binary options trading. By paying attention to the market news reports every day, you will know which assets to watch closely and to trade quickly as soon as you observe a solid trend. As the majority of binary options brokers offer a huge choice of assets for trading, you should have no trouble in benefitting from this strategy.
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- Fong, S., Si, Y.W. and Tai, J., 2012. Trend following algorithms in automated derivatives market trading. Expert systems with applications, 39(13), pp.11378-11390.
- Hu, Y., Feng, B., Zhang, X., Ngai, E.W.T. and Liu, M., 2015. Stock trading rule discovery with an evolutionary trend following model. Expert Systems with Applications, 42(1), pp.212-222.