Binary options for experts

Welcome to the final level of our education articles. If you’re ready for this, that means you already have quite a lot of trading experience and have gone through quite a lot on your trading journey. Hopefully, you have also gone through our advanced binary options strategy and especially our binary options for beginners too and have a firm grasp on all the things discussed there. To help you make that extra step that will put you in the top tier of traders, we’ve analyzed some of the most important trading tools and strategies associated with cutting-edge trading. This level is for those who are willing to commit fully to binary options trading in an effort to maintain a steady income and who are willing to squeeze every last drop of data from their charts. So, if you think you have what it takes, let’s get started. Time to become a binary options expert and the first step towards that is to get learn to understand a very specific market effect!

THE WATERFALL EFFECT

The waterfall effect is a situation that requires a lot of skill and knowledge to extract useful information from the market’s behavior. It belongs to the category of technical analysis and is considered to be a very complex pattern. Its main distinguishing feature is the fact that it is formed of corrective patterns and corrective patterns alone. Another characteristic of the waterfall effect is that it usually ends with a corrective wave in the form of a triangle, which signals the time to start buying call options.

Keep in mind that we are talking about bearish patterns here. After all, it is called the waterFALL effect, implying that the price is always traveling downwards. It should also be mentioned that this effect usually shows up when a zigzag pattern appears three times, so keep your eyes open when examining your chart.

This effect comes in a variety of different forms. It itself can represent a leg of a triangle (a contracting one), which will then be followed by another correction, only this time the correction will go in the other direction. Less common cases of this effect include appearing in an impulsive move in the place of the second wave or as the final, fifth part. The latter case, however, is only apparent when every part of the move is corrective and a combination appears three times. In most cases, though, you will not see the waterfall effect in an impulsive move.

As you can see, there are many variations of this pattern and, consequently, there is a lot to learn. So prepare yourself thoroughly if you want to have success with this type of analysis. Spend some time on education and it will surely pay off since you will always have many powerful analytical tools at your disposal.

Indeed, when it comes to analytical tools, there really is a lot to examine if you want to be an expert binary options trader and create an excellent trading strategy. One such tool is just below.

X WAVES

X waves belong to the category of corrective waves and they always act as intervening or connective waves. This means that you will always see them between two corrections, i.e. they will always be a part of complex corrective waves, not simple ones. Naturally, since they are a type of corrective waves, you can always count on them to go against the main trend.

Because of their nature (which is further explained by the Elliot Wave Principle), X waves are, as we have already said, intervening waves. That also means that certain parameters have to be adjusted for them. Expiration dates are a good example of that because you are not likely to have much success if you pick short-term trades. It takes time for complex waves to develop. Striking price can also be affected by the nature of these waves. Also, generally speaking, X waves are usually less complex than the corrections preceding them, too. However, they do come in two different forms, though – small and strong waves.

Fibonacci retracement plays a key role in distinguishing them, as the strong waves end above the 61.8% border of the first correction, whereas the small waves remain under that limit. This allows much easier predictions when it comes to the situation on the right side of your screen, as you know approximately what to expect. Contracting triangles are also fairly common in these situations, so you will know that you have to react once a side of that triangle is broken. In any case, X waves can tell you what’s coming up. However, you will have to determine their type before you can make a prediction.

To summarize, X waves can be tricky to pinpoint on your chart, but once you do that, you will be on the right track. Being familiar with the Elliot Wave Principle is a must, and Fibonacci retracement is another key element, which is why these tools are better suited for more experienced traders.

Yes, there is a lot to learn here, but if you want to make it in the trading business, you have to work for it. Fortunately, we have a slightly easier topic for you next, so don’t stop and just keep on reading.

ULTIMATE OSCILLATOR

Among the most common tools one can use when analyzing data to make a sound trading prediction are oscillators, tools that can be extremely powerful because they take a long period of time into account, meaning they can provide you with very useful information. Every trader can adapt oscillators to his/her trading strategy.

The ultimate oscillator is a technical indicator invented by Larry Williams. It uses the weighted average of three different time periods to reduce volatility and false transaction signals associated with many other indicators that rely on a single time period. This is a range-bound indicator, meaning the value fluctuates between 0 and 100. Levels below 30 are deemed to be oversold, and levels above 70 are considered overbought (which is very similar to the RSI). Although it’s not as famous as RSI, it can be very useful in finding bullish or bearish divergences that a price makes.

The first thing you should consider when using your ultimate oscillator is the value your oscillator has. As already mentioned, this value can be between the 0 and 100 level, but most of the time it stays between 30 and 70. Therefore, the actual middle range is the 50 level, and that’s the level you should take into consideration while looking for divergences between the price and the oscillator. One of the two (the price or the oscillator) will always lie. It’s always safer to stay with the oscillator, as the oscillator takes into account a bigger period of time than the actual price.

If you have a bearish trend, the market you’re observing will make a low in the 10-20 area, and the second low won’t be confirmed by the oscillator. In this case, the price is making two consecutive lows, but at the same time, the oscillator will be having the second move above the 20 level – that means this divergence is bullish, as it takes a trend line and connects the two lows. The rising trend will be eventually shown, due to the connection of the two lows.

So, the ultimate oscillator uses three different time frames, which makes it more reliable, especially in long-term trading. It’s not very complicated, meaning expert traders should get a grasp of it fairly quickly.

But oscillators come in a variety of shapes and sizes and can help you track just about anything. This is why it’s a good idea to maybe use them together, so that they supplement each other. The following oscillator is a particularly versatile one and should always be considered by an expert trader.

THE AWESOME OSCILLATOR

You may have already read on our website that Bill Williams was a very successful trader because he was one of the first people to apply the market psychology principles. This allowed him to come up with several very interesting and helpful trading tools that are used even today. One of those tools is the so-called Awesome Oscillator.

This is an indicator designed to help you determine the market’s momentum. Just like all other oscillators, this one is also plotted under your chart and is composed of bars going above or below the zero line. These bars come in two different colors – red and green – which shows you whether the value of the bar is climbing (green) or falling (red). Obviously, if the price is going up you will want to buy Call options, otherwise Put options should be what you invest in. However, this is just the most basic principle of using the AO – you can get several important signals from it, too.

The Awesome Oscillator can provide you with three main signals you can use when entering the market. The first is related to the zero line and in this case you want a green bar above the line after a red one has appeared below it. This is when you want to target Call options. The next type of signal is called the Saucer and is composed of three bars, all of which are above zero. The first one should be green and followed by a red one, with the third bar being green again. Finally, there’s the so called Two Pikes signal.

If the pikes formed by the bars are separated by a hollow and the second pike is dropping down closer to zero, you want to focus on Put options. This can also happen below zero, but if the second pike is closer to zero in this case, Call options should be favoured.

As you can see, Awesome Oscillator can be used in multiple ways and represents a great solution when you want to see how much momentum the market has. Of course, keep in mind that it never hurts to back the information you get here up with another trading tool. Keep reading, there are several good candidates for that below.

MORNING STAR

The so-called morning star is a bullish candlestick pattern that consists of three candles: large red candlestick, small-bodied candle and a large white candle. Generally speaking, candlestick patterns are one of the most useful patterns you can apply to your analysis of the market because once you have a few of them memorized, you can begin to work with them as a part of your active trading strategy.

So, a morning star is a candlestick pattern that consists of three candles and they have the following characteristics: the first bar is a large red candlestick located within a defined downtrend; the second bar is a small-bodied candle (red or white) that closes below the first red bar; finally, the last bar is a large white candle that opens above the middle candle and closes near the center of the first bar’s body. Not too complicated, right?

Traders should look at the second candle of the pattern to identify a bullish morning star (on the other hand, if there’s an opposite trend, then we call it the evening star). Price should attempt to dip and create a slightly lower low relative to the first candle. This “jump” should prop the price up closing the candle near the open for the day. You will probably often see a doji in this position, which usually suggests that bearish price momentum is about to expire. The last candle should show the beginning of a new bearish momentum. Among bullish and bearish engulfings, here you should be looking for a bullish one.

Most traders agree on the fact that it’s very good to combine a morning star with all kinds of trend indicators. That way you can get more accurate prediction of trend reversals and use charts properly, which has proven to be extremely useful when trading currency pairs. It’s one of the tools that acts in reality almost totally as it’s supposed to in theory, so it’s considered to be very reliable.

Always have in mind, though, that although the morning star is one of reversal patterns, it may not indicate a complete trend reversal, but just a simple change of direction. Once you have familiarized yourself with the rules of identifying the morning star pattern, you can apply it immediately to your current trading strategy, in combination with other indicators, of course.

A type of techniques every veteran trader should know something about is the one focused on Japanese candlesticks. And there is a very interesting pattern that can be found there, a reversal pattern that can help you out a lot on the market. So stay tuned and learn all about it.

ENGULFING PATTERNS

Engulfing patterns are a type of Japanese candlestick techniques and another important element of binary options for experts. Every trading platform in the world now offers the possibility of having their charts displayed in candles (that is, not only in bars or straight lines), so knowing these techniques offers a big advantage if you’re serious about binary options trading. One of the most important types reversal patterns visually presented as candlestick charts are the engulfing patterns. Like any reversal pattern, they can be either bullish or bearish.

As implied by its name, this trend suggests that a security’s price movement is bullish. This type of pattern is usually followed by a declining trend of the price, suggesting that a low or even an end to the security’s decline has occurred. However, as usual in candlestick analysis, the trader must take the preceding and following days’ prices into account before making any major decisions regarding investments.

A bearish engulfing pattern should provide an indication of a future bearish trend. It accompanies an uptrend in a security’s price movement and is most likely signaling a peak or slowdown in its advancement. However, the same principle as with the bullish engulfing pattern applies – whenever a trader analyzes any candlestick pattern, it’s important for him or her, before making any decisions, to consider the prices during the days that precede and follow the formation of the pattern.

Engulfing patterns function much better if the trades are long-term. Because of that, you would be well advised to fix an appropriate expiration date, maybe even consider the end of the month. Obviously, by choosing such an expiration date you won’t necessarily have to wait one month. If the trade is opened in the second half of the month, you will actually wait less than two weeks. Taking into account the big return on investment binary options offer, waiting for two weeks shouldn’t be a problem.

One way to obtain more accurate prediction is to maybe use Fibonacci Numbers, measure the length of the whole engulfing pattern and buy put options on a retracement into the 61.8% level in a bearish engulfing or call options in a bullish one. You can also use engulfing patterns in combination with many other tools, such as oscillators, for example (the alligator oscillator is a good example).

So, engulfing patterns are a very powerful tool, very popular and widespread among traders. There is a good chance that you will have to use and interpret engulfing patterns in your trading career, especially if you do long-term trading, so getting familiar with this tool would be a clever thing to do. Also, you can combine it with some other tools to improve their accuracy or practice with them using a demo account.

There is one more pattern that can come in very handy, though. And we’ll take a look at that too before we wrap things up here.

FLAT PATTERNS

Flat patterns are something that can help you improve your chances significantly, but you have to be quite a knowledgeable trader to master them. They belong to the group of corrective waves, which immediately tells you a lot about their features and place of occurrence. For example, let’s say you have a 5-wave impulsive move; this type of pattern can only appear in the second or the fourth move.

We must mention, however, that there are many types of flat patterns, and what we will be discussing here is the most basic one, the common flat. It consists of three parts: first we have an upwards move, then a retracement and then an upwards move once again. So it pretty much resembles the letter N. Still, there are some rules this pattern has to conform to if we are to consider it a flat.

If you’re familiar with the Elliott Waves Theory, you know the meaning of the 61.8% limit. In a flat pattern, the second move (retracement) has to be bigger than 61.8% of the first move; otherwise we may be talking about a zig-zag or the beginning of an impulsive move. Remember that this is most often a part of a complex wave, which is why you need a lot of knowledge and experience to master it. Because of this fact, a top-down analysis of the chart is usually advised, so that you can gradually narrow down the time frame you’re using to conduct your analysis. Just remember that flat patterns come in a variety of shapes and sizes.

Recognizing flat patterns can help you a lot, but it is by no means an easy task. That’s why you need to be an experienced trader if you want to completely understand how these corrective waves work. We’ve given you some basic pointers here, but this is a fairly complex issue and quite a lot of experience is needed to make this work. This is binary options for EXPERTS, after all. So, if you want to master this tool, be prepared to invest some time and effort into it.

Conclusion

As you can see, trading binary options on the highest level requires quite a lot of concentration and dedication. But it can be done! If you’ve made it this far, it means you absolutely have what it takes to be a real trading pro. Invest time into studying the tools mentioned here and it will be well worth it to you, but remember – you will never stop learning as a trader. No matter if it’s a new indicator, a new asset or a whole new trading strategy, you will always be encountering something new and growing as a trader. Because of that, it’s important that you always keep an open mind and look for ways to learn from each situation. Only then will you be a real binary options trading expert. Good luck!