A visit to most of the binary options platforms that are available in the market as at 2013 will show that the movement of assets is depicted using very basic line charts. Ordinarily, this would make any form of technical analysis very difficult for binary option traders. If you are one of the traders who have found themselves in a quandary over how to make sense of the basic charts on your platform, then this article is about to show you a very simple and uncomplicated way of using these same bet option charts to pick out trading opportunities in the binary options market.
Case Study: Trading Touch/No Touch on a Binary Options Platform with Simple Charts
As a case study, we shall pick out a popular platform in the market as at 2013, and show how it can be used to trade one of the binary option contracts, with an ultra-short expiry time. This binary options trading platform is that of 24Option. This binary options broker has an interface that is also compatible with mobile and tablet devices, allowing trading activity to be done anywhere.
With an option expiry of between 15 minutes and 2 hours, 24Option’s trade platform provides four to five expiry trading times out of which the trader must choose one. This bet option simply asks if the trader can make a determination of whether the binary options asset will touch a strike level within the chosen expiry or not.
With such a basic trading chart which does not seem to tell the binary options trader anything, how can a digital option trader pick out information which will be relevant to the trade and indeed, help the trader achieve success? Here is how to go about it.
Examine the basic line chart and make the following determinations:
- What is the nearest support/resistance level for the asset in the context of the expiry time chosen?
- Is the asset close to any of these areas? If not, how far away is the asset from the support and resistance levels?
- What is the current trend of the asset?
- Is there a trading influence on the fundamental side acting on the asset? If there is, in what direction is the influence acting?
For this chart shown above, the following can be observed:
- market price: 1.5100
- strike level: 1.51046
- expiry time: 15 minutes
To provide the basis of the bet option to choose, we answer the questions above.
a) What is the nearest support/resistance level for the digital options asset in the context of the expiry time chosen?
Answer: The nearest key level is the psychological resistance at 1.51000.
b) Is the asset close to any of these areas? If not, how far away is the asset from the support and resistance levels on the digital options chart?
Answer: The asset is quite close to the psychological resistance level.
c) What is the current trend of the asset?
Answer: The asset is in a downtrend. This means that it is more likely than any upward retracement to the nearest resistance is likely to be rejected, keeping the asset below the strike price of 1.51046.
d) Is there a fundamental influence acting on the asset? If there is, in what direction is the influence acting towards?
Answer: There were no fundamental factors at work as at the time of trade execution.
With these in view, it was determined that the chance of the asset making contact with the strike level was low, and the NO TOUCH option trade choice was made. This ultimately ended in success as we can see that the asset failed to make contact with the strike by the time the bet expired.
The key points that were obtainable from the chart are shown above:
- The trend of the asset, shown by lower highs and lower lows.
- Any areas of support or resistance.
Try practicing the trading of this setup on your demo platform in 2013 and beyond and see yourself joining the elite traders’ club.