A trend or a pattern is identified as the general direction of the price movement of an asset or market. The price movement can take the form of a series of highs or lows and the time allotment of its existence can be either short or long term. Let’s understand the trend in binary options trading with this article of Secured Options.
Trend Lines-One of the strategy in which traders can identify whether a market or an asset is trending is by using the trend lines. Trend lines basically are straight lines drawn between two points on the price chart. The two points will always consist of a high and a low point stretched over a time period. As trends move in only a particular direction, it is possible to forecast the next possible data point on the price chart using tools such as the Elliott Wave theory.
The Elliott Wave Theory- This is based on the idea that the market moves in a repetitive cycle. These waves were a result of the shift in the predominant psychology of the investors between positive and negative. Understand this binary options theory in better way.
Using the Elliott Wave to identity trends
Because of the repetitive nature of these wave cycles, the Elliott wave theory can be utilized to help you identify trends in 5 different ways.
- Isolating the Dominant Trend- The way to identifying if the overall trend is up trending or down trending is to look at the direction of the first 5 impulse waves. If the impulse waves are moving in upward direction then the trend is trending upside and vise-a-versa.
- Market Reversal- As already discussed above the trend moves in 5 distinct impulse waves and is then followed by 3 corrective waves and in a hierarchical manner, this will give you a heads up as to where to expect the resumption of the bigger trend and place the trade at right position.
- Trend Maturity-With the Elliott wave theory, it is also possible to tell when the trend will be matured. When a trend matures, it is to be suspected that the market will start to reverse its movement.
With this article of Secured Options, traders will understand how they can understand the trend of market.
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