THE HOT WINDOW
Part four: Using pivot points for breakout trading
Trading Breakouts using Pivot Points
Binary options are a simple and exciting method of trading in today’s market. The only thing a trader has to do is predict whether the value of an asset is going to go up or down over a short time period. When a trader’s prediction is correct, huge profits follow, but if a trader’s prediction is incorrect, everything invested in that trade is lost. Binary options are very a lucrative trading option for experienced traders, but are considered very risky for beginner traders. Education is a key ingredient when trading binary options.
Using the Pivot Points
Motion in the market is the way profits are generated. Binary options are trades based on price action, whatever that may be, and are unique in the fact that unlike Forex, binary options allow you to make money on an asset even when it stays still. Breakouts are movements that occur in an assets price after a period of inactivity. There are many reasons why prices of assets see bursts of movement in either an up or down direction. The important thing to do is look for inactivity in an asset that you feel will see a breakout based on researching its market trend. This guide will give you direction with trading breakouts.
Step 1: Pick the assets that you want to start analyzing, and pay close attention their trends.
Step 2: Watch the assets that are going through periods of inactivity, and are not showing major increases or decreases in their prices. A way to identify inactivity is to make sure the price of an asset stays within two pivot points over a large period of time. Pivot points become stronger when an assets price does not cross the pivot point over time.
Step 3: When buying pressure builds up for an asset, it indicates that the price is going get an upward break. A way to identify buying pressure is when an assets prices has tested the resistance level multiple times, with the points of retracement getting higher progressively. When a trader sees this, it signals to him the price is going to break upwards. If you identify this pattern in your assets it is a reliable indicator that the price of the asset will increase, and you should quickly trade that asset to capitalize on its gains.
Downward breakouts should follow the same pattern with prices moving in the opposite direction. Support levels will be tested multiple times, and if the points of retracement are getting lower progressively, its an indicator that the price of the asset decrease, and you should trade that asset to capitalize on its downward movement.
Identifying movement in assets leads to successful trading in binary options. Pivot points play an important role in identifying movement, and are an effective tool to notice buying trends. Over time your experience trading breakouts will increase along with your success. The more you study an asset, and notice its patterns over a long period of time, the more likely you are to avoid misreading the market and experience major losses in trades. Avoid using this technique when you notice volatility in assets, and capitalize on the opportunities where you see a breakout in the direction of your prediction.