Price Action

Trading strategies can basically be split up into to 2 categories. Indicator based and visual based. Indicator based is where you have certain indicators on your chart and when they move certain ways, you enter the trade the way the indicator "tells" you to enter. When I first started binary options, I searched and searched for the perfect indicator that would actually tell me when and how to take the trade, but I never found it. Some people trade this way but I find it less effective than visual trading because of one key point: all indicators lag. This is especially critical in binary options where a delay in a matter of minutes to enter a trade could be the difference between finishing in the money or out of the money. In a later post I might talk about which indicators are the best and how to use them but I fine they really aren't very effective.

The second type of trading is visual based trading. It's using a basic chart and in its simplest form, drawing lines to predict how price will move(very scientific). More specifically, using previous low as values of support and previous highs of values of resistance. These values are where you want to enter trades as price has a good chance of reversing. This is also called price action. This can be explained a lot better in a chart example. Here is the 5min EUR/USD earlier today(sept. 17) with candlestick chart from freestockcharts.com

As you can see, price will often bounce off the same value more than once. Then when the price does fall and break the support level, the roll of the value is reversed (in this case to resistance). Now, price will bounce off it and go back down when price hits that value again.

Of course price won't always follow the support/resistance levels. However, the higher the time frame, the more likely there is to be a reversal. Price hitting a all time high is much more likely to reverse than hitting a 1 hour high.

More on price action here