Trading triangle formations
Graphical models allow traders to predict the behavior of prices in the future. One such model is the Triangle – the basis of many binary options trading strategies.
Not all binary brokers offer Range options trading – we recommend you using a trusted and regulated broker.
There are several types of triangles. Some of them can indicate a breakthrough for upward price direction, others for a downwards one. Next, we will consider all existing triangles, as well as the possibility of buying Put, Call and Range options depending on the situation.
When to buy Call or Up Range option?
Binary options Triangle trading strategy recommends Call binary options when it comes to an ascending triangle. In most cases, the ascending triangle is formed in an uptrend. Visually on the chart, you can draw a line of resistance and support.
In this case, the line of resistance is horizontal and the support, which is passing via the rising lows, will be located at a slight angle to resist. In general about three waves of price movements can be observed in an ascending triangle (i.e. successive ascents and descents of quotes).
Together with the proper formation of this pattern, the third wave is the final, after the price breaks through the resistance line and is directed upwards.
It is at this point where we recommend to buy a Call option or a Up Range option.
When to buy Put or Down Range option?
The Triangle strategy recommends Put options buying in cases when it comes to top-down triangles. This type of chart pattern is formed in a downtrend. Support line of a descending triangle is horizontal and the line of resistance is held by constantly declining highs.
In a downward triangle, as well as in the upward the price may have about three waves. Also, as in the case of the ascending triangle, the third wave will be final and shall break the support line.
At this time, the trader can buy a Put or a Down Range option.
Symmetrical triangle pattern formation
If there is a symmetrical triangle pattern formation on the chart (resistance and support lines in this case are carried out by decreasing highs and increasing lows), the Triangle options trading strategy recommends waiting for the breaking of one of the faces of the triangle (as a symmetrical triangle formation at the moment does not give information about how much the price can head after coming out of it).
In this case, the trader should buy a Call option at a penetration resistance line of the upper bound of the triangle or buy a Up Range option before it. The purchase of a Put option looks good at a break of a suitable support line – the lower bound of the triangle. A Down Range option is also acceptable in this situation.
It should be noted that Triangle chart figure requires mandatory confirmation that is breaking of one of the lines. It is not recommended to buy Call or Put options as long as the price is within the triangle, as it is likely that this figure may not work as the trader intended.
In conclusion we can say that the Triangle binary options strategy is a great tool for graphical analysis of the market. It provides excellent trading signals to traders. However, experienced traders prefer to use more than one strategy for trading.