Breakup and Breakdown
In binary options trading, if a trader is able to make the right decisions about the likely direction of price changes of financial assets, his success is guaranteed.
Success also heavy depends on your broker – you need to trade on a stable platform with no delay in entry so that you can easy control the strike price.
The Breakout trading strategy is very popular, many traders consider it one of the best. To achieve the goal, the trader must predict price level breakdowns. This is the essence of this strategy. Firstly, you need to find out what the price movement determines.
Binary options trading advantages on the market
All market participants seek to make a profit. If they understand that such an opportunity exists, they will rush to invest in the market. In this case, the price will move in one direction or another. If nothing spur traders to trade, market activity drops, and the price will not move at all.
When trading binary options, the trader can make money even when the price of the underlying asset is not changing at all. This is not possible on other markets, in particular – Forex. Price movement should exist if the trader wants to make a profit in the foreign exchange market.
How price behaves at key levels of support and resistance
If the market is inactive for some time, the case of breakdown that occurs during the news may change the value of the underlying asset. Traders seek to make profit and select a position. This situation can be determined in the following manner – in order to analyze how price behaves at key levels of support and resistance.
Before the price breaking up, the price can test the resistance levels at this point and kickback points will approach the level of resistance. As a result, we can assume that the cost increases by traders. If this happens, it means that soon we can expect the breakup.
The same situation with breakdown - the levels are constantly testing, kickback points are lowering.
How we trade on a break of support and resistance levels
Before the price breaks the level, it can test the resistance level at this point several times with kickbacks each time getting closer to it. This situation indicates that buyers always raise the price. When we see this, it will be a signal to the fact that the breakdown of the resistance happened.
Break of the support level are similar. Support levels will be tested repeatedly, and the point of rollback becomes lower and lower, indicating the pressure of bears. In such cases, the pressure of sellers or buyers can be so strong that the prices just break through key levels and continue moving toward breakdown without stopping.
Binary option trading price during the breakdown is very simple. That is why, it is used by a large number of traders. In this strategy, the most important thing is to know how to build support and resistance levels. It is desirable to apply this strategy on a clear trend.
Traders can buy Put option in the case of support line breakdown and Call option in the case of resistance line breakup.