The direction of the market movement. How to determine?

The direction of the market movement. How to determine?

Ted Capwell 253


To trade binary options for profit, you need to learn to intelligently analyze the market situation. Of course, this is not a panacea. There is still a lot to master – from the principles of money management to the development of personal strategies, but the direction of the market movement is of the utmost priority for a trader, so let’s talk about it.

Let’s start with the fact that any market, especially the financial one, is dynamic and unstable. To correctly assess the situation and make an adequate forecast in the short or long term, you need to master the basics of fundamental and technical analysis.

Determine Market Movement Direction

Global and local market

Global and local market

For a trader, determining the direction of market movement is paramount. A growing (aka bullish) or declining (aka bearish) trend? Or maybe we are talking about a flat (the so-called “side” market)?

Both local (real) and long-term trends are changing, and if you analyze the trading volumes of players, you can draw up an approximate plan for their changes in the future.

Bearish or bullish trends in combination with increased volumes are a sign that buyers or sellers are showing active interest, which in turn allows predicting the trend movement.

The market movement is not linear. If we analyze the situation on the chart, it becomes clear that the movement is taking place in a certain price range.

Despite the variable slope of the trend lines, it still remains limited. For a trader, this is an opportunity to make a correct forecast. Prices behave differently: they move inside the corridor, being attracted to the upper or lower border, break through the boundary lines with acceleration towards the breakout.

It is convenient to follow the market movement and mark the inception of a trend using indicators. One of them is Bollinger Bands. Its lines constrain price changes compared to the average. The narrower the corridor, the narrower the price range, which means the lower the market activity. Conversely, the more they diverge Bollinger Bands, the higher the market activity.

What is a volatile market?

What is a volatile market?

Traders have a weakness for volatile markets for one reason – for them it is a way to earn more from active price movement. On the one hand, this is so. On the other hand, trading in a volatile market is invariably associated with risks. Often, unpredictable turns can lead to both losses and profits.

In order to somehow keep the situation under control, they learned to measure volatility. For this, the VIX volatility index is used. It is calculated from the analysis of option prices. An index below 15 indicates an optimistic market sentiment, however, heightened optimism may also be a harbinger of a market reversal. Index values ​​in the range from 40 to 50 indicate active sales and market panic.

It is noteworthy that today the index is close to the minimum level. Analysts are already predicting an imminent reversal, but many are still confident in the upside potential of the market movement.

Traders who practice long-term binary options trading should take a broad look at the situation in order not to be mistaken with forecasts of the direction of movement before the end of the contract.

Trend Lines

Trend Lines

How can charting or plotting lines help identify the market trend? There are at least three options for superimposing lines on charts:lines

  • straight;
  • medium;
  • sliding.

So let’s start by using one line. The more indicators, the better? Not at all. Rather, it will only confuse. To indicate the direction of the trend, it is enough to use just one straight line. To do this, choose any online chart, choose a timeframe and asset type, and then draw a trend line.

It is even easier further. Find a pair of candles with small indicators if it is an uptrend and a pair with the highest indicators if it is a downtrend. Attention! Look for the wick of the candles, not the body!

If the chart crosses the line, this indicates that the trend has already reversed or is coming to an end. Analyzing market movement in this way is not difficult at all. It is important to learn how to recognize trends in charts.

A trend channel is another way to identify a trend. Channels solve the same problem as a simple line, but they also make it possible to track the interval of value movement until the end of the trend.

Even a novice trader can build a trend channel. To do this, you need to connect the two main peaks so that the second does not rise above the first. The line continues further and goes beyond the peaks. In addition, you need to find the smallest value between the peaks and draw a parallel first line from it. The resulting corridor is the trend channel.

If you need to build an upward channel, connect the minimum values ​​in the same way so that the second exceeds the first, search for the maximum between them and impose lines by analogy with the downward channel.

Methods for assessing the direction of price movement

Methods for assessing the direction of price movement

Do not forget that binary options trading has its own specifics. The return on assets does not depend on the level of price change, but we must not forget about expiration. Each binary option has its own expiration date. You can determine the direction of the market price using:

  • news strategy;
  • strategy 60 seconds;
  • technical indicators.

For example, Moving Average indicator. The easiest way to work with it is on the online chart. Choose a periodicity of 100 and watch the moving average. As soon as the price rises and goes beyond this indicator – the time of the uptrend. A price below the mark indicates a downtrend. The price crossing the line several times indicates a sideways character. At such moments, it is recommended to refrain from trading.

One of the easiest ways to predict the direction of travel is to study the economic calendar. You need to realize that news affects the market, the value of assets. Studying the economic calendar, players can assume how the market will behave in the near future and draw conclusions based on this.

How does it work? It’s simple. The trading terminal opens, the chart of the asset associated with the news release. The reaction of the players will follow in response to the publication of the news. Typically, the price drops sharply or rises sharply. It all depends on how serious the news is and how the majority of the players reacted to it.

Which way to determine the direction to choose?

Which way to determine the direction to choose?

The choice of control and analysis methodology is a matter of trader’s taste. If you don’t have experience and best practices yet, you can try to combine strategies, use the economic calendar and trade on price impulses.

Over time, there will be a proven methodology for determining the trend, effective and efficient. Alternatively, you can try to follow the tactics of experienced traders and concentrate on one strategy. On the one hand, this will help to stay focused and not be distracted, on the other hand, it will deepen knowledge.

Is there a universal method for determining the direction of the market movement for a trader? Definitely not. In the binary options market, everything is relative and individual. Everyone is looking for their own ways and chooses methods that are convenient for themselves. Someone succeeds in trading by price impulses, others by news. Find your way through trial and analysis.