By Tim Lanoue
Your capital may be at risk. This material is not investment advice.
If you are looking to take binary options and Forex day-trading into your own hands then you must understand and know how to effectively apply perhaps the most reliable trading pattern which would be Price Action Trading Pattern. Time-and-time again this trading patter nhas proven its worth and reliability in not only the Forex industry but also the highly rewarding binary options industry as well. So what separates Price Action Trading Pattern (PATS) from all the other so-called wonderful and proven investment trading patterns? Great question which I will proudly answer throughout the duration of this educational binary options article!
Going Over The Basics
So for those of you who haven’t taken the time to learn the basics of investing I encourage you to first read my other introductory article concerning the fundamentals of Price Action Trading Pattern which can be found by going to my 60 Second Price Action Trading Pattern. Since this is the advanced version of this investment pattern and involves the incorporation of another investment concept, it is crucial that you understand the fundamentals that can be harvested from the publication that I offered to you above.
Two Main Investment Concepts
Moving forward, I am going to insinuate that you heeded the advice that I gave you in the last paragraph and that you took time out of day to learn all the basics and trading concepts discussed within that previous article. So with that in mind we will move onward to the two main concepts with this investment pattern which would be the creation of support levels and resistance levels. Before we dive in full speed, just understand that this trading pattern varies a little bit from other “traditional” Price Action Trading Patterns, but this version has generated the best success rates for investments in a wide scope and consistently throughout the past half decade.
So what are support levels again? Support levels can be best described as an imaginary level that is created when the price of an asset bounces off a price barrier and heads back up in a bullish direction. The creation of support levels indicate to investors that the buyers have reestablished temporary control over a particular asset and that a potential reversal is likely to occur in the future. When support levels are generated while using this advanced version of Price Action Trading Pattern, it will result in a PUT investment after four confirmations have been previously met.
On the contrary, a resistance level can be best explained as an imaginary level that occurs when the price of an asset reaches resistance and heads back down in a bearish direction. As you may have been able to guess, a resistance level indicates to investors that the sellers were able to temporarily gain control over a particular asset to push it back down in a downward direction. When resistance levels are created they require the fulfillment of 5 steps to be met prior to executing a PUT investment. We will discuss more of these conditions and steps further below.
Setting Up The Trading Pattern
One of the most important preliminary requirements that should always be double checked prior to applying this trading pattern would be to ensure that you have your trading pattern set up properly. This means that you will need access to a reliable charting solution such as freestockcharts.com or MetaTrader4 along with have high volume stocks or low volatility currency pairs as your assets of choice. Currency pairs such as the Eur/Usd, Usd/Chf, Usd/Cad, Aud/Usd and Nzd/Usd are commonly traded currency pairs with this investment pattern. High volume stocks that you could consider using would be Apple, Microsoft, Google, Facebook and Coca Cola.
Once you have selected between 4 to 5 of these assets to invest with and incorporated them into your charting solution you can then make sure to set the time frame of each of these charts to a period of 15 minutes. You see, one of the characteristics about Price Action Trading Pattern that separates it from other day-trading patterns would be that it doesn’t require investors to rely on technical indicators which can oftentimes crowd and makes viewing the price action of an asset more difficult. This trading pattern can also can be used on a wide number of time frames as well whereas most other trading patterns confine you to only certain time frames. So as soon as you have your assets selected and your time frame set to a period of 15 minutes you are able to move onward to the application phase of this trading pattern.
Application of Trading Pattern
The PUT investment application of this trading pattern is exactly the same as the previous trading pattern minus the set up components, but it is derived from four confirmations which can be better understood through the image provided to you below. It is imperative to remember that when you do have an approved trading opportunity that you execute your investments with an expiration time between 15 to 30 minutes. So sticking with the “classic” style of binary options day-trading would be your best bet since most of those expirations expire quarterly of every hour.
So in order for us to be able to place a PUT investment we need first and foremost the creation of a support level. Once a support level has been created, we can then move onward to our four confirmations listed below:
- Price heads in a bullish direction (upward direction).
- Price breaks our previously established support level in a downward movement.
- Price retraces back above our support level in an upward direction.
- Price moves in a downward movement and strongly breaks our support level.
Once this break has occurred, you can execute your 15 to 30 minute PUT investment. Unlike the other investment pattern where one of the confirmations that could be applied would be that you should wait for the following candlestick to close, this is not the case with this trading pattern. When applying Price Action Trading Pattern on a longer timeframe you don’t have to worry about this confirmation.
When it comes to resistance levels we have a total of five confirmations that must be met which occurs after the creation of the first resistance level. When all the confirmations have been met, the investor can execute a 15 to 30 minute PUT investment. In order to get a better understanding of this set up refer to the image provided to you below and analyze the steps involved.
- Price heads back in a downward direction below resistance level.
- Price then creates what is known as a swing point (known as a support/resistance level).
- Price then heads back in an upward direction towards our resistance level.
- Price then creates another resistance level (known as a swing point here).
- Price then heads below resistance level and the following bearish candle closes below the resistance level.
Once the bearish candle closes below the support level, you are then able to execute a PUT investment between a 15 to 30 minute time frame. One occurrence that you will tend to notice while using this trading pattern would be that resistance levels occur much less often than support levels. Now, don’t take this has a sign that they are any more powerful than support levels and double up your investments, if anything I have found better success trading mostly off support level set ups than I have resistance level set ups.
Need To Knows
- Only apply this trading pattern when a strong bearish or bullish trend is present.
- Make sure to apply a strict money management technique (5 – 10% account balance/trade).
- Never overtrade! Only 3 to 7 investments maximum per day!
- Never chase losing investments!
- Try to avoid investing during high volatility predicted market reports (3 bulls symbols present). Refer to our Fundamental Analysis guide to access a free economic calendar.
Advanced Price Action Trading Pattern Conclusion
Learning how to apply this investment pattern on a day-to-day investment basis can greatly increase your success as a binary options or Forex day-trader! Remember, there is no substitute for hard work and if you are willing to devote your time and energy to learning not only this trading pattern but also harvest all the free educational content provided to you on this binary options portal, your probability for success with binary options will greatly increase. Make sure to follow the Need To Knows and to double check that you have your trading set up correctly established before executing any investments. Before you apply this trading pattern, I encourage you to practice at least 250 investments on a Free Demo Account.
As most of you already know by now, if you have any questions or feedback to share, please feel free to provide them in a comment below. As our loyal subscribers would know we are a fairly active community here devoted to see each other succeed while looking out for each other so the more feedback we accumulate, the better everyone in our community benefits!
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