Binary Options Trading for January 22, 2014

Even though I’m back in college, I’ve been able to find some spare time to trade. And obviously whenever I take trades I’m more than happy to share them and my reasoning to the community here. Also, you will see that my screenshots below are a bit different, as I’m using a MetaTrader4 platform here. My usual charting software, ThinkOrSwim, has been acting up on me lately so I’ve resorted to MT4 instead.

I do have a pivot point indicator plotted on my MetaTrader charts here, but the indicator always formats itself to the specific server time of the MT4 software. What I mean by that is that being this broker’s server is set to GMT+2, I believe, the pivot point indicator will be relative to particular time. Pivot points are determined by three factors: the high, low, and open/close of the previous day’s data. So therefore, these lines will vary based upon the server time of the trading software. I believe pivot points that use the New York close as the basis are the best, as this is what many traders use. So I may keep this pivot indicator on my charts or I may get rid of it altogether. All I really need is the price chart itself, as I don’t find the indicators essential. Anyway, on to the trades:

My first trade came as a put option at the 0.91095 level on the USD/CHF. Price had seen some minor congestion around this level a little over an hour before my trade. Around 7AM EST, once price had broken down below 0.91095, the market came back up to this level and rejected it. A half hour later, price came back up and rejected this level again on consecutive candles. Consequently, I decided to take a put option on the 7:35 candle (relative to Eastern Standard Time). This trade worked out great and went in my favor the entire time. The USD/CHF had been in a clear downtrend the entire morning, so finding some form of resistance to take a put option was a very good method to put the odds in my favor here.

My next trade turned out to be a call option created by the support level that formed after the conclusion of my previous trade (0.90924). When in a downtrend, you always need to be careful about taking call options (and vice versa), but I felt pretty confident about this one. The 0.90924 level was proving to be rather strong as a support level, and price was showing a strong degree of “bounce” here. Once 0.90924 was hit, it retraced back up about five pips. After price nearly came back down to 0.90924 it went back up to about seven pips above support. This suggested that the buyers were starting to exert more power in the market after the long wave of selling on the USD earlier in the morning. When price re-touched 0.90924 on the 8:20 candle, it rejected the level once again, so I took the call option on the 8:25 candle. This trade only won by about a pip, but it was five pips in my favor at one point.

My final trade came back up at the 0.91095 level. At first, it appeared that the buyers were exerting so much influence that this resistance level could be broken outright on the first try. But it turned out to be a false break. And like I’ve stated many times in the past, whenever you have a false break, you need to be very wary about considering that level for trades. In this case, the sell orders at the 0.91095 resistance may be able to keep price at or below the level, but whenever a false break occurs it signals that the level is quite vulnerable to being broken once it’s hit again. So a bigger push from the buyers is really all it could take to get above it.

But this case was different I felt, because the following candle tested 0.91095 again, but ultimately became a bearish candle and was met with low-volume trading thereafter. Once price re-hit 0.91095 on the 10:00 candle, I didn’t immediately get into a put option. Instead I waited and saw price merely lingering around the resistance level. That’s when I decided to get into the trade. The price feed cut out on me toward the end of this trade, but I believe I won by about five pips.

It was, however, not so surprising when 0.91095 was breached later on in the afternoon. The bounce off this level only saw weak selling and didn’t quite make it down to the 0.90924 support level. This, to me, qualifies as a “weak retracement” and makes it very likely that resistance could be breached on the next visit to that level. And indeed, when 0.91095 was re-visited, price went through it on the first touch.

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