Binary Trading for December 26, 2013

The forex markets shutdown for Christmas Day on December 25, so I decided to check out the markets the following day. Of course, due to holiday-related vacations, Boxing Day, and other holidays in various parts of the world, I still expected the markets to be relatively listless. But surprisingly I had a great series of trades on the EUR/USD.

The markets didn’t open until 6AM EST, but I decided to start watching around 8AM. With the opening gap (which occurs whenever trading is suspended for a period of time, most commonly from Friday afternoon to Sunday afternoon in the forex market) and inevitable languid movement right off the bat, I really didn’t feel the need to start watching right at the re-opening of the forex market.

One thing I noticed I had going in my favor right away was a potential pivot point trade, although the market was still relatively far from it when I began watching the screen. But price quickly fell to this level on the 8:45 candle. After an immediate bounce off the pivot (1.36804), price retraced briefly, before bouncing off the pivot sharply on the 8:55 candlestick. These two strong bounces suggested a strong place for a call option. So upon the touch of 1.36804 on the 9:00 candle, I took a call option. This trade spent roughly equal amounts of time in-the-money and out-of-the-money, so it was only fitting that it resulted in a break-even trade.

After that trade, the pivot level was still holding well, so taking the same exact trade seemed like a perfectly reasonable trading decision. I took a call option on the 9:20 candle, and this trade ended up working in my favor for just over a one-pip winner.

Price continued to tiptoe along 1.36804 or stay roughly 0.5-2 pips above the pivot in subsequent candles. The pivot was rejected again on the 9:40 candle, which told me that the pivot point was still more likely to hold than be breached. Of course, U.S. markets open at 9:30AM, which can cause more volume and volatility to flood into the forex market, so you never know. No trade is ever a certainty; it’s all a matter of taking trades when you believe the probabilities are in your favor and avoiding them when they’re not.

So with the re-touch of the pivot point on the 9:45 candle, I entered a call option at 1.36804 for the third time. This trade also won, this time by two pips.

After about an hour of price running along the pivot, the market finally retraced back up. One potential level of resistance was 1.36974, the current daily high, just below the 1.3700 whole number. I’m a big believer that confluence in the market is the best indicator of a high-probability trade opportunity; namely, when more than one factor is supporting a trade set-up – e.g., support or resistance level created from price history with a Fibonacci retracement level overlapping or in the very near vicinity.

Granted, there was a relatively high degree of bullish momentum on the 10:40 candle that hit 1.36974. So what I did is I went down to my one-minute chart. I rarely do this, but sometimes it just offers a clearer resolution of how the market is acting on a very small scale as opposed to the five-minute chart. On the one-minute chart, I saw two rejections of the 1.36974 level I had been eyeing on back-to-back candlesticks (10:43 and 10:44). This for me was enough confirmation to get into a put option on the touch of 1.36974, as I felt this could be a very high-quality trade set-up.

Once price re-touched 1.36974 on the 10:48 candle, I entered a put option. This turned out to be a really nice trade, as a six-pip winner. Price continued to fall very strongly in the minute after the expiration of the trade, at over ten pips away from my entry.

I continued to watch the EUR/USD until about 12PM EST, but I never saw anything set-up to my liking. And when that happens, you simply don’t trade, period. I had another 3/4 ITM day, and essentially a 3/3 ITM day since the at-the-money trade simply returns your initial investment. And there’s really nothing worse than giving that profit back afterwards simply by trading out of boredom – especially when those winning trades came as a result of a series of sound trading decisions. There’s nothing more demoralizing than that. A trader’s worst enemy is almost always himself, not the actual market being traded. As always, be careful while trading and be conscious of your own personal mental state at all times.

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