Let's get started
BINARY OPTION TRADING BY
ADITYA
PURE PRICE ACTION
A binary option is a financial product where the parties involved in the transaction are
assigned one of two outcomes based on whether the option expires in the money. Binary
options depend on the outcome of a "yes or no" proposition, hence the name "binary."
Traders receive a payout if the binary option expires in the money and incur a loss if it
expires out of the money.
KEY TAKEAWAYS
Binary options depend on the outcome of a "yes or no" proposition.
Traders receive a payout if the binary option expires in the money and incur a
loss if it expires out of the money.
Binary options set a fixed payout and loss amount.
Binary options don't allow traders to take a position in the underlying security.
Most binary options trading occurs outside the United States.
How a Binary Option Works
Binary options have an expiry date and/or time. At the time of expiry, the price of
the underlying asset must be on the correct side of the strike price (based on the
trade taken) for the trader to make a profit.
A binary option automatically exercises, meaning the gain or loss on the trade is
automatically credited or debited to the trader's account when the option expires.
That means the buyer of a binary option will either receive a payout or lose their
entire investment in the trade—there is nothing in between. Conversely, the seller
of the option will either retain the buyer's premium, or be required to make the full
payout.
A binary option may be as simple as whether the share price of ABC will be above
$25 on April 22, 2021, at 10:45 a.m. The trader makes a decision, either yes (it will
be higher) or no (it will be lower).
Let's say the trader thinks the price will be trading above $25 on that date and time
and is willing to stake $100 on the trade. If ABC shares trade above $25 at that date
and time, the trader receives a payout per the terms agreed. For example, if the
payout was 70%, the binary broker credits the trader's account with $70.
If the price trades below $25 at that date and time, the trader was wrong and loses
their $100 investment in the trade.
TYPES OF ALL MARKET
THERE ARE THREE TYPE OF MAIN MARKET SUCH AS.
1. STOCK MARKET
2. FOREX MARKET
3. CRYPTO MARKET
WHERE FOREX MARKET IS The
foreign exchange (forex or FX) market is a global
marketplace for exchanging national currencies. Because of the worldwide
reach of trade, commerce, and finance, forex markets tend to be the
world's largest and most liquid asset markets. Currencies trade against
each other as exchange rate pairs.
SO IN BINARY OPTION WE ARE GOING TO TRADE ON FOREX MARKET BUT WITH FIXED
EXPIRY TIME WHICH IS KNOW AS FIXED TIME TRADING
BEST BINARY OPTION BROKERS ARE(2023)
POCKET OPTION (https://po8.cash/register?
utm_source=affiliate&a=BgsXVOXvzqU2mL&ac=pocketoption)
QUOTEX
BINOMO
IQ OPTION
OLYMP TRADE
FOR GETTING STARTED YOU NEED TO LEARN THE FOLLOW
THOINGS
PRICE ACTION
1. MARKET STRUCTURE
2. SUPPORT
3. RESISTANCE
4. TREND LINE(TRENDS)
5. SUPPLY
6. DEMAND
7. CANDELSTICKS PATTERN
8. CHART PATTERN
9. INDICATORS
10. ENTRY LEVEL
11. EXIT LEVEL
12. VOLUME
SOME TRICKS FOR BINARY OPTIONS
MARGINAL SAFETY
5 SEC CHARTS
POCKET OPTION TRICKS
DOUBLE THE CAPITAL
DRAWING TOOLS
RISK MANGEMENT
PRICE ACTION
Yes, price action forms the basis of technical analysis and helps you in timing entries and exits
better without relying on news or opinions.
Many short-term traders mainly rely on price action and the formations and trends that
help them make trading decisions.
Price Action Trading? Yes, price action forms the basis of technical analysis and helps
you in timing entries and exits better without relying on news or opinions.
Many short-term traders mainly rely on price action and the formations and trends that
help them make trading decisions.
Price action can be analyzed using charts that plot prices over time. Traders use the
different charts to improve their ability to analyze trends, breakouts and reversals.
But the main problem here is that since there’s so much information out there like
candlestick patterns, chart patterns, trendlines, etc. it makes it challenging to take
trading decisions.
Novice traders often have this questions-Where do I start? What should I look for?
SO WE START FROM THE BASIC MARKET STRUCTURE
“Support and resistance” is one of the most widely used concepts in
trading.
Strangely enough, everyone seems to have their own idea of how you
should measure support and resistance.
Let’s take a look at the basics first.
Look at the diagram above. As you can see, this zigzag pattern is making its
way up (a “bull market”).
When the price moves up and then pulls back, the highest point reached
before it pulled back is now resistance.
Resistance levels indicate where there will be a surplus of sellers.
When the price continues up again, the lowest point reached before it
started back is now support.
Support levels indicate where there will be a surplus of buyers.
In this way, resistance and support are continually formed as the price
moves up and down over time.
The reverse is true during a downtrend.
n the most basic way, this is how support and resistance are normally
traded:
Trade the “Bounce”
Buy when the price falls towards support.
Sell when the price rises towards resistance.
Trade the “Break”
Buy when the price breaks up through resistance.
Sell when the price breaks down through support.
some examples are
How to Draw Support and Resistance Levels on Pocket
Option?
There multiple ways of drawing Support and Resistance levels however the
most popular ways are
1. Horizontal line: Horizontal line is the most popular way of drawing
support and resistance levels, In order to use this tool, first click on the
tool button and select Horizontal line from the menu. Next, place the
horizontal line below two lows for the support level and vice versa
place the horizontal line above the two highs for the Resistance level.
2. Trend line: Trend line is another one of the most popular ways of
drawing Support and Resistance levels. In order to draw Support and
Resistance levels using a trend line. Similarly, click on the tools button and
select the trend line from the menu Next apply the necessary
amendments.
TREND LINES
Trend lines are probably the most common form of technical analysis in
forex trading.
They are probably one of the most underutilized ones as well.
If drawn correctly, they can be as accurate as any other method.
Unfortunately, most forex traders don’t draw them correctly or try to make
the line fit the market instead of the other way around.
In their most basic form, an uptrend line is drawn along the bottom of
easily identifiable support areas (valleys).
This is known as an ascending trend line.
In a downtrend, the trend line is drawn along the top of easily identifiable
resistance areas (peaks).
This is known as a descending trend line.
How do you draw trend lines?
To draw forex trend lines properly, all you have to do is locate two major
tops or bottoms and connect them.
What’s next?
Nothing.
Uhh, is that it?
Yep, it’s that simple.
Here are trend lines in action! Look at those waves!
Types of Trends
There are three types of trends:
Uptrend (higher lows)
Downtrend (lower highs)
Sideways trend (ranging)
Here are some important things to
remember using trend lines in trading:
It takes at least two tops or bottoms to draw a valid trend line but it takes
THREE to confirm a trend line.
The STEEPER the trend line you draw, the less reliable it is going to be and
the more likely it will break.
Like horizontal support and resistance levels, trend lines become stronger
the more times they are tested.
NOTE:-And most importantly, DO NOT EVER draw trend lines by forcing
them to fit the market. If they do not fit right, then that trend line isn’t a
valid one!
What are Supply and Demand Zones
Supply-demand is nothing but the border area of support or resistance
In the chart above you can see a demand zone (broad support level) and a supply zone (broad area
of resistance).
What we want to find at the price zones where supply overwhelms demand and where demand
overwhelms supply.
The former is known as SUPPLY ZONES. When the market bumps into SUPPLY ZONES, the price
will drop. Then, you can make money by shorting the market.
The latter is market DEMAND ZONE. With the support of demand, the price will rise. Then, you
can profit in a long position.
If the supply zone is broken it becomes a demand zone, pullback test from the demand zone
you can go LONG
How to Find Supply and Demand Zones in Trading
Two steps in order to identify the supply and demand zones.
1. Look at the chart and try to spot successive large successive candles. It is important that price
moves a lot
2. Establish the base (usually sideways price action area) from which price started the quick move
Different Types of Supply and Demand Formations
There are different supply and demand zone patterns. Some of the more popular ones are shown
below:
TREND CONTINUOUS BASE
1. RALLY BASE RALLY(RBR)
2. DOWN BASE DOWN (DBD)
TREND REVERSAL BASE
1. RALLY BASE DROP (RBD)
2. DOWN BASE RALLY (DBR)
And
FLIP ZONE
CANDLESTICKS PATTERN
Candlestick Components
The four components of a candlestick are the open, close, high, and low
prices for a specific time period. Let’s look at an example of a daily candle:
The open price is the first price at which the asset trades in one specific day.
The close price is the last price at which the asset trades in one specific day.
The high price is the highest price the asset reaches during the day.
The low price is the lowest price reached during the day.
Hammer
The hammer candlestick pattern is formed of a short body with a long
lower wick, and is found at the bottom of a downward trend.
A hammer shows that although there were selling pressures during the
day, ultimately a strong buying pressure drove the price back up. The
colour of the body can vary, but green hammers indicate a stronger bull
market than red hammers.
Inverse hammer
A similarly bullish pattern is the inverted hammer. The only difference
being that the upper wick is long, while the lower wick is short.
It indicates a buying pressure, followed by a selling pressure that was not
strong enough to drive the market price down. The inverse hammer
suggests that buyers will soon have control of the market.
Bullish engulfing
The bullish engulfing pattern is formed of two candlesticks. The first
candle is a short red body that is completely engulfed by a larger green
candle.
Though the second day opens lower than the first, the bullish market
pushes the price up, culminating in an obvious win for buyers.
Bearish engulfing
A bearish engulfing pattern occurs at the end of an uptrend. The first
candle has a small green body that is engulfed by a subsequent long red
candle.
It signifies a peak or slowdown of price movement, and is a sign of an
impending market downturn. The lower the second candle goes, the more
significant the trend is likely to be.
Piercing line
The piercing line is also a two-stick pattern, made up of a long red candle,
followed by a long green candle.
There is usually a significant gap down between the first candlestick’s
closing price, and the green candlestick’s opening. It indicates a strong
buying pressure, as the price is pushed up to or above the mid-price of the
previous day.
Morning star
The morning star candlestick pattern is considered a sign of hope in a bleak
market downtrend. It is a three-stick pattern: one short-bodied candle between a
long red and a long green. Traditionally, the ‘star’ will have no overlap with the
longer bodies, as the market gaps both on open and close.
It signals that the selling pressure of the first day is subsiding, and a bull market
is on the horizon.
Three white soldiers
The three white soldiers pattern occurs over three days. It consists of
consecutive long green (or white) candles with small wicks, which open
and close progressively higher than the previous day.
It is a very strong bullish signal that occurs after a downtrend, and shows a
steady advance of buying pressure.
Six bearish candlestick patterns
Bearish candlestick patterns usually form after an uptrend, and signal a point of
resistance. Heavy pessimism about the market price often causes traders to
close their long positions, and open a short position to take advantage of the
falling price.
Hanging man
The hanging man is the bearish equivalent of a hammer; it has the same shape
but forms at the end of an uptrend.
It indicates that there was a significant sell-off during the day, but that buyers
were able to push the price up again. The large sell-off is often seen as an
indication that the bulls are losing control of the market.
Shooting star
The shooting star is the same shape as the inverted hammer, but is formed in an
uptrend: it has a small lower body, and a long upper wick.
Usually, the market will gap slightly higher on opening and rally to an intra-day
high before closing at a price just above the open – like a star falling to the
ground.
Evening star
The evening star is a three-candlestick pattern that is the equivalent of the bullish
morning star. It is formed of a short candle sandwiched between a long green
candle and a large red candlestick.
It indicates the reversal of an uptrend, and is particularly strong when the third
candlestick erases the gains of the first candle.
Three black crows
The three black crows candlestick pattern comprises of three consecutive
long red candles with short or non-existent wicks. Each session opens at a
similar price to the previous day, but selling pressures push the price lower
and lower with each close.
Traders interpret this pattern as the start of a bearish downtrend, as the
sellers have overtaken the buyers during three successive trading days.
Doji
When a market’s open and close are almost at the same price point, the
candlestick resembles a cross or plus sign – traders should look out for a
short to non-existent body, with wicks of varying length.
This doji’s pattern conveys a struggle between buyers and sellers that
results in no net gain for either side. Alone a doji is neutral signal, but it can
be found in reversal patterns such as the bullish morning star and bearish
evening star.
Spinning top
The spinning top candlestick pattern has a short body centred between wicks of
equal length. The pattern indicates indecision in the market, resulting in no
meaningful change in price: the bulls sent the price higher, while the bears
pushed it low again. Spinning tops are often interpreted as a period of
consolidation, or rest, following a significant uptrend or downtrend.
On its own the spinning top is a relatively benign signal, but they can be
interpreted as a sign of things to come as it signifies that the current market
pressure is losing control.
PERFECT ENTRY & EXIT ,STRETEGY AND INDICATIORS STRETEGY
PLATFORM :-POCKET OPTION (LINK GIVEN IN BRIKER SECTION YOU CAN CREATE
ACCOUNT THROUGH THERE)
1. Pinocchio Strategy
Pinocchio specifically targets the candlestick figure of the graph; even though it seems short,
the wick is long. It basically imitates the character “Pinocchio” and is a very useful strategy
for the 60-second, 5-minute, or longer trades.
Like the character Pinocchio lies, and his nose grows bigger, the wick grows in the graph,
too, but in the wrong proportions. Therefore, you can compare when a trend does not suit
the strategy and adopt a different strategy.
Wicks are the result of a rejection of a price, and it is shown immediately by a candlestick. To
trade wicks in the trend direction or against the trend can increase your hit rate dramatically.
The entry for a trade is the next candle after a Pinocchio wick.
2. Support and resistance strategy
This strategy has its origin in the technical analysis. For technical analysis, you need to know
how to read candlestick charts and other charts as well, but it is not that difficult for a beginner.
Support and resistance mean there are prices in the markets where the chart will turn around.
We recommend focusing on “V” shape forms to identify support and resistance areas. There is
a difference between buyers and sellers, and that is why it works. You can also say that the
price is too expensive or too cheap. See the example here:
For example, if a price was rejected two times by the market, there is a good chance that you
see a third reaction on that price. There, you can place your trade!
3. Price action strategy
The price action strategy is one of the best Pocket Option strategies. Using this trading strategy,
a trader can better understand the market. Looking at the price action will help you
determine your future course of action when trading on Pocket Option.
A trader can use the price action strategy in different charts. For example, you can use this
strategy for your 1-minute- or 5-minute trades. Traders only need to select the chart settings to
see the changes occurring every minute in the market.
4. Momentum/ swing strategy
Pocket Option offers many trading indicators to the users, which they can combine with trading
strategies. Momentum/ swing trading strategy helps determine the market force responsible
for changing the asset’s price.
Momentum/ swing strategy, when used with indicators like moving average convergence
divergence indicator, will help you determine whether you should place your 5-minute trade.
5. Candlestick strategy
Another Pocket Option trading strategy is the candlestick strategy that a trader can use to
evaluate the market’s mood. Once you can judge the changes taking place in the market, you
can make better decisions for your 5-minute trades on Pocket Option.
Many Pocket Option users use the candlestick strategy because it is the best strategy that can
help you know the complete market information. It is a perfect strategy to help you determine
the resistance and support levels essential to determine the best time for placing your 5minute trades.
You can increase or decrease the chart’s time frame to get a comprehensive market view.
6. Following the news
The most underrated Pocket Option strategy is to follow the news. Advanced traders who
profit immensely from their 5-minute, 1-hour, or even longer trades on Pocket Option never
underestimate the importance of following the news.
You can use various news channels to gather information about your favorite asset. Trading
journals are another way that a trader can comprehend the changes taking place in the market.
Once a trader knows whether an asset’s price will increase or decrease, you can place
winning trades.
7. Trend trading
Trends form the perfect Pocket Option strategy to help you make your trading decisions. If
you follow market trends correctly, you can place winning trades. Since market trends make
you aware of how the asset’s price has been moving, you can get a clear picture of its future
price.
Accordingly, you can place your trade using trends as your 5-minute Pocket Option trading
strategy. Understanding trends will benefit you in the long run and make you a better trader. It is
essential to know the trends whether you are placing 5-minute trades or 1-minute trades.
Trends will increase the possibility of success for your Pocket Option trades.
8. Using Indicators
Indicators are something that a trader should use if he wants to come out with the perfect
trading decisions. For Pocket Option trades, nothing can beat the importance of technical
analysis with the help of trading indicators.
Though a few clicks are sufficient to place a trade on Pocket Option, it involves a lot of work in
the background.
The platform offers you multiple Pocket Option indicators that you can combine to analyze the
market and place your 5-minute trades. Some trading indicators available for deciding about
your 5-minute trades include the relative strength index, moving averages, and Bollinger bands.
RISK MANAGEMENT
Binary options are an all-or-nothing option type where you risk a certain amount of capital,
and you lose it or make a fixed return based on whether the price of the underlying asset
is above or below (depending on which you pick) a specific price at a specific time. If you
are right, you receive the prescribed payout. If you are wrong, the capital you wagered is
lost.
That definition has expanded though. Back in 2009, the US-based Nadex exchange
created options that allow traders to buy or sell an option at any time up until expiry. This
creates a wide range of scenarios, as a trader can exit for less than the full loss or full
profit.
Key Takeaways
Professional traders usually risk no more than 1% of their capital per trade.
Minimizing your risk allows you to make many mistakes without losing all of your
capital.
Calculate your position size on every trade as you're starting.
As you progress, you don't have to recalculate your position with every little fluctuation
in your account; you can pick a simple, round number and trade that every time.
How Much to Risk on Each Binary Options Trade
How much you risk on a binary option trade should be a small percentage of your overall
trading capital. How much you want to risk is up to you, but risking more 5% of your
capital isn't recommended. Professional traders typically risk 1% or less of their capital.
If you have a $1000 account, keep risk to $10 or $20 (1% or 2%) per binary options trade.
Risk 5% ($50 in this case) is the absolute maximum and isn't recommended. When you
start trading you'll want to make as much money as you can, as quickly as you can.
Making some quick cash is why many people attempt trading. Avoid this impulse though.
Risking a lot on each trade is more likely to empty your trading account than create a
windfall. Most new traders don't have a trading method they tested and practiced, and
therefore have no idea if they are a good trader or not. Better to risk small amounts of
capital on each binary options trade, to test your trading methods and hone your skill, and
then gradually increase the amount you risk to 2% once consistent.
How to Determine Risk on a Trade
Binary options have a maximum fixed risk. This lets you know in advance how much you
could lose if the asset (called the "underlying," which the binary option is based on)
doesn't do what you expect. For binary options, the risk is the amount you wager on each
trade.
If wager $10 on a binary option trade, your maximum loss is $10. Some brokers offer a
rebate on losing trades; 10% for example. If this is the case, your maximum is only $9,
calculated as:
maximum loss + rebate = trade risk
-$10 + ($10 x 10%) = -$10 + $1 = -$9
Nadex binary options don't have rebates on losing trades, but if you buy an option at 50,
and it drops to 30, you can sell it for a partial loss, instead of waiting for it to drop to 0 (or
move above 50, which would produce a profit). Ultimately though, at expiry, the Nadex
option will be worth 100 or 0. Therefore, when determining your risk you must assume the
worst case scenario.
Nadex binary options trade between 100 and 0. With each digit representing a $1 profit or
loss. If you buy one option at 30 and it drops to 0, you have lost $30. If you sell one option
at 50 and it goes to 100, you have lost $50. You can trade multiple contracts to increase
the amount you make or lose. This is a tutorial on position size, not Nadex options.
Determining Position Size on a Binary Trade
You know how much you are will risking risk (percentage of account, converted to a dollar
amount) and you know how much money you could lose in a binary options trade. Now, tie
the two together to calculate the exact amount of money you can wager on a trade.
If you have a $3500 account, and you're risking 2% per trade, the maximum you want to
lose is $70. If the broker offers no rebate on losing trades (this is the norm), then only risk
up to $70 on the trade.
In the "Amount" box on the binary options trading platform, input $70 (in this case). That
means you are willing to risk $70 on the trade.
If the broker offers a rebate, for example, 10%, then you can increase your position size
by the amount of the rebate...in this case 10%. Because of the rebate, you can risk $77 on
a trade ($70 plus 10%). If you lose you will receive a $7 rebate, so your maximum loss is
still only $70, which is in line with your 2% risk parameter.
For binary options you have an extra step because you can purchase an option at any
price between 0 and 100, which affects how much you could lose. Assume you have a
$5500 account and are willing to risk 2% per trade. That means you can lose up to $110
per trade and still be within your risk parameter. Don't take a trade where you could lose
more than $110.
Assume you want to trade a gold binary options contract, because you believe the price of
gold will rise today. You can buy the option at 50. If you are right, and gold is higher than
the strike price (price level of gold that determines if you are right or wrong) when the
option expires, the option will be valued at 100. You make a $50 profit on each contract
you buy. If gold is below the strike price when the option expires, its value is 0, and you
lose $50 on each contract.
Therefore, your risk is $50 for each contract you trade. You are allowed to lose up to $110
per trade, so you can buy two contracts at $50. If you lose on the trade you will lose 2 x
$50 = $100. This is below the $110 allowed. You can't buy three contracts though because
that exposes you to a $150 loss. A $150 loss is more than your established risk tolerance.
Considerations for Real World Trading
When you're starting out, calculate your ideal position size for each trade. Even when
actively day trading there is time before each trade to quickly determine how much to
wager based on your percentage risk tolerance and the trade you are considering. This
repetition will serve you well, and when you are losing money the dollar amount you can
risk will drop (as the account value drops) and when you are winning the dollar amount
you can risk will increase (as the account value increases). Note that your percentage at
risk doesn't change, but as your account value fluctuates the dollar amount that
percentage represents does change.
As your account stabilizes you may trade the same amount on every trade, regardless of
the fluctuations in your account. For example, the balance in my trading accounts stays
the same. I withdraw profits at the end of each month, and any drops in the balance are
usually quickly remedied by a few winning trades. Therefore, there isn't the need to make
tiny changes to my position size on every trade. If your account value stays around $5000
(because of profit withdrawals, or profits and losses balance each other out), and you risk
2% per trade, then risk $100 per trade. Don't reduce or increase this amount by a few
dollars every time your account fluctuates slightly above or below $5000.
The point of only risking 1% or 2% of the account is that you can lose 100 or 50 trades in
a row before you are cleaned out. That's a good level of safety...if you are using a
researched, tested and practiced strategy.
Not constantly changing your position size for every minor fluctuation in account value
also allows you to make quick trading decisions in fast moving market conditions. If you
know you can risk $100 on a trade, you can just act, instead of calculating if you can
actually risk $105 or only $95. In the long-run, it won't matter too much.
Once you are creating a good income for yourself, and you are happy with your account
size (withdrawing profits over that amount) then it is quite likely you will trade the same
position all the time, and it will rarely change.
Final Word on Risk in Binary Options Trading
First, establish the percentage of your trading capital you are willing to risk on a single
trade. Ideally, this should be 1% or 2%, with the absolute maximum being 5% (not
recommended). For a normal binary options trade, this dollar amount gives you your
maximum position size. For a Nadex option, also consider your maximum risk on the
trade, and then calculate how many contracts you can take to stay within your risk limit.
In the beginning, calculate your position size on every trade. It's a good skill to have. As
your account balance stabilizes—as you improve as a trader—you may opt to use the
same position size all the time, regardless of the minor fluctuations in account value from
day to day.