7 binary options binary options trading based on volumes
The OBV has the great advantage of being based on a simple calculation. Some technical indicators are so complicated that many traders lose sight of what the indicator does and how they should interpret its results. The OBV keeps things simple, which minimizes the risk of failure and maximizes usability. The OBV can help you understand whether more traders are currently buying or selling an asset. This indication is important because the volume of a period can tell you a lot about where the market will go.
Every period creates a prediction. For example, candlestick analysis defines hundreds of unique periods and their implications for future market movements. Even without knowledge of candlestick analysis, you can draw predictions from candlesticks. Candlesticks always predict that the movement could carry over into the next period, too. Of course, these predictions are highly unreliable. The market often changes direction after a candlestick, and simply predicting that the next period will look like the previous one is an inefficient strategy.
The volume can help you understand whether a period is important or unimportant. Periods with a high volume are more important for predicting future market movements than periods with a low volume. The OBV takes this assumption, analyzes a number of periods with it, and creates an aggregated result of whether rising or falling periods have the greater volume.
This assumption can tell you a lot of things about whar traders think. With a strategy that trades moving average crossovers, for example, you would only trade upwards crossovers when the OBV is above 0, and only downwards crossovers when the OBV is below 0.
When the OBV crosses the zero line, the market must have changed direction. Traders were bullish and now became bearish, or the other way around. Now would be a good time to invest in the new direction. The next period does not necessarily have to point in the direction of the indication, which is why you should use a medium expiry of at least five periods. In a minute chart, for example, you should use at least an expiry of 50 minutes, if available, or one hour.
You can also trade this strategy with one touch options. Since this options type requires a strong movement, you should add a momentum indicator to your strategy that helps you predict the range of the movement. Based on the OBV alone, this strategy would be too risky. Sometimes, the OBV will show a sudden surge or fall. These quick, strong movements are often the result of fundamental changes in market opinion, which is why they can alert you to great trading opportunities.
For the OBV to significantly accelerate its current movement or change direction, there has to be a sudden surge in volume. When many traders are suddenly entering the market, there must be something going on.
The effects of this momentum shift are highly likely to carry over to the next periods. The sudden movement tells you that something is going on, its direction tells you in which direction to invest. The first step is to locate an hourly chart which shows your specific asset.
You will then be able to see the candles on the chart, showing the highs and lows of the asset. The last candle for a bear and bull market should be looked at more closely. You will need to calculate the average for the peaks and the troughs of the asset. Once you have completed this draw a horizontal line through the lows of your candle and the highs of your candle. You will then have created your boundaries, the majority of assets will not move outside of these lines.
If the asset you are looking at is very close to one of the boundary lines you should consider placing a trade which is the opposite of the current trend.
Alternatively, if it currently near the middle but moving in one direction you could place a trade with the asset movement. Volume is an important technique to confirm the way you are reading the chart and your gut instinct. If there is a large amount of movement on the market then many traders have picked up n the upward or downward trend of an asset and are attempting to make a good return trading its trend.
By combining the volume with the highs and lows on the average price candle you should be able to predict the turning point. You can then place a trade which goes against the majority movement in the market and you should see a correspondingly high return as your trade seems more risky than going with the market. It is vital to consider your trade carefully before placing it; if the volume movement is high; and you have calculated the highs and lows correctly, then timing is crucial.
You need to trade just before it peaks and reverses; this will allow you to make the maximum possible return, and, provide a great sense of satisfaction! Subscribe To Trading Secrets. Tunneling Binary Options Trading: