Binary options customer support and resistance
To become a successful trader, you have to consider these two parameters in the decision-making procedures; hence they have to be included in trading options too.
A resistance level is generated when prices fail to rise beyond a certain price level for at least twice. By this, it means the prices cannot increase further unless the buyers change their opinion. The more the asset tries to pass through the resistance level, the more valid it becomes. Support is a price level below which an asset or a currency pair fails to fall. So, in a way Support is the floor and Resistance is the ceiling and the area between the two is the room.
Both the parameters will move between these two levels unless a breakeven is reached in any one of the directions. Support and Resistance offer the traders numerous clues about how to trade in the market and ways to survive losses.
Being one of the most popular technical analyses, it is very simple to comprehend. The rationale behind the Support theory is that as the price becomes closer and closer to Support, it becomes cheaper and cheaper. Now, from the point of view of sellers, the deal becomes less and less lucrative as the price has fallen so much. Sellers will find that the deal is of no use, thus forcing buyers to outdo sellers and this scenario will prevent the price from falling below the Support. Situations may arise where the price may go below Support and sellers can overcome buyers.
This kind of behavior will reveal that inclination towards selling is more than buying. As the name implies, in this case, we will buy an option hoping that the price will not break the level and will unfold. Many traders buy binary options strictly at important price levels.
Such trading approach is wrong, because technical analysis is not exact science, and it is impossible to identify the specific price level up to a point. Therefore, it is necessary to wait for confirmation of a rebound from the level in the form of completely closed candle below important price level.
It would be better if this candle has a long body. We see on the chart, the price is touching the red resistance level and a bullish candle with a long body closes directly at this level. Is it a signal for Put option deal? No, because there is no evidence of level breakout, nor rebound. We are still waiting for the next hourly candle closing. Then we see that the next bullish candle also does not give us a clear signal.
It is only after another hour, when we see that the market determines the direction bearish candle with a long body. At the close of that candle, traders should buy a Put option with expiration time of hours. Unfortunately, support and resistance levels do not always become an insurmountable obstacle for the price. Very often a breakdown of these levels occurs. Rules for trading at the breakdown level are similar to that on the rebound, but in this case we are waiting for the signal candle to close above the resistance level.