Welcome to this new Binary Option Club video.
This is to examine how to use support and resistance numbers. You are now a growing number of people wanting to learn more on this topic. This is why we have decided to produce this new tutorial binary options video.
We begin by explaining what these numbers correspond to, and how they can be useful to you in your binary options trade.
To make this tutorial more accessible to all, we will attempt to explain in the most basic technical terms, in order to make this concept easy to understand for those who want to begin trading binary options.
A market, no matter how stable, experiences fluctuations throughout a day of trading, whether they are upward or downward. According to its peaks, we will be able to define what are the support point and resistance point; all this to make your binary option trade as effective as possible.
Let us use the following chart as an example. If this chart represents a binary option asset, you can as of now observe that this asset is going upward. This trend is also called a “Bull Market.”
In this specific case, we see that the price drops constantly. To define the resistance points, it is sufficient to take the highest point reached just before the price begins to drop. Each upward peak represents a resistance point.
The same goes for the supports, except that this time, we take the lowest point reached before each recovery of the binary option asset upward.
We remind you that the support and resistance numbers are not exact numbers; they are rather estimations. Nevertheless, most of these estimations are often proven correct, if not to say accurate, and will therefore allow you to achieve successful binary options transactions.
You will see the price of you binary option asset surpass the support or resistance prices. You will naturally think that these prices are useless. This is why we ask you to be patient and observe attentively the next movements. You will note that the asset price has returned to the support or resistance level, and that this is only a simple reflex or false alert from the market.
These reflexes appear most often on candlestick-shaped charts as represented by the fine black line seen here.
Therefore, how does one know if the supports and resistances are reliable enough to base your binary option trading technique upon?
Many consider that the support or resistance is broken once the price of your binary option asset has surpassed it, but we will now see that this is not always the case.
Take the example of the following chart and observe what happens when the price of your binary option asset indeed surpasses the support and drops well below.
In this specific case, we see that the price did indeed fall well below your binary option asset’s support level, but that it also climbed back above it just as quickly.
If you believed that your binary option contract’s support had been broken and then decided to trade downward, or worse yet, closed your binary option contract prematurely thinking you will curb your losses, you would have committed an error.
Now examine the following chart and observe how in reality the support was not broken, but rather reinforced.
To help spot the false alerts, think of supports and resistances more as zones and not as specific numbers.
One technique that is easier than the others to define support and resistance points is to use an online chart instead of a candlestick chart, because the latter can add useless peaks and disturb your analysis.
These excessive fluctuations can be only simple reflexes of the market and have no real significance or impact on the price of your binary option asset.
When you define your support or resistance numbers, you do not want to obtain the market’s possible reflexes, but rather its real intentions and future movements.
When you examine this new chart, you want to determine your binary option asset’s lines of support and resistance, where you can distinguish the peaks, whether they are upward or downward.
Other useful tips and tactics regarding supports and resistances and how they can help you with binary options
Often, when the price surpasses the resistance price, it is possible that the resistance price can become the support price during the next upward movement.
When the market tests the support or resistance levels several times without breaking them, it strengthens them further.
When a resistance or support point is broken, the next movement’s strength depends on how the support or resistance has resisted during the different tests.
We now move on to the last part of our tutorial on Support and Resistance.
Thanks to this chart and the precious information previously learned, you will be capable of finding the support and resistance zones increasingly naturally on your own.
This concludes our video on supports and resistances. We hope this will be useful in making your binary option trading more professional than before. We recommend that you observe the charts over 15 minutes, ½ hour or one hour in order to determine the support and resistance zones of the binary option assets you will be led to trade more specifically.
You will also receive estimations of the support and resistance numbers each day by mail when you register for our newsletter.
See you again at the next binary options trading lesson to be published very soon. In the meantime, enjoy trading!
View our tutorial on How to choose between high and low with binary options.