Binary Options Fibonacci Strategy
The retracement tool is probably the least understood, especially among the new traders. They hardly realize about the importance of having this tool by their side in order to take their trading to the next level. Retracements are one of the most prominent elements of any uptrend; therefore developing a trading strategy around this phenomenon can be a wise decision to take.
Percentage Retracements: A Brief Understanding
They are some essential tools that are especially made for swing traders, helping to decide how far the correction will go. You might know that market creates trends and it never goes in a straight line. And as for the trends, they keep on taking zigzag routes while building higher highs alongside higher lows during uptrend and the opposite in downtrends.
Precisely, the market is in continuous movement, fluctuating between high and low. And the movement against the usual trend is known as the correction (retracement). Since the swing traders try every possible ways to benefit from the single movement, regardless of the high or low, they have to be capable of predicting the future movement of the retracement. This will help them to determine whether the touch option will be a good investment in the present environment or not or should they still consider investing in the retracement or wait till the trend returns to the main direction.
Percentage Retracement Occurrence
To go by the past, the correction is likely to move one third, or say half the distance of the existing movement. Well, the exact percentage value that the traders use for estimating the retracement’s size varies. Where some traders use 50% to 60%, the others have faith in Fibonacci retracement, which is a series of number developed by the famous Leonardo Fibonacci. In here, every number is the total of two preceding number. For example, 0, 1, 2, 3, 5, 8, 13, so on and so forth.
The traders use these numbers for calculating the movement’s distance. The majority of the good charting software like Meta Trader can get percentage retracements to the traders’ chart automatically, whereby saving them from calculating in pen and paper.
Trading Percentage Retracements
When trying to build an automated system for trading, you should make a decision on the values to be used. Essentially, you need to understand that correction in a trend never ends at a particular percentage value. Instead, this ends at a point near a percentage value. So, in that case the trader will have to use a wide range of percentages, like 33% to 38%.
Being a regular binary option trader one should not let the discussion on various percentage values confuse oneself. It’s better to go by the one third, two third, or a half, indication. If you are thinking of investing in high or low options, use percentage retracements in order to search for an indication of the impending conversion in the price direction close to the price levels. On the other hand, if you are investing in the touch options, use percentage retracements as the determining the distance a correction would move.
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