As mentioned in the first part, building levels is a creative process, and each trader sees their own path on the same chart. But there are also standard methods of how to make money on binary options that can be used to determine support/resistance, which give a stable profit on any trading asset. The most popular are the following:
The calculation is made to the maximum/minimum and the opening/closing of the previous period. As practice shows, the price in the Pivot zone makes sharp fluctuations, and the trend can completely turn around. Three calculation algorithms are used:
During the trading day, the price may cross the Pivot Point several times and it is far from certain that this will be the beginning of a new trend. You need to look at the coincidence with the levels of the higher timeframes, data from technical indicators, real binary options signals and configure the calculation period for the characteristics of the asset.
Fibonacci correction levels
Named after the mathematician Leonardo Fibonacci who created the numerical sequence, in which the following number is the sum of the previous two, with the ratio of 1,618 to the previous value.
A breakout or rebound from Fibonacci support/resistance gives a reliable signal of continuation or reversal. The methods of use in strategies are described in detail in literature and on specialized sites, so we will not dwell on them in detail.
When trading in financial markets, the trader first analyzes where the price will go, and the question of when he will overcome the calculated levels is not so important. But the time factor is also important, especially when trading futures and binary options with a fixed maturity (expiration), which is accompanied by strong movements in the spot Forex market.
The first strategy based entirely on the time factor was Gann's theory, which predicted market movement using "price-time squares" and many related factors from the phases of the moon to the position of the constellations. Only Gunn knew how to do this, and for everyone else in the exact binary options strategy, his method was extremely difficult. Murray's mathematical levels simplify this process and allow you to trade without any extra "mysticism".
Used 8 intervals (levels), called by the author "Octave":
If the chart moves within the range of more than 10-12 bars, look for an opportunity to open the opposite position, otherwise we add to the trend.
Examples of binary signals software strategies with support/resistance levels:
Using support and resistance levels in binary options
The main task and at the same time difficulty of any strategy that works from price levels is to determine the truth of breakdown of "equilibrium point". When the breakout does occur, the price will start a new or continue current movement with a low probability of returning to previous values. In the opposite situation, when chart deviates from level, you can enter a correction or stay out of the market, expecting a strong movement.
If the price makes several false breakouts (retests), this means that level is really significant and the market needs to make significant efforts to overcome it. And as always, the rule works: larger timeframe, more reliable signal.
Characteristics of a "true" breakdown:
When confirming volumes, even tick volumes, we should monitor the dynamics of their changes before, during retests, and immediately after the breakdown. Without their sharp increase, support/resistance levels are not so and represent the following speculative bursts of market makers and false binary options trading signals.
Let's move on to false breakdowns. This is the exit of quotes beyond the level, followed by a rapid rollback to the original values for 2-3 candles. There is a classic “herd” instinct of small players who are trying to make money at the end of the trend or do not understand the real balance of forces without conducting an analysis in binary trading platform. Therefore, transactions end in a loss, just like for market makers.
It is after several false retests and breakouts that medium - and long-term trends are formed, and the initial support and resistance levels of Murray, Fibonacci or Pivot are formed. Experienced traders may try to open small binary options “against the crowd” for such short-term impulses.
Characteristics of false breakouts:
Let's summarize: no matter what strategies are used or auto binary signals, all traders should be able to find and use support/resistance levels correctly. They show the “hidden” mechanics of the market and provide an opportunity to make money where others receive only losses.