Stochastic is a well-known indicator that works well in forecasting price movement for binary options trades. In this strategy it is used in the process of technical analysis for the purpose of identifying a price trend. Trends are among the best types of price movement, as they provide the clearest view of upcoming price direction. Although asset prices can be quite volatile at times, other times they are going to move in a single direction for a period of time.
Price trends include both upward and downward price movement. At times the price of an asset will start to rise or fall quickly. Other times the change is more gradual. Fast movement, or spikes, typically do not allow a lot of time for trading. This type of price action is usually short-lived because it causes the price to reach an area of resistance rather quickly. Slower movement will allow more time to execute a number of trades in accordance with the current direction.
This binary options strategy can be put to use within the live trading platform. Included are two different methods which may be used to verify a price trend. Both methods should be used to increase the accuracy of your technical analysis. The first method is visual confirmation, the second uses stochastic along with various time-frames to assess the upcoming price movement.
Visual Verification of the Trend
Visual verification consists of simply pinpointing the trend via the use of a basic price chart. Most brokers provide this type of chart, and it should include the ability to see past price movement for various time-frames. Basic charts show just a single line that moves up and down along with the action price movement. This makes it extremely easy to see exactly how high or low the value of your selected asset has gone for a specified period of time.
Additionally, you can use trend lines for visual confirmation. These lines connect successive highs and lows inside a chart. A series of high peaks typically points to an upward moving trend, a series of lows typically points to a downward moving trend. Whenever neither of these types of movement are noted, the price is said to be range-bound and not trending. The Stochastic indicator will show you all of this, but note that it is less reliable under ranging conditions.
Stochastic Verification of the Trend
Stochastic only provides an entry point when the price shows a number of high or low peaks in succession. High peaks point to “Call” opportunities, while low peaks point to “Put” opportunities. Whenever stochastic validates the trend, you’ll enter the market once stochastic is aimed in the same direction as the current price movement. If you have visual confirmation and stochastic is providing confirmation as well, enter into a trade when the stochastic generates a new trough and points up or down.
There will be times when the prevailing trend is extremely clear, resulting in little need for in-depth analysis. Even so, it is wise to still analyze the movement so as to determine just how long the trend may last. Using short-term trades such as 60 Seconds, you may be able to execute a number of profitable binary options trades within a short time-frame.