This binary options strategy is designed to allow you to take advantage of sharp short-term price changes that can occur within the markets. These spikes can be upward or downward, and tend to be very short-lived. Once such movement has occurred, a price correction will at some point take place, allowing those who are prepared to take fast action to generate profits from these movements.
The fundamentals of this strategy are simple – watch for sharp increases or decreases, and when then enter into a trade that goes against the direction of movement. For example, should the price of the selected asset climb quickly, a Put option could be purchased based upon the prediction that the price will stop climbing and pull back as part of a correction. The opposite would apply for downward movement, with a Call option being the correct selection.
Knowing when to look for corrections can certainly help. Market news can be helpful, but so too can knowing how markets typically move at certain times of day. An excellent example here would be the hour just after a market opens for trading. This hour tends to be one of the most active hours of the day in terms of trade volume. Price surges or drops are more likely to occur during this hour than any other time of the day. Monitor price movement during this time-frame and you’ll see this to be true more often than not.
Trading binary options with price corrections offers a lower level of risk due to the fact that once a correction begins to take place, the price rarely changes direction unexpectedly. This is due to the fact that there is typically no immediate support or resistance to change the movement. While a correction is taking place, it may be possible to enter into several profitable trades. This is especially true then short-term expiry times of one to five minutes are being selected.
Key support and resistance lines can be used to provide additional information. Ideally, the asset price would be higher than the point of resistance, yet lower than the level of support. When the price remains between the two, it is considered more likely to retrace back to its average level. When viewing candlesticks in a technical chart, wait for a candle to appear that verifies that the price is moving in the expected direction before trading. If either support or resistance is exceeded, the price should still reverse at some point, so watch for this to occur.
Price correction strategies have been used by traders for many years now. Although sudden, large price changes are not extremely common, they do occur. For those who learn how to identify this type of movement as it is occurring, a success rate of up to 80% or more is not out of the question. With such a huge potential for having trades finish in the money, this is one binary options strategy that should be in the toolbox of every trader.