In order to trade binary options with any degree of success, traders will need to be able to make use of various technical indicators and tools. Fibonacci is indeed one of these. Fibonacci percentages and lines do an excellent job of telling traders what to expect from asset price movement. Beginner level traders are advised to learn how to use this analysis tool as soon as the basics of trading have been mastered. There are other analysis tools to learn how to use as well, but Fibonacci is among the most important.
In traditional and Forex trading, stop losses and limits and often put in place based upon near Fibonacci line placement. When trading binary options, these lines can tell you whether to select Put or Call, based upon the anticipated direction of price movement. Fibonacci does not actually forecast the upcoming price movement, but can help you do so by pinpoints the key areas in which resistance and support are. When an asset price nears these levels, a reversal in the direction of price movement becomes very likely.
As markets move and work to maintain some type of balance, asset prices tend to move within Fibonacci ratios. Although short-term trades are not the best option for this type of technical analysis, it is possible to use 4-hour charts, and longer options such as one day and one week. These longer time-frames will provide more reliable views of not only the speed of price movement, but also how the price is moving within the key levels.
When viewing a suitable price chart such as MetaTrader, it will be easily to insert Fibonacci lines with very little effort required on your part. Typically, one click is all that is required to get the job done. Once these lines are in place, the next step will be to identify exactly where the asset price is located in regard to where the major Fibonacci ratios are. Should you have a specific entry price or level in mind, you should easily be able to see which Fibonacci line that price is closest to.
The benefits to this type of analysis are quite clear. The connection between a strike price and a Fibonacci line can confirm whether or not that particular price is actually the best level at which to enter the market. Additional confirmation can come from identifying both the highest and lowest prices for the specified time period within the chart. The Fibonacci lines will connect these highs and lows, and in doing so, produce the Fibonacci ratios that can provide further validation.
A Fibonacci line may assist in locating a prime entry point whenever the market price has recently moved higher than a 61.8%. Excellent Call option opportunities are often revealed when the strike price is positioned just beneath the Fibonacci line. In addition to 61.8%, 38.2% and 50% are also key levels to look at. These are common levels that the asset price could very well retrace back to. However, other retracement levels may also work well.
The ability to recognize price patterns is one that all who trade binary options need to have. It will be these patterns that help you to accurately forecasts movements within the market. Technical indicators are powerful tools, but can present challenges to those who are new to trading. Having said that, Fibonacci is not extremely complex, and once mastered can certainly help you to maximize your earnings.