We watched many traders and noticed that very few of them use Fibonacci retracement tool when analyzing the market. Traders are well aware of other technical indicators like moving average or MACD, but when we asked about Fibonacci tool, they were lost.
If you know how to use retracements right, you can make it your advantage. By Using Fibonacci retracement levels you will see how far a market has retraced from some earlier move. This article will show you in details how Fibonacci binary options trading works.
What Fibonacci Tool Does?
This tool draws 5 horizontal lines on the chart that show 5 possible areas of retracement. The distance between the lines is expressed as a percentage from the initial move:
- 100% level
- 61.8% level
- 50% level
- 38.2% level
- 0% level
Retracement can be made to any of these areas.
How to make Fibonacci Binary Trading?
We recommend you to follow the next tactics if you want to do Fibonacci binary option trading using the Fibonacci retracement tool:
- Choose a highly trending financial instrument, such as Gold, EUR/USD, EUR/JPY or GBP/JPY.
- Choose a time frame that will indicate what is going on with the market and the retracement itself. Daily chart is most commonly used in such case.
- Choose “Touch” as preferred option for trading in the Touch/No Touch trade type. Then pick a point between the actual price and the 23.6% retracement level.
Fibonacci Binary Options Trading Technique
Examine your Daily chart for the EUR/USD currency pair. By choosing this chart you have already fulfilled first two conditions for such trading. On this chart you can see actual retracements and you will not confuse it with any other moves. And the second condition is that EUR/USD currency pair has a very good trend. This is also the reason why many traders choose this currency pair for trading on the FX market. It is important to start trading binary options with Fibonacci tool on the asset that has a good trend.
Now only the third condition left. This is the main condition for trading binary options using Fibonacci retracement tool. Now you need to choose the price to open the position alongside the retracement course between the current market price and 23.6% Fibonacci retracement level. To make sure everything is correct you must check that a retracement is really moving. Next you will find how you can do this.
On the left side of the chart you can see an area with the blue arrow pointing to the button “Move Fibonacci tool here”. EUR/USD had been consistently growing over the period of more than 10 candlesticks. Yet the price has reversed by the formation that is often referred to as a bearish harami. This type of a candlestick pattern is a sign that a price is going to reverse. The explanation of this point is given below:
If it occurs at the maximum of bullish point – it means that the price is about to go down. The retracement that appeared straight after this, decreased to 50% retracement level.
In fact, binary options’ trading is not that difficult. Of course, trader better be familiar with fundamental trading terms and theories, like chart patterns, candlestick, bullish and bearish points. Among many topics about %financial markets%, you should pay a special attention to candlesticks, because understanding them will make the process of defining a price much easier. But do not relax – keep exploring other useful trading tools.
So, in this article you have found out how you can start trading binary options Fibonacci method, now it is time to pick up one of the best binary options brokers and start benefiting from your knowledge. Next time Binary Options Hub will tell you about another interesting aspect of binary options trading. For now – you can go through our binary options tips section and find another helpful article.