Fibonacci in Binary Options Trading
Fibonacci and Binary Options is for the advanced trader
The Fibonacci retracement tool is one of the lesser used technical indicators in market analysis, but still forms one of the best and most accurate strategies to accurately predict where prices are heading to.
Retracements are a regular part of trading. They happen all the time which means a trader needs to know how to use retracements to their advantage. This is where the Fibonacci retracement tool comes into play. The tool plots 5 horizontal lines on the charts which relate to 5 possible areas in which the price might retrace. The distances are expressed in terms of the percentage of the original move:
The Fibonacci sequence is essentially made up of a series of numbers where the 3rd number is the sum of the two numbers preceding it. An example is 0, 1, 1, 2, 3, 5, 8, 13, 21, and so on. It can be seen from the five levels above, the 23.6% and 38.2% levels are combined to provide the 61.8% standard. Once the charting tool is used with a pricing movement, these ratios stay true over any timeframe, providing high probability indicators into the areas where future levels of support and resistance might occur.
Once the price of the asset starts to indicate settling down, it is possible to see these as the levels where the prices will begin to show signs of stability.
Fibonacci retracements are at its best once the trader considers the trends in the market for an elongated time period. This might be difficult for the options with shorter times of expiry, but binary options trading now can involve month long options offered by many platforms.
Fibonacci ratios have proven to be a very useful tool for assessing the barrier points in binary options. However, as with any other indicator system, they are not flawless despite being more accurate than others. They can be an indicator to where traders are probably to act, but as with most forms of investment extra verification from other indicators would provide a more accurate guide to the interpretation of price action and increase the ability to correctly forecast future price directions. There are a number of varieties of free charting packages which will provide this information just a couple of clicks of the mouse away.
Overall, using Fibonacci in binary options is suitable ideally only when looking at the shorter term and is not best used for the longer term. They can be one of the most accurate and popular strategies to assist the trader in the shorter term where asset prices are moving towards.
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