We have at our disposal numerous tools and strategies while trading binary options. Triangle strategy is one of them. Such technical strategies can help us in maximizing our profit. The triangle strategy makes use of triangle chart patterns to make plans to trade myriad binary options contracts available on several trading platforms. In order to do it one should be correctly able to identify and trace the patterns. Let’s dig more details about them.
There are three triangle patterns identified in the market.
The above mentioned patterns form sides of triangle that usually converge. The triangle patterns are not just restricted to such fashion. Elliot wave patterns of system and analysis have also discovered diverging trend line patterns, producing similar signals. This formation is known in technical terms as broadening triangle.
The question comes, how to identify a triangle? The first step is to draw the trend lines that form the sides of the triangle. A proper trend line is the one that connects the highs and lows of at least three candlesticks. This is what will comprise the upper and lower border of the triangle. This border converges in the first three types of triangles mentioned and will diverge from the apex in the broadening ones. You can do this process manually or apply software tools to do it. Tools such as AutoChartist Chart Pattern Recognition, identifies these patterns automatically. You can also use its web based version then head over to your chart to do it manually. The following contracts are available to be used with triangle patterns.
- Direction based contracts like UP/DOWN , RISE/FALL.
- Touch/No Touch options.
Now let’s talk about the types of triangles.
Symmetrical: This one contains two slope lines which point towards each other symmetrically. In a symmetrical triangle there are two possible outcomes, an upside or downside break of the price action. Outcome is unpredictable till the price action is within the boundaries of the triangle. One has to wait till the price action goes out of either one of the boundaries. Once that happens, set the direction of trade in the direction of break.
Ascending: In this triangle an upward slope is formed by two lines, one horizontal upper trend line and other, the lower trend line. Its bias remains up because of the chances of price action to break out of the upper boundary. There is an assured outcome here and one should go for CALL option choosing an area that lies above the upper trend line, as do the strike price does.
Broadening: In this the slope lines diverge from each other. The same thing goes with this type of triangle. You have to wait for the price action to break through one of the boundaries and then set the trade in that direction. You can also see that area where your strike price must be located.
Descending: It forms a downward slope using horizontal lower and an upper trend line. The upper trend line converges here in a downward slope. One can expect the price action to break the lower boundary.
Expiry Time Setting
You can use the time frames to determine your expiry times. To allow for enough time, so that the trade moves in a particular direction, you can allow at least two or more candlesticks in length for CALL/PUT trades, which is approximately 8 hours. For TOUCH option, at least six candle sticks, this is 48 hours. Modification must be based on the type of chart used by you in the trade analysis.