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Basics of binary options: market maker traps

Basics of binary options: market maker traps

How many times have you thought that you were completely sure of a trend change, and then bit your elbows, watching a completely opposite reversal? How many times since then have you reviewed the ideas of how to make money on binary option? But it's not your fault.  The whole problem is in the traps that market makers set for us to activate their own pending orders or knock out your expirations. Today we will briefly look at how to identify the trap, what they are and how to try to make money on them. Let's start with the definition.

A “trap” is a moment when large players try to convince the bulk of small market participants of the correctness of a false move.

Looking for traps

Let's look at the picture below and answer the question, where is the opportunity for top binary options signals?  There are Price Action patterns behind which not a reversal begins, but pullbacks and corrections. Only when market makers closed their pending orders did they start making uptrend and downtrend.

Breakdowns of levels are very noticeable, but if they do not occur during the release of important fundamental news and occur without preliminary testing and trading binary signals, you need to look at their presence on other timeframes.

We look at the Pin-Bar on the daily chart of the GBP/USD pair. Let's move on to a smaller time frame for a more detailed analysis - a pin bar is also observed on H4 and H1.

Changing the timeframe to a smaller M30, we see that there is no pin-bar here, and in fact, in this place, market makers were deceiving. The chart shows regular candles that break through the round price level and then the market starts to reverse.

On high timeframes, where a large pin bar is visible with a clear bounce from the level, experienced traders would not open options in the direction of the breakout. But on M30, the situation is no longer so clear - an attempt to break outlasts several candles (which is itself a clear sign of a possible trap), and after a breakout to open a PUT option, everything looks perfect. Newbies usually end up in spreading nets, so be careful with auto binary signals!

The main types of traps

We can say that most traps are nothing more than false breakouts of strong price levels and support / resistance lines. The first of these will be the classic «Double Bottom/Double Top» chart pattern.

Many who started looking for and working out a double top or bottom noticed that the second top is almost always slightly higher than the first, and the second bottom, on the contrary, is slightly lower, although the original interpretation of the pattern assumes a second top below the first, indicating a slowdown in market movement. But in fact, it is at the first top that the bulk of small options are located, which market makers “select” in their binary option strategy to increase overall liquidity and turn the market around.