Price reversal: open an option or not?
- VFX Blog
- For beginners
When there is a trend, you always want to be with everyone and take a trade where everyone goes. But you can do the opposite, deciding that I am the cunning one who knows how to make money on binary option when the rollback starts. Moreover, moneymakers and other big players do just that.
What does a "real" rollback look like?
A rollback or rebound in this article will be called a situation when a price reversal begins from a significant level (intraday max/min, Pivot Point, etc.) or a graphical pattern on the chart (the boundaries of trend channel, Fibonacci, the release of fundamental news).
We can say that this is the opposite of a breakout, when the market starts a strong movement, confirming top binary options signals. In our case, it is most often speculation, profit/loss fixation or unsuccessful attempt to change the balance of bulls/bears forces.
There are two scenarios for the development of the situation:
- The price will return to its original positions;
- There will be a short and narrow consolidation after which the trend will recover and there will be no rollback.
The more unsuccessful retests (at least 2-3), the more effort you need to make to break through the corresponding level. Therefore, before trading, it is recommended to find out what the correction is related to: there may be a large accumulation of pending orders of large players or other "open interest".
Examples real binary options signals rollbacks from supports/resistances levels:
Conditions for a "true" rollback:
- The rolled back candle closes far below or below the estimated level.
- Look at the size of the body: if it is greater than the average volatility of the past 5-7 periods, this adds reliability to the signal;
- If there is no reverse breakdown on the next 2-3 candles, the rollback can be considered confirmed. We warn fans of short-term options from a small expiration: a rollback is a more unstable structure than a breakout, so the transaction should last at least 4-5 candles of the working timeframe.