Binary Options: Understanding Market Sentiment in a Bearish Trading Enviroment
Binary Options: Understanding Market Sentiment in a Bearish Trading EnviromentApril 9, 2013
Sometimes even the most skilled binary options traders can misinterpret market sentiment and make decisions based on bull trap formations and misleading entry signals. This happens to all of us, but its important to have a reversal strategy to fall back on if you see a bearish Harami Cross on the candle stick charts.
So, of course if you crunch the figures, run your pivot tables on the stock, and see a pattern on the distribution you would naturally attempt to correlate the historical patterns with the candle stick formation and attempt to engage in predictive modeling.
Now, in binary options you can invest in stock, forex (currency pairs), indices, and commodities. This is the usual spiel, now the interesting part is that each trading platform differs in the trading features it offers, as well as the bonuses and incentives it provides. For example, 24Option is a relative new comer to 60 second options, but TradeRush has had this feature since they started operations and are considered to be one of the leading Spotoption-powered platforms.
Remember, a well thought out strategy doesn’t just involve understanding market sentiment by trading the news and following financial events, it has to factor in a plethora of parameters and somehow try allocate influence or “weight” to the call or put options (see below).
Bearish Trading Scenario #1:
* Put (Low) Option on APPL Stock at 24Option
* Return: 75%
Bonus Rules: Initial deposit must be traded 40 X before cashing out winning trades
Upon purchase, 50% of the original deposit will be credited to your account up to $2,500.
Apple Market Sentiment: Due to Brazil importance as an emerging market,and the recent Brazilian government announcement barring Apple from distributing iPhones, and/or iPads under those names, perceived sentiment is that the stock will be devalued.
Candlestick Analysis: Bull trap formation indicating a false buy signal is clearly evident due to rumors concerning a possible deal which stands to make millions for stock holders.
Historical Data and Comparative Analysis: Historically APPL has shown a decline in sales during this specific week due to a review that comes out around that time, and people are waiting to hear news and updates about new products.
Decision: Based on the information at hand, I would proceed to the cashier section of the software and purchase $5,000 to receive a $2,500 bonus.
Secondly, I would continue and select the High/Low tab and start buying APPL put options on a 24 hour trade.
My reversal strategy would include two possible options: The first is a very aggressive put option on Fiat Stock, or alternatively a complete shift to Forex EUR/USD based on different modeling tactics.
Word to the wise: I would not recommend anyone new to binary options touch the 60 second options tab as I consider it to be very high risk and a pure form of financial betting (it’s also extremely addictive).
To summarize, profiting from binary options trading in a bearish market involves in-depth research and comparative analysis. Your ability to make split-second decisions and ease-of-access to the best trading software which easily presents the information in a legible and easy-to-decipher way, will make all the difference between your contract expiring in the money or alternatively your loss.
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