Support and Resistance Levels in Binary Options Trading

Support and resistance levels are the key price levels, on which buyers or sellers enter the market in such amount that is enough to stop or reverse the price movement. Binary options traders use these levels to find the most favorable moment to enter the market as once the price interacts with the support or resistance level we can predict with the high probability where the price will go then (depending on what the interaction was).

How to trade binary options according to Resistance level?

Resistance Level

On the graph you can see that the price is reaching sort of ceiling several times. It reaches the point where the price movement stops and the price (or the trend if you will) reverses. Once you see that price has bounced from one certain level several times (at least 3) you can call it a resistance level.

resistance level

Once the price reaches resistance level it can either bounce back from it or break through it. You need to closely watch the candle that interacts with the resistance level and check what happens when the candle closes.

  • If only the shadow of the candle broke through the resistance level, but the body of the candle remained under the level, you need to buy a PUT option as the price bounced from the resistance level.
  • If the candle closed with its body (not shadow) above the level, it means there was a break of the resistance level and the price will grow further to set a new resistance level, so you should buy CALL option.

Support Level

When price goes down at some point it hits the bottom. At this point the buyers start to dominate the market and sellers slowly fade away. When this happens several times at the same level we can draw a support level and then closely monitor the next interactions of the price with it.

support level in trading

  • Buy CALL option if the price bounced from the support level as it means that the price tested the level and couldn’t break it. The price will stop falling and start growing.
  • Buy PUT option if you see that the price broke the support level (important to see that the body of the candle is outside the support level, not only its shadow).

Last Thing You Need to Know About Support and Resistance Levels

The more times the price bounces from support or resistance level, the more secure it becomes. If you see that the price only bounced from the same level 2 times it is a newly formed support/resistance level which will be tested by the price in future and is yet not strong enough to give you a reliable and secure signal. But if you see that the price tested the support or resistance level 3-5 times and each time the level remained, it makes it very secure and you can rely on the signals that you get from the price interactions with it.

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