In Binary options trading, it is usually very hard to grasp the essence of time frames and trends. Trends and time frames are amongst the most valuable and highly significant trading strategy and every binary trader receives a recommendation to understand it thoroughly. But the primary question is…’what is a trend?’. Well, defined in simple terms, a trend is primarily a direction in which something shows development or movement (in other words, it could be termed as a growth pattern). When it comes to financial asset trading; the trends are usually measurable entities pointing towards the price direction (up or down).
Trends and Timeframes (Binary Edition)
Generally, there could be several trends operating within a specific time frame. To make sense of trends and their types we may broadly categories them into secular trends for longer duration, primary and secondary trends for shorter duration etc. Thus, making sense of trends can seem like an impossibly twisted ordeal to most and the factor of timeframes simply add up to the complexity. Something that you may be able to identify at a time frame, may not be that obvious in another one.
Trend analysis is focusing on the precise direction of market and predicts the probability of an upcoming market trend. So, in this guide we are discussing all about timeframes and trends to help binary traders make sense of these overly confusing concepts.
Getting to know the Secular Trends:
These are among the strongest and primary trends for binary traders to get familiar with. The beauty of secular trend is that it reflects the prevailing economic circumstances and may last anywhere from 7 to 15 years.
To grasp the concept of secular trends, we must also discuss types of markets that are available to you; i.e. secular bear and bull markets. In secular bear market you would see a downward-sideways trend for a time period that is measured to be in years. While a secular bull market shows the market trends to move in upward direction for a period of years. Moreover, in secular bull markets one of the likeliest things is to see the bear markets (the short-term ones) returning to bull markets, instead of turning into drastically major corrections. A similar shift of trend would happen for secular bear market but in reverse direction. If you are interested in observing such trends, you would consult a trend chart of ten years or more; you may make use of the monthly closing to add a focal point to the chart.
Long Term or Primary Trends:
In a secular market, the price movement that happens to be the largest measurable amount is always a primary trend and it often lasts anywhere from 3 to a period of 5 years (depending on the overall trend strength). Often, you might come across a pattern where within a secular market, you would see quite a few primary trends that may end up with a final bull trend that may break the secular bear market top range. However, it is only an example scenario and the trend patterns could emerge any other way as well.
This is the type of analysis many binary options software and signal providers utilize in their systems.
One of the key points to note in a secular bear market is that the bear-market primary trends are a lot stronger and stays for long, in comparison to that of bull market primary trends (and vice versa for bull markets).
Short Term or Secondary Trends:
Secondary trends can be observed within the primary trends and are usually ‘near-and-short-term’ dips and rallies that are powered by various events or news. These are the type of trends that holds great interest to the binary traders because they are focusing on monthly and weekly expiries.
Why Should You Conduct a Trend Analysis at all?
Well, as a binary trader we all are primed to think critically and question every other strategy and technique in order to sift through the unwanted techniques in the market. When someone brings up an elaborate and exhaustive trend analysis, it is very natural to be quizzical about it because trend analysis is a dedicated and time-consuming process. So, let’s discuss why is it so significant for binary traders to conduct a trend analysis and set their goals accordingly.
One of the most important reasons to go for trend analysis is to facilitate the understanding about why a certain trade opportunity would be more profitable than another. In case the market is showing a lower trend in the primary trend segment, then, it is more likely for a bearish play on the secondary trend pattern to work (as opposed to a bullish one). Similarly, in case of a signal in a secondary trend that offers confirmation for the primary trend, there’s a greater profitability chance than attending to a secondary signal that is basically counter to a primary one.
A key strategy to enjoy a thriving trade business is to have ample time frame options. Most often, a secular trend is way too long to be able to hold the interest of binary traders, however, you can get started with a primary trend and move on a secondary one, then the near-term trend options. All in all, when you consider all three trends in synchronization, it improves the chances of success for a signal substantially.
With this guide you should be able to get started with tweaking around the trends in binary market with a more confident footing and holistic understanding. So, do your thing as a binary trader and do share how did it go for you! Comment below.