With-trend trading vs. Counter-trend trading for Binary Options

One of the biggest questions binary options traders ask is whether they should always trade in the direction of the dominant side of the market, or if counter- trend trading is also an alternative.

The answer is that both can be effective and this article will focus on the advantages both alternatives can have and when you should them when trading binary options instruments.

binary options trading


With-trend binary options trading

Highly effective, especially if the market has a well determined directional bias. The big advantage of this is you are putting the money where most of the market participants are also, so the probability of ending up with profits is higher. Since you are trading binary options, by going with the “flow”, you are most likely to hit a winner, as the price can end up higher when you place a call option in an uptrend, or it can end up lower, if you place a put option. Also, the time frame is very important. If the trend had been going for several days in a row, placing a longer term option can help avoid price corrections that might intervene. If you want to place a short-term binary options, placing it around strong support/resistance levels can be highly effective.

Counter-trend binary options trading

Most of the time you should be trading with trend, but as you know, the market will turn at some point in time and the trend will reverse. Counter-trend trading is very effective when you spot that the market is very likely to reverse or, if you spot a strong support/resistance area in front of the trend, where the counter-trend players might see an opportunity to get in.

Also, news trading, when it comes to headlines that don’t support the overall trend in the market, could represent another opportunity for counter-trend binary options trading.

Risk Warning and Disclaimer

Trading binary options on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in binary options you should carefully consider your investment objectives, level of experience, and risk appetite. No information or opinion contained on this site should be taken as a solicitation or offer to buy or sell any currency, equity or other financial instruments or services. Past performance is no indication or guarantee of future performance.

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