One of the concepts used by many traders worldwide, including those trading on Binomo, is price action. It’s simply a trading concept whereby one makes an analysis of the market on simple price movements and doesn’t rely too much on technical indicators. In other words, price action will teach you to “read” price movements directly from the chart, understand what patterns form, and use this information for trading.
One of the tools that will definitely be very useful in trading on Binomo is price action. This is because Binomo is a platform for traders to open and close positions quickly, so the ability to read price movements quickly can give a huge advantage.
By the price action, we literally mean how price reacts to certain levels on the chart. For example, say we have support and resistance levels on the price chart. Support is that level by which the price tends to stop falling and start rising again. Resistance is the extent at which the charge has a tendency to prevent growing and begin falling. This will help us make predictions as to what might happen next by understanding how price reacts while approaching these levels.
For instance, if we notice that it’s approaching a support level many times and that the price often bounces off this level, we can probably assume this support level is strong. So, the next time the price comes near this level of support, we can already open a buy position in anticipation of the price again bouncing upwards from this level. On the contrary, if price levels reach close to a resistance level and we see that, after contacting this level, the price keeps falling, we may think about opening a sell position.
However, price action is not just about support and resistance. There are many other price patterns that can be used to make trading decisions. One popular pattern is candlestick patterns, which are patterns formed by the arrangement of candlesticks on a chart. Candlesticks themselves are a representation of the closing price, opening price, and highest and lowest prices in a certain period of time. Candlestick patterns such as doji, engulfing, and hammer are often used by traders to identify potential trend reversals or continuations.
For example, a hammer pattern is a candlestick with a small body and a long shadow below it. This pattern usually appears after a downtrend and is considered a bullish reversal signal. When we see a hammer pattern near a support level, this can be additional confirmation that the price may reverse upwards. Likewise, the engulfing pattern, where a candlestick covers the entire body of the previous candlestick, can also be a strong indication of the direction of the next price movement.
Price action also teaches us to pay attention to trading volume. Although Binomo focuses more on price movement than volume, volume can still be an important indicator in price action. High volume on a particular price movement can be a confirmation that the movement is supported by significant market forces, making it more likely to continue.
In addition to candlestick patterns and volume, price action also involves concepts such as trends and channels. A trend is the general direction of price movement over a period of time, whether it is up (bullish), down (bearish), or sideways (sideways). Price action traders will always look for strong trends and try to trade in line with them. This is because trading by following trends generally has a higher chance of success than trying to fight the trend.
For example, in an uptrend, we will look for opportunities to buy near support levels or during pullbacks (when prices experience a temporary decline in an uptrend). Conversely, in a downtrend, we will look for opportunities to sell near resistance levels or during retracements (temporary increases in a downtrend). Thus, price action helps us to “go with the flow” rather than against it.
In addition, price action also encourages us to pay attention to how prices react to news or economic data. Sometimes, price movements can be very volatile after important news releases. By understanding price action, we can be better prepared for such volatility and may be able to use it to our advantage.
In practice on Binomo, price action can be a very useful tool for making better trading decisions. By studying price patterns and how prices react to certain levels, we can gain deeper insight into market movements. It’s not just about guessing, but about understanding how the market works and using this information to make smarter decisions. While price action can be very effective, it’s important to remember that there is no perfect method in trading. Price action is a tool that should be used in conjunction with good risk management and a clear understanding of the market. With this combination, we can increase our chances of success in trading on Binomo.