5 Minute Strategy.
A price retracement is a temporary reversal in the direction of an assets price that goes against the prevailing longer-term trend. The retracement does not signify a change in the larger trend but rather is a short term dip (and reversal) in price. A 5 Minute binary options trader can successfully trade price retracements for profit using trading tools such as Fibonacci Retracement patterns for price confirmation.
Fibonacci Retracement.
Used to determine support and resistance levels, Fibonacci Retracement is a very popular tool used among technical traders and is based on the key numbers identified by mathematician Leonardo Fibonacci in the 13th century. Most successful in identify potential price retracement points, Fibonacci Retracement levels are created by drawing a trend-line between two extreme points (swing high and low) and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.
Fibonacci Retracement Levels.
A 5 Minute binary option traders must determine Fibonacci Retracement levels to identify high probability trade opportunities.
To do this, when price is trending upward or downward, longer term swing high and swing low data points are identified on the price chart as well as Fibonacci points 0.382, 0.500, and 0.618. These numbers represent how far price could retrace in percentage terms.
That is, after a significant rise (or fall) in an assets price, prices usually go back (retrace) to their previous levels. It is during this return movement that prices often meet support and resistance levels at Fibonacci retracement levels (or close to them).
On the upside, when the price breaks through a resistance level, this resistance level then becomes a support level. Conversely, on the downside, when price falls below a support, this support levels then becomes a resistance level.
Fibonacci Retracement Trading Signals.
For 5 Minute binary options traders, Fibonacci Retracement support and resistance levels can be used for determining buy and sell points.
A trader will typically place a buy (call) trade on a retracement at a Fibonacci support level when the market is trending upwards, sell (put) on a retracement at a Fibonacci resistance level when the market is trending downwards.
Reversal Pin Bars Confirmation.
Pin Bars are considered a very reliable reversal candle pattern and when combined with the Fibonacci Retracement tool, assists 5 Minute traders with identifying high probability trade opportunities.
For a clear Call or Put trading signal, binary options traders should await a bullish (or bearish) reversal pin bar registered in close proximity of a key Fibonacci Retracement level such as 61.8%. The larger wick and/or candle body confirms a price reversal, with price excepted to continue in the direction of the previous (or prevailing) trend.
A 5 Minute expiry Call (or Put) trade placed at the bar following the reversal pin bar signals a high probability opportunity for profit.
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