Binary options bull and bear
Moments later the breakout has failed and you find yourself in a trade that is rapidly accelerating in the opposite direction. Welcome to bull traps and bear traps; terms used to describe an event where traders are trapped into thinking one thing is about to happen, only to have a bait-and-switched pulled on them. Bear and bull traps occur in all markets and on all time frames. I see them when I day trade futures and I see them in the forex market. When London opens in the forex market it is very common to see a bull or bear trap.
Typically there is low volatility overnight, and when London opens the price moves outside that range on one side or the other only to move back the other way shortly after. Traders looking at the overnight session may view this as a breakout, and it may be, but it also could be a trap.
The overnight range is marked with horizontal lines, showing the overnight high and low. As London opens highlighted in yellow the price just edges above the overnight high.
Since buying on new highs is a common strategy not one I endorse it is likely many traders get caught by this type of price move—buying on the new high only to have it quickly move back the other way. The price then finally settles into a downtrend. There are several ways to deal with traps. Before getting into them though it is important to point out that bear and bull traps are quite common. The first option is to do nothing. If you have a winning trading plan, losing trades happen.
When most asset prices are falling, PUT options tend to be a better choice. To describe which dominant trend is in place, the trading community will usually use term like Bull Market or Bear Market but it is much less common to see a discussion which characteristics actually make up these economic environments.
Here, we will look at the differences between Bull and Bear Markets so that traders can more easily identify the dominant trend in a market and to place binary options trades accordingly. Bull Markets are typically characterized by a financial environment that is composed of a large number of assets that are increasing in value, or are expected to increase in value. In many cases, the term refers to the stock markets but for those in the trading community, the term is applicable for all asset types.
Bull Markets are created by generally optimistic sentiment, rising consumer confidence and the wider expectation that companies will successfully generate profits. Your capital is at risk. One clear indication of the existence of a Bull Market can be seen in the price of commodities , in the changes in valuation of a national currency, and in the overall performance of the major stock indices.
When looking at price activity in all of these various asset classes , it becomes clear that price swings show higher highs and higher lows the definition of an uptrend. When all of these factors are seen in combination with one another, a Bull Market is in place and CALL options will generally be viewed as favorable when entering into trades.
Psychology and news headlines in the financial media are also instrumental in these cases, as positive momentum tends to be contagious. On the flip side of this is the Bear Market, which is typically characterized by a financial environment what a majority of trading assets are decreasing in value , or are expected to decrease in value. Again, this term can be applied to all asset classes and Bear Markets are typically created by pessimistic sentiment, declining consumer confidence and the general expectation that companies will perform weakly in terms of profit generation.