Binary options head and shoulder patterns


Certain shapes, called graphic patterns or models, may appear every now and then on the chart. These figures are harbingers of certain trends formation in the market.

Some of these figures may indicate the continuation of the current market trends or trend. For example, if a particular tool grew up in price, this figure is only a period of uncertainty, after which there is a further upward movement. As for other similar patterns, they belong to a reversal and certainly warn the trader that the current trend is likely coming to an end.

The binary options strategy Head and Shoulders which is based on exactly the same reversal pattern, alerts the trader that the market will change soon. In other words the main market movement will change to the opposite direction. If you look closely at the figure above you can see why this chart pattern has acquired such a name. It consists of a Head — the highest point or extremum and two shoulders which are formed on the left and right sides of the Head.

Formation of the left shoulder occurs during the formation of the next uptrend extremum. After that, the price of the asset in question goes down.

Further, the upward trend continues to develop and reaches a new high the formation of the Head. After that, the price goes back toward the line of the neck and touches it. In this situation, we can say that the rule of the uptrend formation is broken, since during renewing highs, lows are not rising up, but remain at the same level. Some of these figures may indicate the continuation of the current market trends or trend.

For example, if a particular tool grew up in price, this figure is only a period of uncertainty, after which there is a further upward movement. As for other similar patterns, they belong to a reversal and certainly warn the trader that the current trend is likely coming to an end.

The binary options strategy Head and Shoulders which is based on exactly the same reversal pattern, alerts the trader that the market will change soon. In other words the main market movement will change to the opposite direction. If you look closely at the figure above you can see why this chart pattern has acquired such a name.

It consists of a Head — the highest point or extremum and two shoulders which are formed on the left and right sides of the Head. Formation of the left shoulder occurs during the formation of the next uptrend extremum. After that, the price of the asset in question goes down. Further, the upward trend continues to develop and reaches a new high the formation of the Head. After that, the price goes back toward the line of the neck and touches it.

In this situation, we can say that the rule of the uptrend formation is broken, since during renewing highs, lows are not rising up, but remain at the same level. A signal to buy a Put option appears only after the price overcomes the neckline which acts as a support level. However, some traders recommend to wait one more touch of the neckline which, after a top-down break, turned into a resistance level.