Trading binary options all comes down to single most important factor of all that is to predict the price trend and it’s duration and it is not easy to do had it been that way everybody would be making loads of cash on their investments. The thing which differentiates the successful traders and the traders who tried and gave up due to failure is that they gained their experience over time and to perfect this price trend move they had to develop certain set of rules, which they did by keeping an open ear listening to the experienced traders and discussing their failures with them to improve their analysis techniques. Out of all this one theory stands the test of time which to take advantage of a powerful move if you encounter one.
There is this theory that if there is an ongoing bullish trend that is breaking the thresholds of the previous highs of the price or an ongoing bearish trend that is breaking the thresholds of the previous lows of the price it signifies a powerful move. It is known that the bullish or bearish price trends show that the market is either rising or falling. So when trading binary options it is best to use the “Call” option when encountering the strong part of the price level and it is best to use “Put” option while encountering the weaker part of the price levels.
The highs of lows of the market have their own risks when you are trying to buy or sell at those points, as the trend reversals present a risk at any time. This is how the market behaves and that is the sole reason there are equal amounts of winner and losers. This is also the reason why many traders tend to stay on a safe side and avoid trading near the extreme points as it is thought that the reversals can cut their profits.
But not every trader thinks the same as the theory goes, some think that for specific asset if the market is strong enough to break through the previous threshold then the price levels will continue to go in that direction and there is no reason that it will not continue to rise in that very direction. Those traders encourage the buys while the asset is still hot in the market.
The same theory goes when it comes to the lows of the market when dealing with certain assets and “Put” option can be used instead.
So it is important to point out the continuation trend through technical analysis with the use of flags and pennants.