In speculative trading assets, whether foreign exchange (Forex), stocks, commodities or indices, there is a golden wisdom that is known to every trader: "The trend is your friend". This indicates that it is the safest way to trade profitably if an existing trend is followed. It is therefore only logical that the trend following strategy belongs to the standard equipment for trading binary options.
The most important thing to apply the trend-following strategy, is the unambiguous recognition of an existing and ongoing trend. To this end, the chart of the observed asset is analyzed. It makes sense to use the trading platform MetaTrader 4, because it provides the necessary indicators for the technical analysis. Thus, the price development over different periods can be displayed graphically, and moreover it includes the tools listed below.
The Trendline
The trendline is a rather simple tool which however has a high information content. If a price is located in an uptrend or downtrend, it is rarely that the price development has no fluctuations. The trendline is an excellent way to take advantage of these fluctuations for profitable trading binary options.
How the trendline is drawn in the chart depends on whether there is a downward or upward trend. If it is an upward trend (the price increases), the trend line is drawn at the bottom of the price fluctuations. If there is an obvious downward trend, the trendline is drawn at the top.
Trendline in an uptrend
Achieves the candle in the chart now the trendline, rising or falling, a position is opened when the price moves back in the opposite direction. In the illustration of the example can be seen clearly that the course twice slightly breaks through the trendline before it turns in the opposite direction. At the end it breaks the trendline and goes into a sideways movement. Waiting for the counter-movement ensures that the trend persists and prevents unnecessary losses.
The Trend Channel
Basically a trend channel is a double trendline. It consists of two lines that are drawn paralel in at the top and the bottom of the price fluctuations in the chart. In MetaTrader 4, these lines do not have to be drawn individually, but it offers the possibility to draw a channel directly. With the appropriate course of exchange rates, the trend channel offers the possibility to profit from both, the upward movements, as well as from the downward movements.
Trend channel in an downtrend
In the picture it can be seen that the course four times touches the lower limit of the channel and two times the upper, before it turns in the opposite direction. A position is also here only opened when the direction has turned. At the end of the running trend the price breaks through the upper limit of the channel. In this example, therefore a total of six trading opportunities are given. When using a trend line would have only two (the top two touches are not traded because the trend here forms only).
Whether the trendline or trend channel is applied, it is important to adapt the expiring time on the time frame represented by the candles on the chart.