Trading Patterns

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IQ OPTION

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Trading Patterns

To be a successful binary options trader you must have a trading pattern. With IQ Option, you can develop a trading pattern and optimize it as you have access to a range of resources and educational tools. You can access most of the tools directly from your dashboard on the trading platform. The visual display is easy to understand. You can see trends, plus there is technical analysis information available as well.

The educational resources cover a vast range of topics. They are also free to use, which is always a benefit to new binary options traders. There are options designed for all kinds of tastes. The resources available include videos and tutorials. Some examples are below.

The Trading Patterns You Can Learn at IQ Option

(WARNING: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future)

Examples of the binary options trading strategies that IQ Option offers are outlined in brief below. This will help you decide where best to focus your time first. Before going into those strategies, it is important to understand some basic tools of investing:

• Japanese candlesticks – If you have seen a chart that shows the price movement of an asset over time, you have probably seen a Japanese candlestick. They show the movement of the price over a given day. Once you learn how to read them, they are incredibly useful. You get both the opening price and the closing price. An asset that increases in price will have a green candle, and an asset that falls in price will have a red candle. You can therefore see at a glance how far an asset’s price has changed (the bigger the change the bigger the candlestick) and in what direction.

• Trend lines – Trend lines are depicted visually by a line above the price of an asset on a chart and another line below the price. These two lines create what is known as a trending corridor. They represent the typical upper and lower values that the asset usually fluctuates between, i.e. when the price of the asset reaches the upper line, trends suggest that it will start to move down again. The bottom line is called the support line, and the upper line is known as the resistance level.

Simply understanding these analysis tools and getting practice using them might help a trader understand an asset price movement better.

Let’s now look at the main trading strategies you can learn at IQ Option.

1. 1. The Three Black Crows Trading Pattern

*Your capital may be at risk. This material is not investment advise.

This is a pattern that looks for trend reversals. To make it work you need to identify an asset that has several candlesticks in a row that are all showing a price movement in one direction – either up or down. Then you have to wait for this to reverse. You will know this is happening when you see three falling price candlesticks in a row. This is an indicator that the trend is reversing and gives you a signal that can be used to make a trade.

2. 2. The Rebound Line Trading Pattern

*Your capital may be at risk. This material is not investment advise.

In this trading pattern, the price trend of the asset is not relevant. Instead, you look at the trend lines mentioned above. What you should look for specifically is a closing price the is just below the resistance level (the upper line) or just above the support level (the lower line). In this situation, it is much more likely the price will move away from the line than go through it, breaking the trend. Therefore, you can use this as information to place a PUT trade if the price closes just before the resistance level and a CALL trade if the price closes just above the support level.

3. The Rainbow Trading Pattern

*Your capital may be at risk. This material is not investment advise.

This is a more complicated trading pattern, so it is probably best to get familiar and comfortable with the other options on this list before attempting this one. It works by simultaneously using exponential averages. There are three of them, all with different periods. On the chart of your selected asset you have to mark in blue the first line you see with a period of six. Mark in yellow the second line that has a period of 14, and mark in red the third line that has a period of 26.

To identify a potential drop in price, look out for:

• The yellow line moving below the blue line
• The blue line on top of the other two
• The red line at the bottom

The best time to place a binary options trade (a PUT trade) is when the blue and yellow lines intersect.

To identify a potential rise in price, look out for:

• The red line on top followed by the yellow line and then the blue
• The red line on top of the other two
• The blue line at the bottom

The best time to place a binary options trade (a CALL trade) is when the blue and yellow lines intersect.

4. 4. The Piercing Line Candlestick Patter

*Your capital may be at risk. This material is not investment advise.

This trading pattern involves looking closely at the candlesticks on your chart. Again, it is about identifying trend reversals. To spot an upward trend that is about to reverse, look for two candlesticks where the second closes in the middle of the first one. The candlestick that immediately follows (the third candlestick in the row) should be ascending. If a fourth candlestick also shows a price increase, a trend reversal is probably imminent. You can work this pattern the opposite direction to spot a downward trend that is about to reverse into an upward trend. These potential price reversals are good information that you can use to place binary options trades.

5. 5. The Pin Bar Trading Pattern

* Your capital may be at risk. This material is not investment advise.

The Pin Bar Trading Pattern is another example of a more complex and involved trading pattern to execute. Therefore, it is usually used by traders who have built up some experience using other strategies. It is an effective trading pattern so it is one you should explore when you feel comfortable.

The basic principle is to predict an asset’s upward or downward trend. You do this by analyzing the asset’s pin bar candlesticks – in particular, pin bar candlesticks with tails.

The specific type of pin bar candlestick that you should look for is one with a long tail and a small body. The direction of the tail indicates which way the price might move as it demonstrates which way the market is moving. This is a signal that you can use to place a binary options trade.

Not all pin bar candlesticks with tails are the same, and not all are suitable for this trading pattern. Here are some additional criteria that you should apply to ensure you get a pin bar candlestick that generates an accurate trading signal:

• Its open and close price should be close to the end of the previous bar
• This open and close price should be near the bottom or the top
• The open and close price of the pin bar candlestick should be inside the left bars

The signal is regarded as strong when these conditions are met. Usually, strong signals are an indicator that you should place a trade.

You now need to know whether the price of the asset is going up or down so you can place a winning trade. If the tail of the pin bar candlestick points up, you can expect the price of the asset to go down in most situations. The reverse happens as well. If the tail of the pin bar candlestick points down you can expect the price of the asset to go up.

6. 6. The Moving Averages Pattern

* Your capital may be at risk. This material is not investment advise.

In this pattern you develop indicators of moving averages. This is done using the technical analysis tools available in the IQ Option. It is an extremely popular trading pattern. In fact, it is one of the most commonly used strategies by traders of all levels of ability. They don’t always use it in the same way, i.e. traders of all levels of ability can successfully deploy simple and exponential moving averages. Weightage and smooth moving averages, however, are usually only attempted by experienced traders who are deploying complex strategies.

Of the four options – exponential, simple, smooth, and weightage – simple and exponential strategies are also the easiest to calculate. This makes it possible to create profitable strategies and place winning trades.

That said, exponential and simple moving averages are not exclusive to beginner traders. They are also used in complex strategies to increase profit margins and win ratios, with the objective being to maximize the benefit of the breaking line and rebound line in the corridor.

7. The Alligator Pattern

The IQ Option platform makes this pattern quite simple to execute and use successfully. It is another one that is based on moving averages, but this time we are only interested in smooth moving averages. It is theoretically possible to make the trading pattern work with exponential and smooth moving averages as well, but the IQ Option platform is optimized only for smooth moving averages. The reason for this is that smooth moving averages are largely unaffected by insignificant fluctuations in the market. This gives better information and, potentially, makes it more likely to place winning trades.

The smooth moving average that you will monitor will show the different moves of the asset within a defined time period. The lines you see will show the price the asset is likely to reach within the time period. Shocks to the asset or wider financial markets can affect this, but when that doesn’t happen, the pattern is reasonably accurate.

The reason the trading pattern is called The Alligator Trading Pattern is that the candlesticks look like alligator teeth when it is time to place a trade. If the candlestick opens upwards, you should place a CALL trade. When the candlestick opens down, you should place a PUT trade.

If the candlesticks look any other way, you should not enter the market. This is because it is too difficult to predict which way the price is going to move, i.e. you won’t know whether to place a CALL or a PUT trade.

8. 8. The Breaking Line Trading Pattern

* Your capital may be at risk. This material is not investment advise.

This pattern is one of the simplest to understand and execute at IQ Options. It is based on the support lines and resistance lines of an asset, as explained above. These are the lines that indicate the upper and lower prices that an asset trades between. If those lines are broken, it is an indicator that something else is going on in the market aside from normal price fluctuations. It can, therefore, be a signal to place a binary options trade.

In simple terms, your trade should go with the direction of travel. This means placing a CALL trade if the candlestick closes above the resistance line and a PUT trade if the candlestick closes below the support line. This is because the price is likely to continue moving up if the asset breaches the resistance line, and it is likely to continue moving down if it goes through the support line.

This is a pattern that can be used regardless of how the price of the asset is trending overall.

9. 9. The Bollinger Bands Trading Pattern

*Your capital may be at risk. This material is not investment advise.

This is a commonly used investment pattern that looks at the volume of trade on a particular asset to generate a signal of which way the price is likely to move. In IQ Option, you use a chart that shows three lines – or bands. The middle band is the smooth moving average and will have around 20 candlesticks.

The bands widen and narrow depending on the volume of trade taking place on a particular asset. When trading is heavy, the bands widen; and when trading is light, the bands narrow. What you should look for is a rapid widening of the bands, as this can produce a signal that you may be able to use to place a trade.

As you can see, IQ Option offers trading strategies that vary in terms of type and sophistication. This is one of the reasons that it is such a popular binary options trading platform. It gives you all the tools you need to develop a trading pattern. You can use the many analytic tools available – all of which are free – to improve your trading patterns and how you interpret price movements.