Recognising Bullish & Bearish Market Trends – Binary Option Strategies

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Bearish Binary Options Strategy

Beginner level traders often start with the bullish and the bearish binary options strategies. The bullish strategy, which employs the bull spread as previously discussed, utilizes the sudden rise or fall of an asset price to the traders advantage. The foundation of this strategy is to be able to make a profit by betting on both put and call if information as to sudden market changes becomes available. It is up to traders to make accurate predictions of price movement by correctly identifying market conditions and their effect on the price of an asset.

As with the bullish strategy, bearish strategies for binary options merely require that the trader make a put or call prediction based on current market conditions. During highly bullish or bearish time periods, asset prices usually become more clear. Traders are able to earn money quickly and easily. Direction changes happen even when price trends are robust. Asset prices tend to trend for a set period. Then, they will move back in the opposing direction. This alternating nature of asset price is always the case. There are many factors that take control of the price movement at some point.

Feeling the Market Sentiment

The bearish binary options strategy is most effective when elementary and advanced technical analysis are each invoked in the process of forecasting. Since these strategies are directly related to current status of the marketplace, traders should be able to determine what is propelling the general sentiment. Honing your market evaluation skills early on can greatly help your trading skills in the future. Asset prices move in certain directions for certain time periods for a number of different reasons. If traders are aware of these factors, profit can be made with the right binary options.

Marketplace sentiments are directly connected to asset price movement. The bearish strategy is employed not only for general markets, but also to the assets inside them. For example, marketplace conditions for the bearish strategy could be occurring, while simultaneously, investors are bullish on specific assets. Investor opinion as a source of the sentiments of the marketplace ultimately controls how prices change and therefore must always be accounted for.

The Bear Put Spread

When you have sound information that the price of an asset is going down a bit, the bear put spread is appropriate. This binary option trading strategy is employed by option traders when they see that the price of the underlying asset will go down moderately in the near future. Bear put spreads can be implemented by buying a put option with a higher striking , then selling a put option at a lower striking of the same underlying security with the same expiration time.

For example, a stock is trading at $30. An option trader can use a bear put spread by purchasing a put option contract with a strike price of $35 for a cost of $475 and selling one put option contract with a strike price of $30 for $175. In this case, the trader will need to invest a total of $300 ($475 — $175) to set up this strategy. If the price of the underlying asset closes below $30 upon expiration, the trade ends , then the investor will end up with a total profit of $200.

By lowering the put option for trades, the options trader reduces the cost of initializing the bearish position. However, bearish techniques assumes to forgo the chance of making a huge profit in the event that the underlying asset price plummets. The bear put spread options strategy is also known as the bear put debit spread as a debit is taken upon entering the trade.

Bearish options strategies are employed when the options trader expects the underlying stock price to move downwards. It is necessary to assess how low the stock price can go and the time frame in which the decline will happen in order to select the optimal trading strategy.
The most bearish of options trading strategies is the simple put buying strategy utilized by most novice options traders.

Maximum Profit, Loss, and

The maximum profit for the bearish binary options strategy is computed as the difference of the strike price of the long put minus the strike price of the short put. Then, you also deduct the net premium paid and the commissions paid by you. In addition, to reach maximum profit, the stock price needs to close below the strike price of the puts on the expiration date.

When both options expire but the higher strike put that was purchased will have higher intrinsic value than the lower strike put that was sold.

If the stock price rises above the put option strike price at the expiration date, then the trader employing the bear put spread strategy suffers a maximum loss equal to the debit taken when putting on the trade. This loss can be computed by adding the net premium paid and any other commissions paid to enter the trade transaction.

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is achieved for the bear put spread position by calculating the break even point. This point is computed to be the difference of the Strike Price of Long Put minus the Net Premium Paid.

Bear Spread on a Credit

The bear put spread is a debit spread as the difference between the sale and purchase of the two options results in a net debit. For a bearish spread position that is entered with a net credit, this is called bear call spread.

Advanced technical analysis of market data is often fairly simple when implementing these binary options strategies. Charts and graphs will show the general direction of marketplace prices or asset prices. Whenever an asset price has trended either up or down for a while, you’ll need to figure out how much time remains for the trend. Support and resistance calculations can provide the answer for such queries. Above all, the trader must identify both the highest and lowest price an asset has ever reached.

With regards to fundamental analysis, marketplace news should make it possible for the trader to easily identify which type of marketplace conditions are taking place at any time. Frequently, price shifts will occur when important news and economic data are published. This is practically guaranteed. When utilizing a bullish or bearish binary options strategy, monitor marketplace news intently on a day to day basis. Many traders will time trade execution exclusively around media releases as they are extremely robust signals and frequently lead to a lucrative trade outcome.

Take note that both strategies may be applied to price shifts, or pivot points within the marketplace. There will be times during which it is possible to anticipate when a bullish marketplace will shift to bearish, or when a bearish marketplace will shift to bullish. With just a bit of practice, your should be able to grasp the process of recognizing pivot points and in the process boost your overall trading profits. Prospective breakout points can also be identified throughout the analysis process. These can also be profitable.

The bullish or bearish strategies demand no extensive learning curve and may be put to use immediately by beginning traders. Either marketplace situation will generate the possibility to gain and can even make profiting an easy task. Either strategy may be used with any of the main asset groups, as investor sentiment will be the primary concern. Traders who have yet to use their first binary options trading strategy are encouraged to begin with either of these basic strategies. There will be numerous benefits to learning these before moving on to making use of more complex techniques.

Binary Options – Bearish and Bullish Market Trend Strategies

Binary options trading enjoys the position of the best trading platform due to huge benefits involved. There is no denial in the fact that the binary options trading is based upon facile concepts, but it is also mandatory for the traders to have the constant market track and a vigilant eye on the market updates for the significant earnings. In binary trading, the strategies act as a helping factor for the apprentice and professional traders. These strategies are devised to raise the chances of profit by diminishing the prospective risks. The bullish and bearish strategies are best to apply in trading in case of respective trends.

Role of Bullish Strategies

When the market trends shift towards the upward direction for a longer duration of time, it is termed as bullish trend. When the market of the underlying asset goes through the bullish phase, the bullish strategies are deployed to counter the situation. When the asset price is expected to rise in future at the time of expiry of trade, call option is used. The bullish market helps in generating the profit on the basis of the increase in the price of the underlying asset. In order to receive a good sum of cash, the trader has to anticipate the value of the underlying asset to be higher than the strike price at the time of expiry. However, in bullish trend, the price may face an upward and downward shift that makes the upward movement inconsistent during the trading period. Therefore, it is essential for the trader to analyze the condition of the market before entering into the trade, and in case of the inconsistency, bullish strategies are used.

Purpose of Bearish Strategies

When the financial market of the underlying asset faces a downward trend, bearish strategies are deployed to counter the loss. As the downward bearish trend remains for a significant time period, it gives the opportunity to the trader to produce great payouts. In bearish market condition, it would be ideal to sell off the underlying asset. In this condition, if the market shifts in the upward direction, the consistency fails. It leads to the loss situation for the trader if the bearish trend faces an upward shift in a short time period. Under this scenario, binary traders apply different tools and bearish strategies under the guidance of the broker as well, after the detailed gathering of the data to make fearless decisions.

TABLE OF CONTENTS:

For those looking to get started in the exciting world of binary options trading, there are some underlying concepts that should be understood. Specifically, this means knowing the differences between bullish trends and bearish trends. This is important because of the dual nature of the binary options market: Investments are based on the belief that the price of an asset will either rise or fall in the future. Because of this, traders must be aware of the ways experts differentiate between these two market outcomes.

“For those looking to establish call options in an asset, a bullish trend should be in place,” said Michael Carney, options analyst at Teach Me Trading. “On price charts, this suggests that there is a series of higher highs and higher lows that is clearly visible on the price chart.” From the fundamental perspective, things are slightly more complicated, and will depend on the type of asset that is being traded. For example, stocks will need to see strong corporate earnings in order to generate bullish trends. In currencies, higher interest rates are generally positive for the asset and this is something that can send more active buyers into the market. In commodities like gold and oil, markets will generally need to see that there is decreased supply in the market in order to generate a bullish rally.

For those looking to establish put options in an asset, a bearish trend should be in place. On price charts, this suggests that there is a series of lower highs and lower lows that is clearly visible on the price chart. From the fundamental perspective, stocks will need to see weak corporate earnings in order to generate bearish trends. In currencies, lower interest rates are generally negative for the asset and this is something that can send more active sellers into the market. In commodities, markets will generally need to see that there is decreased demand in the market in order to generate a bearish rally.

Conclusion

With all of these factors in mind, options traders are better able to tailor their positions to what is actually happening in the market. Once you are able to align your trading initiations with the dominant forces that cause prices to rise or fall, it becomes much easier to generate stable profits on a consistent basis. These are all factors that should be considered, as they can help you to turn the odds back into your favor and avoid the unnecessary losses that can often come when traders fail to outline a strong trading plan.

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