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Pattern recognition is a very popular trading strategy based on technical analysis chart patterns. Financial markets tend to move in certain patterns and those traders capable of identifying some of these patterns may increase significantly their likelihood of winning. Identifying patterns as a method can be combined with other trading strategies and be used to confirm the entry/exit signals of other trading methods. Trading patterns recognition as a method is a much more reliable method in mid-term and long-term trading periods than in short-term periods.
What is a Chart Pattern?
A chart pattern means a distinct price formation presented on the chart. There are many different types of chart patterns, in this article, you can find the most important patterns. Patterns can not forecast the future but it can help traders increase their likelihood of winning. In general, we can distinguish two main types of Chart Patterns:
(1) Continuation Chart Patterns
(2) Reversal Chart Patterns
Definition: Continuation chart patterns signaling that a price trend will continue.
1.1 Cup & Handle Chart Pattern
Cup & handle formation suggest that a price trend has paused for a while but it will not probably be reversed. When this formation is confirmed then a price trend becomes even stronger.
Timeframe: Cup & Handle pattern can be best identified in charts from 1-month chart to 1-year.
News-Trading Strategy for Binary Option Traders
News-Trading is a fundamental-analysis strategy that is based on the upcoming economic calendar.
News-Trading focus on short-term periods and can be used for trading 1 minute, 2 minutes and 5 minutes binary options (Turbo Options). Most of the news releases have a short-term effect but there are also news releases with a long-term effect on global markets. The mission for every News-Trader is to track important news releases and trade the right direction of the news impact.
What is Event-Trading and Market Expectations all about?
Every major economic, social, politic or military event has a particular influence on the global financial markets. Even a weather forecast can highly influence the global markets (especially energy assets). Some events have a tremendous effect on financial markets while some other events have a minor effect. What is important isn’t just the event itself -It is of equal importance what the market really expects about certain events.
Three Factors affecting News Trading
■ The Nature and the Significance of the News Release (For example an important macroeconomic event such is an interest rate cut)
■ Market Expectation about this Event / News Release
■ The difference between the Market Expectations and the Actual Event
What means Market Expectations?
When we are referring to market expectations we are mainly referring to the results of the research of specialized analysts. These analysts who may work for a Financial Company, a Governemnet Body or to be completely Independent have the ability to influence all kind of market participants.
Example of an Important Macroeconomic Event
Let’s suppose that our market is Forex and the market expects that the ECB (European Central Bank) will cut Euro interest rates by 0.25% (hypothetically 0.50% currently).
Suddenly ECB doesn’t cut the Euro rates but in addition it presents a scenario of future interest rate increase based on inflationary concerns.
Can you imagine what happens next?
Euro against the other Majors, for example against USD, will probably gain 2,000 pips in the next few minutes. In the following chart you may observe the effect of important news on EURUSD.