Those traders who have encountered volumes on real exchanges may think that using them in binary options trading will not work, but this is not so. You can trade binary options using currency pairs , stocks or cryptocurrencies . And as you know, on stock exchanges and cryptocurrency exchanges there are trading volumes that are available to any trader.
Content:
- What are volumes in binary options and where do they come from?
- Vertical volumes in binary options;
- Horizontal volumes in binary options;
- Volume in binary options and trend movements;
- Where to look at volumes for binary options;
- How to trade binary options using volumes;
- Conclusion.
What are volumes in binary options and where do they come from?
Regardless of the market or the phase of the trend, price tends to move in waves, and if you look at such waves in more detail, it becomes clear that the price is simply moving from zone to zone. These can be simple levels of support and resistance , or zones of supply and demand. Simply put, if demand prevails in the market, then the price rises and stops at supply levels, and at moments of prevailing supply, the price will stop and reverse at demand levels. The levels can be schematically depicted as follows:
The lower price level is support or demand, and the upper price level is resistance or supply. And when the price reaches a lower level, many traders may decide that the price has reached its lowest point and will begin to buy the asset, since such a price will look cheap. When the price reaches the upper level, the same thing will happen, but on the contrary - the price will seem expensive and many will begin to sell the asset. Taking all of the above into account and considering the following example, it already becomes clear that as soon as the price reached the upper level (resistance), a lot of selling occurred and this reduced the price.
Sales in this case occur not only on the market, but also with pending orders, so it will not always be correct to call such places levels, since these will be zones (sales occur in a range and not at the same price, but at different ones).
When the price reaches the lower level, most traders will close their sales by buying the asset, and they will also be joined by other traders who want to buy at a low price.
Such actions, accordingly, will cause the price to rise, and on this rise even more new traders will join the movement, which will increase trading volumes:
Vertical volumes in binary options
If we talk about volumes, it now becomes clear why they increase in certain places and are very low in other places. During moments of high trading activity, volumes will increase, and, for example, in a flat , volumes are almost always at a low level, since price fluctuations are in a narrow range. And if we take the previous examples and consider them with volumes, then a price reversal from the resistance level could look like this:
While the market was experiencing a flat, volumes were low, but as soon as the price approached a level that was interesting to traders, the number of transactions increased sharply, and accordingly, the volume increased. The same thing would happen if the price approached the lower level:
Buying increases and therefore the volume even on the move increases as new traders join the growth.
Horizontal volumes in binary options
Tick volumes in binary options trading are used not only in the form of classic vertical histograms that display the volume of each individual bar on a separate panel below the chart. They allow you to use cluster analysis in binary options trading and, on its basis, build a market profile, or, as it is also called, horizontal volume.
Horizontal volume reflects the number of completed transactions at a certain price level. Indicators can visualize this information in different ways, but most often the horizontal volume is reflected in the form of a vertical histogram on the left or right side of the chart, as, for example, the indicator for binary options VP6 Range does:
Market Profile is based on the work of Peter Steidlmeier, who back in 1984 explored the importance of volumes in level trading and reflected them in the form of horizontal volumes. According to Steidlmayer's theory, the market always tends towards a balanced distribution, which is reflected in the form of a bell-shaped market profile histogram.
In the value zone (the central part of the bell), buyers and sellers are in equilibrium close to the fair price. This is where about 70% of transactions take place. The level with the maximum volume for the analyzed period is called the point of control or POC (Point Of Control).
In distribution zones, the market is in a state of imbalance as the dominant buyers or sellers seek a new fair price. Strong trend movements usually occur in the distribution zone.
It is believed that, being in an imbalance, the price always tends to return to the value zone or form a new such zone. Thus, the VAH, VAL and POC levels are a kind of magnets that attract price. These levels serve as support and resistance , which is the basis of many binary options trading systems, such as the ASG GRAAL VOLUME SISTEM.
Volume in binary options and trend movements
During a trend, volume can also be an important indicator and provide additional clues. In an uptrend, not only updates of extremes can be accompanied by increased volumes, but also corrections that can be used in binary options trading:
As you can see, the growth is accompanied by increased volumes and during pullbacks, activity in the market does not subside, as new traders buy additional assets or, on the contrary, “dump” them. But if we talk about the most correct entry points during a growing market, then these will undoubtedly be corrections, since the price decreases and makes it possible to buy cheaper.
During a downtrend, the situation will be similar in most cases, and pullbacks with increased volumes can also be used for sales.
It is also worth noting that during a flat you should pay attention to volumes only in two cases:
- If the price approaches the border . When the price approaches the border and the volume begins to increase, this indicates that the price is likely to “bounce” from this border.
- In case of flat breakdown . If a breakout of a flat occurs, then you should pay attention to the volume, and if it has grown, then this is a sign that the price will most likely continue to move in the direction of the breakout.
Where to look at volumes for binary options
To begin with, it is worth saying that there are two types of volumes:
- Exchange (real).
- Teak.
Both types of volumes can be used in the analysis, but real volumes will be much more useful and informative in contrast to tick volumes, since tick volumes are constructed without taking into account real transactions.
Real volumes for binary options
There are many terminals and trading platforms that broadcast real volumes for different markets. But it’s worth saying right away that, unfortunately, there are no completely free options for obtaining volumes for any market 24/7. But partial access volumes can be used on the TradingView trading platform :
On the free TradingView platform, you can easily use historical volumes, but in real time, quotes are delayed by 10 minutes, and therefore you cannot see the data that appears right now. But this only affects small time frames (M1-M15), and for hourly charts 10 minutes can very rarely play any role and therefore you can carry out volumetric analysis even with a free subscription. If desired, anyone can purchase a paid subscription and receive data from any world exchange in real time for any charts, including seconds.
Tick volumes for binary options
You can also use tick volumes, which are available both on the live chart on our website and in each terminal, including MetaTrader 4 :
The volume indicator in MT4 allows you to see tick volumes, which are not real and are built by the number of price ticks, but they can also be used in trading if you study all the nuances. In addition to the standard volume indicator for binary options in MetaTrader 4, you can also use a modified volume indicator Better Volume :
There are also many other indicators for binary options that can use their own algorithms for calculating tick volumes.
If we compare real and tick volumes, we can see that in most cases they are very similar:
In the image above, almost every increase in tick volume differs slightly from the real one, and it is precisely such “flashes” that are needed for analysis, since it makes no sense to analyze the price for each bar in a row.
How to trade binary options using volumes
You can use volumes in binary options in various ways and it will take a lot of time to study such analysis, but there are also simple ways that have already been discussed earlier.
It is worth noting that currency pairs do not have real volumes, so currency futures can be used for them and the Euro futures (6E) will be used for examples.
Trading volumes in binary options from borders
If trading is carried out in a flat or simply from the borders of certain levels, then you can observe the volumes at the moment the price approaches the border:
As you can see in the image above, volumes increase sharply when the price is at a level, which means that activity appears and traders begin to buy or sell depending on the level.
Trading volumes in binary options with the Absorption pattern
Volumes also go well with candlestick patterns , one of which is called “Absorption”. This pattern is characterized by the fact that the new candle must completely cover the range of the previous candle, and if this is all supported by volumes, then the strength of the pattern increases:
And as you can see, after the “bearish engulfing” the price moved in the direction of the pattern.
Conclusion
As it now becomes clear, volumes in binary options can also bring profit if used correctly. But you should understand that before trading using volumes, you should definitely study them by trading on a demo account , how they work, and only after that try to make real transactions using them.
Also, do not forget that in any strategy you must adhere to the rules of money management and risk management , as this will help protect your deposit from losing even over a long unprofitable distance.
See also:
Psychology in trading - what does a beginner need to know?
How to correctly determine the trend in the market?
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