Trading Binary Options on Market Geometry
Level
3/4

Market geometry (or the geometry or markets) represents one of the oldest trading methods out there and it is used by traders from all over the world. The key to successfully use market geometry is to look on the left side of the charts for valid information to be used on the right side of the chart. There is a saying that what’s on the left side of a chart is free information and it cannot be more true than in this case.

The thing that a trader should do is to look for support and resistance areas that happened in the past and project them in the future as price should react at those levels too in the future price action.

Predictions and Forecasts for Market Movements

Markets have the tendency to move in cycles and it is a saying that history is a good indicator for future market price action. So, looking at what market did in the past and how it behaved might offer a trader solid information about future price action and what to expect next. When looking at a chart and trying to make a prediction or a forecast, then it is obvious each and every financial product or security has its own way of moving. It’s normal even for the currency markets. For example, the USDJPY is always more resilient to move to the downside than to the upside due to the fact that it is directly linked to the equity markets in the United States. In a NFP week, (Non-Farm Payrolls week) the USDJPY is linked through algorithmic trading to the ES and Dow Jones indices in the United States and basically it is mimicking the movements there.

Seconds before the release the link is broken and then depending on the actual versus the forecasted numbers, the pair is moving. This is being called market geometry as well as it is not only about specific levels but also about the way market is moving. Still related to market geometry is the projected levels on the right side of the chart by the time things on the left side of the chart are offering support or resistance. Let me explain this in more details.

Let’s assume one is finding a line that is offering both support and resistance areas multiple times and the line is not mandatory to be horizontal. If that is the case, then the principle of market geometry is referring to the amplitude of the moves market is making when it travels far from that line that proved to be support and resistance. Measuring that amplitude and projecting it on the right side of the chart allows one to have an idea where price can go and if that specific place is suitable to be the striking price for a binary option. Of course that the striking price is the only one that matters before setting the expiration date so patience is key here as it is key in any trading activity.

Expiration Date and Market Geometry

The expiration date should be strongly correlated with the time frame the analysis is made as it is not making any sense to trade short-term expiration dates in the analysis is made on the bigger time frames like daily or monthly charts. Binary options trading is not allowing trading with pending orders but this doesn’t mean that we should trade only short-term expiration dates. No. Medium to long term expiration dates can be traded based on market geometry as by the time price is reaching a support or resistance area we don’t really know how much time it is spending there.

For example, if the support or resistance area is being reached with a complex correction and knowing complex corrections end most of the times with contracting triangles then we should look when the triangle is broken and only then trading binary options. In this case, the b-d trend line is the most important one as by the time it is broken put options should be traded if the market geometry level was offering resistance and call options should be traded of course if the market geometry level was offering support.

The market geometry concept is one of the oldest in the technical analysis branch and it represents the “old school” of technical analysis. However, a clear understanding lets traders know where to look for the perfect entry, in our case for the perfect striking price as this is one of the most decisive factors when trading binary options together with the expiration date. After all, expiration date gives the “waiting time” and striking price the moment of entry.

Find out more about market geometry and what it means by watching the video recordings in this project that explain the concept and offers a general picture of one of the oldest trading tools in any technical analysis history.

OptionFairAcademyBanner

Your capital is at risk

Top 10 brokers

  • Broker
  • Min. Deposit
  • Min. Investment
  • Reviews
  • nadex logo small
  • $250
  • $25
  • NADEX
  • $250
  • optionrobot logo small
  • $250
Your capital is at risk