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TRADING BINARY OPTIONS WITH ELLIOTT WAVES (PART 2) - USD/CHF EXAMPLE

The last part of the Elliott Waves series dedicated to binary options trading deals with another practical example. I mean, theoretical concepts are easy to find. However, practical examples aren’t.

This time, the pair to interpret is the USDCHF. And, the time frame is the four-hour one. Believe it or not, it was a random pick.

 

 

USD/CHF Four-Hour Chart Elliott Wave Analysis

Starting from the most recent high, we analyze the bearish move from an Elliott Wave point of view. Again, it all starts with answering the very same question: is the first swing lower, an impulsive or a corrective structure?

If you check the rules of an impulsive wave and the video recording that comes for that part of the project, you’ll see that it is impossible for it to be impulsive. There’s no extension, the motive waves don’t look impulsive…

As such, the first swing lower can only be corrective. Again, for all the reasons explained on the AUDUSD earlier example, this swing lower can only belong to a flat pattern. Or, to the wave of a flat.

However, we know a 61.8% retracement must come. The b-wave must retrace that much. But, how do we know when to buy a call option? The answer comes from the very definition of a trend.

A trend, either bullish or bearish, is made of a series of lower highs or higher lows. In our case, as the first swing is bearish, we check to see if we can identify a series of lower highs. This is an important part of the analysis, as we effectively don’t know when the first swing lower will end. Imagine that we don’t know any of the price action that followed from that moment on the right side of the chart.

Therefore, after identifying the series of lower highs, the thing to do is to simply wait for the market to break the series. That’s our signal. From that moment on, simply buy call options until the 61.8% level comes. As always, mind the expiration date and align it with the time frame.

Next, after the USDCHF reaches the 61.8% retracement, it is time to reverse the trade. Again, how do we know when the b-wave ends? The same trend characteristics come to help. Only this time, we interpret the higher lows series.

The moment it is broken, we can trade put options for the impulsive wave part of the c-wave of the flat pattern.

 

Conclusion

The Elliott Waves Theory is a logical process. It is made of a set of rules we cannot bend. Even though the original concept started with the stock market, it can be applied with success on every financial product that moves.

However, keep in mind that what we presented here represents the basis of what the Elliott Waves Theory is. Just some concepts to help make a difference between different swings. But, if you want to know even more, and find even better striking prices for your binary options trading, you must dig deeper into this wonderful theory.

Look for understanding concepts like double and triple combinations, waterfall effects, small and large x-wave, and so one. Find all the types of flats, triangles, and zigzags, and all the possible complex corrections. They are a few, but not that many.

Finally, put everything together. The result will blow your mind.

Will end up with understanding the most powerful trading theory ever created. The next Elliott Waves series that we’ll make here, will deal with an intermediate approach.

The aim of the current series was to make rookie traders understand how to use it in binary trading and how powerful this logical process is. When we’ll go deeper into further details, things will become more evident.

 

Risk Warning:Trading may not be suitable for everyone, so please ensure that you fully understand the risks involved. Especially trading leveraged products such as Forex and CFDs carry a high degree of risk to your capital and can result in the loss of your entire capital. Only invest with money you can afford to lose.