Reversal Binary Options Strategy

Whether you are just starting to use binary options or have been using them for many years, chances are that you have heard of the reversal binary options strategy. This is one of the most commonly used tactics in the world of binary options, mainly because of the simplicity of the approach.

To use this strategy, an investor watches the fluctuations in an asset over a period of time to gauge when the asset is most likely to begin to trade in the opposite direction, known as a reversal. For a novice trader, a reversal trade might be wise when a given asset has had a rising value for a period of time and is nearing historical highs or lows. Traders can watch the values of their assets manually or use some of the advanced tools available for comparing historical values of a given asset.

For more advanced traders, tools can be used to predict which reversals are likely to be small and short and which ones will speak to a larger downward trend. Recognizing the difference in these two situations will allow that trader to benefit from higher profits on the investments made.

In order to use the more advanced reversal binary options strategy, it is wise to use one or more of the technical gauges in the realm of finance. These can include things like the RSI, or the Relative Strength Index, or the MACD, known as the Moving Average Convergence Divergence. The first measures the momentum of an asset over time to predict when an asset might be about to change in value – a trader seeing a value under 30 in the RSI could predict that the given asset might be oversold at that time, while seeing the RSI over a value of 70 may show that it is being overbought.

The other tool, known as the MACD, allows traders to see a calculation of the changes between an asset’s averages at a 26-day mark and 12-day mark, using the difference to create trade signals. A trader will usually want to buy an asset when the value of the MACD is above the 9-day average value and sell when it is lower than this.

The reversal binary options strategy can be employed in simple or complex ways, using a variety of tools and methods, but is a great asset in the arsenal of a binary options trader.

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