Same as other binary options strategies, this one is also based on principles utilized in other marketplaces. Even though an increase in the price of the asset is the only price behavior that`s profitable when using other forms of trading, reversals are still important. With binary options however, reversals become even more important and have a very vital role as profit can be made regardless of the price movement.

A price reversal refers to a moment when the price of an asset switches directions. Normally it`s used to describe a total change in direction after the price has been going in the same direction for a while. With binary options trading, a reversal can result in big winnings no matter the direction in which the underlying asset is moving. In other words, the price can change from an upward to a downward trend or vise-versa and still make money for you.

Price Reversal Trading Strategy

The point of the strategy is to be ready and trade a reversal immediately when it happens. To be able to that, you need to do analysis and prepare accordingly. Important data that you should check includes the highest, lowest and average prices of the asset. Naturally, support and resistance levels also play an important role. It`s good to have some knowledge on price charts, but you should also do historical information research. There is a lot of market data available that can provide you with the insight for an upcoming reversal.

There are a few factors that can make a reversal happen. The most common one is probably a shift in investor sentiment. What`s good about this is that it`s very easy to notice. All the trustworthy financial news providers will have the top pieces of information for each day. There will be a report on the assets whose value is on the move, along with a short analysis of the reasons behind it. This is the kind of information you need and will help you both in general trading and reversal forecasting.

When the price of an asset gets close to the level of support or resistance, it means that a reversal might happen. Same goes for when the price gets close to the biggest or lowest record values. Have in mind that when the investor sentiment is strong, it`s possible for the asset prices to go way beyond the expected levels. Regardless, in most cases this shouldn`t happen. Remember to think long-term. Usually, asset prices are well balanced by the push and pull forces of the market.

Why should you use price reversals for trading? As they happen at least a few times throughout a trading session, it can translate into lucrative profit for you. Reversals present good opportunities for the brave traders who use a diversified strategy and want to make the most out of their investment.

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