Binary Options Tips & 3 Deadly Bearish Setups for Trading FX Options

Note: The charts listed are all daily and strategies are initiated when they take out the previous day lows.

Market: Short GBP/CAD

Pattern: Topping tails

Topping tails with the combination of lower highs on the daily chart of GBP/CAD provide the first signal of upside exhaustion. Look for a breakdown below day lows and move towards the lower trend-line of the ascending channel.

Buy Setup: You would like to buy a put at the open if it is valued underthe previous day low.

Market: EUR/AUD

Pattern:  Channel identification and internal patterns (“bull flag” inside “down-channel”)

Currently in a common pattern, “bull flag”, consolidation is seen after the most recent leg up from April to August.  This currency pair needs more time to rest after such a strong move, so look for the EUR/AUD to trade back to the bottom of the “bull flag.”  A move below the day lows usually result in the continuation to the lower channel resistance as this pair continues to consolidate before the next move.

This trade setup is ideal for a good entry for a put option. The risk/reward and target is very clear defined for the trader.

Market: USD/JPY

Pattern: Short resistance

This daily bar represents a “lower high” and shows the lack of buying interest at these levels.  Resistance levels is also coming into consideration as well.  The result will allow for a trader to look for a move towards lower resistance levels below the day low.  After confirmation of the break below day low, this will set up a good entry for a put option.

In conclusion, every pattern setup is based around the core ideas that each trader has for their trading strategy.  It is important to note that even though these setups present ideal strategies for put buying, do NOT ignore the fact that another trader can make a case to buy call positions at these levels instead.  It is a market, and every trader must realize that both sides are being played throughout the trading day.  It must be stated, if a pattern FAILS to produce favorable results for the bearish setup, this could signal a failed trade and MUST be exited immediately to prevent loss of capital.  There is a common phrase; “Previous resistance becomes futures support” indicates that once the pattern above (short resistance) fails, it becomes a long trade now.  With traders looking for the break of resistance levels to add call positions, that new support level should hold long trade positions looking for a move up to previous highs.