The Probability Approach
If you can count you can use this method. The probability approach is based on pure chance and nothing else. When an options premium is priced it is based mostly on probability, or, the chance that it will be profitable. Therefore, if a premium is priced at 50% of the value, then an assumption may be made that there is an estimated 50% chance that this option will turn out to be profitable.
Can using this method alone be profitable? Theoretically yes, however due to the virtually unlimited amount of data, it is not known in what order the profitable options will appear. Chances can be significantly enhanced by adding any or all of the simple techniques listed on this page to the probability approach.
The Trend
A direct approach to trading. Trading the trend follows the premise that if the rate is moving up it will continue in an upward direction. Conversely, if the rate is moving down, it will continue to move in a downward direction.
Click here to see a sample of a trend.
Recommended Options: Use the One Touch Option when a trend is expected to continue.
Trading the Breakout
A breakout represents an immediate, forceful move from a previously congested, or range bound period and thus achieving new highs or lows.
Click here to see an example of a breakout.
Recommendation: Use the Barrier One Touch Option when a breakout is expected.
Tip: Use the More Data Feature to confirm or find a breakout.
Finding the Reversal
The reversal trade provides the highest potential. Although a trend is easy to recognize, it is not certain when it will end. An alternative to the trend is to wait for a reversal. Various chart patterns exist that identify reversals and prove to repeat themselves with a high probability.
Click here to see examples of reversal patterns.
Recommendation: Any single barrier option may be used for the reversal. Use the One Touch in the direction of the reversal or a No Touch just beyond the reversal point.
Tip: Use the More Data Feature to confirm or find a reversal.
Range Trading
It is common for currencies to become congested or range bound while the market is digesting recent moves or anticipating the next breakout. During this time rates maintain an almost predictable trading range.
Click here to see an example of a range bound pattern.
Recommendation: Use the No Touch or Double No Touch when range bound activity is expected to continue.
Tip: Use the More Data Feature to confirm a range or find a breakout.
If a breakout is discovered use the One Touch Option .
Support and Resistance
Support is defined as a level where price tends to stop as it is moving down, and thus provides support. Resistance is the opposite of support. It is where price tends to stop while it is moving up, and thus meets resistance. Support and Resistance (S/R) levels provide insight to predictions of future price movement.
When S/R levels are obeyed price is expected to reverse when these areas are met. When rates break through S/R levels it is expected that new highs and new lows will be reached. A common phenomenon with S/R occurs when previous levels of support become future levels of resistance and when previous levels of resistance become future levels of support. Knowing this phenomenon can assist in successful predictions.
Click here to see an example of support and resistance. Note how previous resistance became future support.
Recommendation: Use the One Touch in the direction of the move or the No Touch in the opposite direction of the move.
Tip: Use the More Data Feature feature to confirm S/R levels or to find a breakout.
Trade Allocation
How much should you trade on each data set? When data conforms to a tested strategy, trade a larger amount. When it does not, trade a smaller amount.
Tip: Use the More Data Feature to confirm your strategy. Even though there is a small price to use this feature the benefits can significantly outweigh the costs by turning what would be a losing trade into a winning one.
The aforementioned techniques can be learned by anyone in a short period of time. The advantages provided are in their simplicity. Too often traders overcomplicate analysis with esoteric, complicated indicators. Recognizing the fact that currency moves can only go up, down or sideways makes the process of analysis much simpler.