Lesson 3. Bullish Trends Vs. Bearish Trends in Binary Options

For those looking to get started in the exciting world of binary options trading, there are some underlying concepts that should be understood. Specifically, this means knowing the differences between bullish trends and bearish trends. This is important because of the dual nature of the binary options market: Investments are based on the belief that the price of an asset will either rise or fall in the future. Because of this, traders must be aware of the ways experts differentiate between these two market outcomes.

In this lesson, we will address the following questions:

1. Bullish Trends
2. Bearish Trends
3. Conclusion

1. Bullish Trends

“For those looking to establish call options in an asset, a bullish trend should be in place,” said Michael Carney, options analyst at Teach Me Trading. “On price charts, this suggests that there is a series of higher highs and higher lows that is clearly visible on the price chart.” From the fundamental perspective, things are slightly more complicated, and will depend on the type of asset that is being traded. For example, stocks will need to see strong corporate earnings in order to generate bullish trends. In currencies, higher interest rates are generally positive for the asset and this is something that can send more active buyers into the market. In commodities like gold and oil, markets will generally need to see that there is decreased supply in the market in order to generate a bullish rally.

2. Bearish Trends

For those looking to establish put options in an asset, a bearish trend should be in place. On price charts, this suggests that there is a series of lower highs and lower lows that is clearly visible on the price chart. From the fundamental perspective, stocks will need to see weak corporate earnings in order to generate bearish trends. In currencies, lower interest rates are generally negative for the asset and this is something that can send more active sellers into the market. In commodities, markets will generally need to see that there is decreased demand in the market in order to generate a bearish rally.

3. Conclusion

With all of these factors in mind, options traders are better able to tailor their positions to what is actually happening in the market. Once you are able to align your trading initiations with the dominant forces that cause prices to rise or fall, it becomes much easier to generate stable profits on a consistent basis. These are all factors that should be considered, as they can help you to turn the odds back into your favor and avoid the unnecessary losses that can often come when traders fail to outline a strong trading plan.