A simple and effective strategy for trading in consolidation zones

Consolidation zone trading strategy

Let's consider a simple and at the same time effective strategy for trading in consolidation zones. The essence of the strategy is to break through the flat zone and buy an option in the direction of this breakout.

If we look at the price chart of any single financial instrument for binary options trading, we will notice that market fluctuations are not uniform.

Quotes of the underlying asset indicate price channels, impulses, create graphical figures, and sometimes make such movements that cannot be predicted in advance.

Based on this, many different trading tactics have been created, which are usually based on the technical analysis of the market.

Now we will talk about the methodology on consolidation zones, which is capable of creating simple trading signals for the execution of transactions with an unambiguous forecast for the market movement.

The consolidation zone is essentially a segment of the quotes of a financial instrument, formed mainly after an impulsive market movement. This zone is characterized by minor fluctuations at short-term resistance and support levels.

In simpler terms, the exchange market becomes calm after an impulse movement and is engaged in building a side flat zone near a certain quotation level. Such a zone is the zone of consolidation.

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The right choice of a brokerage company for trading

First of all, you should pay attention to the technical capabilities of the trading terminal of a financial company. As a rule, non-advanced trading software does not allow you to create graphical figures on the price chart of semi-automatic services, and the program MT4 may seem daunting to a beginner.

In this regard, the trader's technical tools associated with the moments of market technical analysis are limited.

Nevertheless, there are brokers with professional-level trading software on the exchange market. For example, this financial company offers its clients its own trading terminal for binary trading, which has powerful technical functionality.

Using this broker as an example, we will consider a strategy for consolidation zones.

This financial company offers excellent trading conditions, thanks to which you can properly manage financial risks and carry out binary trading at low cost.

Binomo allows you to trade with an initial deposit of $100 and place bets at the same time for $5.

Such indicators make this broker not only a high-tech company, but also an effective platform for option trading.

How to build consolidation zones correctly?

On the trading broker terminal we need to choose the most efficient financial instrument. First of all, we need to open a price chart and use a set of graphical services to build a consolidation zone. Here we need a rectangle construction service.

Building a rectangle on the chart

Let's determine on the price chart the period during which the quotes of the financial instrument fluctuate the least, and build a figure on the peaks and troughs of the fluctuating range as follows:

Designation of the consolidation zone on the chart

How to get signals to trade on consolidation zones?

To create a very accurate quote movement forecast, you should use a simple trading technique on technical analysis.

We are talking in this case about the breakdown of the consolidation zone. For the execution of binary option trades - WAY DOWN we are waiting for the breakdown of the lower price border of the consolidation zone:

Consolidation zone breakout and down trade

For the execution of transactions - UP we are waiting for the quotes of the underlying asset to break through the upper price limit of the consolidation zone:

Trade up binary options

It is worth noting that after we received a signal to trade, the quotes of the financial asset began to create a very powerful impulsive market movement. Due to this, it is possible to execute not individual transactions, but a series of trading positions.

In addition, trades can be executed until the momentum ends and the creation of a new consolidation zone begins.

According to statistics, about 80 percent of positive deals can be obtained through this system. As a result, market participants receive a rapid increase in the deposit account.

Proper money management

The high pace of trading and the short period of building a price chart have a strong impact on the level of financial risks. In this regard, to conclude transactions, you should use small rates, which, for example, this broker equal to one dollar.

If you have large amounts of money on your account, then you can place bets up to three percent of the deposit amount. With this approach to managing trading risks, you can get a good income at a low cost.

Choice of expiration

The large cyclicity of trading signals and the high speed of price movement on tick charts require the use of options with short transaction completion times.

It is best for the system to use turbo options with an expiration period of 1-2 minutes.

With such parameters, the quotes of the underlying asset do not have time to create a new trend with such a direction that contradicts the forecasts of open trading positions. As a result, we get a guaranteed income from transactions!

Apply strategy ⇢

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