Flags – a continuation pattern in binary options trading
Share Market is volatile in character. The price that prevails and its behavior and its continuity of the market are denoted by flags, which is one of the binary options for analysis. Binary options trading patterns like flags are used both in up trends and in downtrends of the market.
These flags even though they flow in the direction which is reverse of the trend – they tend to indicate that this behavior would continue. The traders should look minutely when there is a break in the direction of the slope which is reverse, when the flag has formed.
The binary traders need to place themselves in an appropriate manner when the flags are formed. One should not confuse flags-one of the binary options, with other patterns of continuing trend like pennants and triangles. Flags are quite similar to them though, and the differences between the patterns are quite subtle so the confusion may arise.
There are parallel trend lines to show the movement of the market and its prices. When trading of prices begins in the direction which is different from the usual trend, and the new pattern of the price thus formed stays within these two parallel trend lines, there is a formation of the flag. When the trend lines meet at a point, the pattern will not be a flag anymore but then it would be a wedge pattern, which would denote the reversal pattern. In the binary options trading, an uptrend in the market would mean a flag going downwards.
The strict binary option traders would consider this signal for Call style buying options, at prices that are high. A downtrend in the market would mean a flag with a slope that moves upwards. When the trendline that is at the bottom, and there is an increasing volume broken by the price, along with it, this would mean that the prevailing trend is reasserting itself.
The strict binary option traders would consider this signal for put-style options that can be traded in a profitable manner, during this trend. A flag being one of the vital binary options is quite widely used patterns as an option, in the binary options trading to denote continuation and their break out signs which are pretty dependable.
It would be very rare that the two trend lines of the flag would be parallel to perfection so the traders have to be very careful in using their decision making agility when they need to decide whether it would be a flag pattern or a wedge pattern. This comes in along with the experience.