10/04/2012 – Binary Option Play on the AUDJPY Head & Shoulders

Hello there traders, sorry its been a while. Some of you may or may not be aware of the present correlation between the AUDJPY and the S&P 500.  There are people far smarter than I who can explain the full range and reasons  for this correlation. As a trader I just want to find good low-risk / high reward opportunities.

One of the tools I have added to my trading in 2012 is the use of Binary Options and in particular Touch & No-Touch Barrier trades.  I use Bet On Markets as they’re simple to use and focus on the instruments I like (FX & Indices) and are easy to work out and place.

There are plenty of different types of trade but I tend to use the Touch or No-Touch trades. Not surprisingly a Touch barrier trade means you are looking for a market to touch a particular level and a No-Touch barrier means you’re expecting price to not touch a level.

Easiest way for me to describe them is using the AUDJPY trade I have on at the moment.

Looking at the daily AUDJPY chart you can see that I have annotated the Head and Shoulders pattern that I saw forming a couple of weeks back. After the H&S triggered I set two trades to cover my position.

Level 1. is a level of  resistance near the right shoulder of the Head & Shoulders pattern.  If the H&S plays out as per the text book (and lets be honest few do) then price should be dropping south not heading north.  I placed a No-Touch Barrier Trade that price does not touch 86.20 before close of business on 23rd April 2012. This is now 13 days away from completion.

Level 2 is a target level for the Head & Shoulders based on standard Technical Analysis whereby we take the distance from the head of the pattern to the neckline and then project the same distance forward from the neckline break.  This  is in the region of 81.50 hence why I have a smaller Touch Barrier trade for price to hit 81.50 before COB on 21st May.

The reason for the smaller trade size on the second position is due to the fact that whilst I believe price will drop who’s to say whether it will make 81.50.  I have given it a good time length so we shall wait and see.

Personally I prefer the No Touch Barrier trade. I seem to find it easier to pick areas where I believe price is unlikely to go within a set time parameter.

Anyway we shall wait and see over the next few weeks what happens with the AUDJPY, will its decline reach 81.50?  Will price manage to stay below 86.20?  As always I have no-idea, I shall just watch and wait and see what plays out.

Hopefully you can see how by combining a good knowledge of Technical Analysis and an understanding of probability you can use Binary Options to help you take low-risk positions in the market.

Until next time, trade well.