Strategy – The Momentum Strategy
Using the momentum indicator is an excellent way to determine how fast the asset’s price is moving upwards or downwards.
Learning to use the indicator can help binary options traders estimate an asset’s price in the future and make profitable trades. It is also a great method of picking the right type of Binary Option.
The momentum of an asset can be analyzed in different ways:
- Process-oriented analysis: The momentum is analyzed by considering every period and calculating the distance it has moved on average. Many indicators calculate this value differently, but the most popular indicator of process-oriented analysis is the Average True Range.
- Relative analysis: A few indicators of momentum compare the price’s current movement to the asset’s historical average momentum. These indicators enable you to understand if it’s the right time to use a binary option and attempt to make profits. If there are strong movements in the asset’s price, you will be able to make super profitable trades if you can manage the high risk. You can also choose to trade assets with smaller movements and low risk to make smaller profits.
- Absolute analysis: These indicators compare the current price to the asset’s price in the past while ignoring everything in between. The momentum indicator is the most popular tool for absolute analysis and compares the last period’s closing price to the asset’s closing price 14 weeks ago.
You will see the result of these indicators’ calculations as a percentage value with the baseline being 100.
Using boundary options is one of the best ways to leverage the momentum and win trades. In fact, they are the only options type that will let you win a trade based only on the momentum.
Since the two target prices in boundary options are equally far away from the current market price, you don’t have to worry about the direction in which the price is going.
As long as the price is moving fast enough, you will make money.
