Each Binomo trading strategy is based on analysis after reading the charts. The most popular chart on the platform is Candle, which consists of a body and shadows. Let’s learn how to trade effectively on Binomo using the Japanese candlestick shadow technique.
About Japanese candlesticks
The Japanese candlesticks is a technical analysis tool that assists traders in reading and analyzing the price movement of assets. The candlesticks chart on Binomo shows several continuously moving candles in different colors and sizes. The red ones are bearish, and the green ones are bullish.
On the Binomo candlestick chart, you can see the body and shadows of the candle. The body is a hollow or filled part of it. The lines above and below the body are shadows of the candlestick. The charting candlestick technique uses the wick or shadow of a candlestick to provide Binomo traders with a detailed analysis of the direction in which an asset’s price is moving.
Shadows indicate where an asset’s price has fluctuated relative to the opening and closing prices. A candlestick with a shadow gives a trading signal in two cases:
- the price moves sideways and reaches the support/resistance level;
- the price breaks through the support/resistance level. It forms a trend and again tests the level.
As part of education on Binomo, you can see how a candlestick chart is formed thanks to a demo account.
Trading with the shadows of the candles on Binomo
Now that you know what Japanese candlesticks are, let’s look at how you can use their shadows in your Binomo trading strategy:
- Login to your Binomo account and select an asset to trade.
- On the left side of the screen, you will find four icons depicting the timeframe, chart type, trading tools, and drawing tools.
- Click the chart icon, and then select Candle from the four options. Red and green candlesticks will appear on the screen.
- Choose a timeframe (from 5 seconds to an hour).
- Select the indicator you want to use for analysis.
As we said, there are two situations where you can use candlestick shadows to determine when to enter a trade. Let’s look at these situations that usually arise when trading on Binomo using a candlestick chart.
Note! A 5-minute chart is the most widely used time interval using the candlestick shadow technique on Binomo.
Situation 1. The price moves sideways
A sideways trend is when the price moves horizontally due to equal forces of supply and demand. In a sideways trend, the price moves in a narrow band, neither upward nor downward. It typically occurs during consolidation, and the price tends towards a prior or a reverse trend. A sideways price trend is also known as a “range-bound“ or “horizontal trend”.
Long candlestick shadows often appear at the end of a trend before the price reverses, forming a new trend in the opposite direction. Short candlestick shadows show that most of the asset’s trading activity occurred between the period’s opening and closing prices.
Suppose the situation when it is worth opening a buy position:
- Draw a support line when the price is moving sideways to see a signal to open a trade.
- Wait until a candlestick with a long downward shadow touches your support line.
The opposite situation is when a candle with a long rising shadow appears at the resistance level. In this case, it is worth opening a short trade.
Note! If you use a 5-minute chart, the trade expiration time should be 5 minutes.
Situation 2. A breakout of the meaningful zones
A breakout refers to a situation where the price of an asset breaks through areas of resistance. Breakouts are an essential indicator that confirms price direction. For example, an upward breakout of a candle may indicate that the price will start to move higher. You should open a short position when the price touches the shadow of the previous downward candlestick shadow closest to the breakout point.
Conclusion
The Binomo candlestick trading strategy for fixed-time trades is the most widely used. It is practical and one of the best techniques available on the Binomo platform. The candle chart display offers a quick overview based on the color, size, and number of candles. It helps traders to enter into quick trades and get an opportunity to earn additional income. To check it out, go to the Binomo demo account now.
Do not forget that trading always involves the risk of losing funds. Before switching to a real account, you must learn how to choose the best indicators, read candle shadows, and test trading strategies on your Binomo demo account.
