Adherence to tradition

___

Adherence to Tradition

Adherence to Tradition is a binary options trading strategy built on the statistical observation that certain price patterns and market behaviors tend to repeat themselves over time. It’s rooted in the idea that market psychology, while complex, often exhibits predictable cycles and reactions to specific stimuli. Unlike strategies focused on rapid profit or complex indicators, this approach emphasizes patience, disciplined execution, and a respect for established market norms. It’s a conservative approach, typically suited for traders who prefer lower risk and consistent, albeit smaller, returns. This article will explore the core principles, implementation, risk management, and limitations of the Adherence to Tradition strategy.

Core Principles

The foundation of Adherence to Tradition lies in several key principles:

Historical Recurrence: Markets aren’t random. While unpredictable in the short-term, they demonstrate tendencies to repeat patterns seen in the past. This isn't simply about identical charts appearing – it’s about similar conditions eliciting similar responses.
Psychological Levels: Certain price levels act as psychological barriers for traders. These can be round numbers (e.g., 1.0000 in EUR/USD), previous highs or lows, or levels identified through Fibonacci retracements. When price approaches these levels, predictable behavior often occurs.
Time-Based Cycles: Markets often exhibit cyclical behavior, influenced by factors like economic reporting schedules, seasonal trends, or even the trading week itself. Understanding these rhythms can provide an edge. See also Candlestick patterns for visual representations of these cycles.
Confirmation Bias Mitigation: The strategy actively discourages chasing quick profits or reacting to every market fluctuation. It prioritizes confirmed signals over speculation, minimizing the impact of emotional trading.
Statistical Edge: The strategy aims to identify situations where the probability of a particular outcome (Call or Put option) is demonstrably higher than 50%, creating a statistical edge for the trader.

Identifying Traditional Patterns

The Adherence to Tradition strategy relies heavily on recognizing recurring patterns. Here are some common examples:

Support and Resistance: Perhaps the most fundamental pattern. Identifying strong support levels where price has historically bounced and resistance levels where price has consistently stalled is crucial. Trading a *Put* option when price approaches resistance and a *Call* option when it approaches support, with appropriate confirmation, is a core tactic. Consider also trend lines as dynamic support and resistance.
Breakout Retests: When price breaks through a significant resistance level, it often *retests* that level (now acting as support) before continuing its upward trajectory. A *Call* option can be placed on this retest, expecting price to continue higher. Similarly, a breakdown of support followed by a retest can signal a *Put* opportunity.
Double Tops and Bottoms: These chart patterns suggest potential trend reversals. A double top indicates a likely move downwards (potential *Put* option), while a double bottom suggests an upward move (potential *Call* option). Chart patterns are essential for this.
Head and Shoulders: Another reversal pattern. The "head" represents a higher high (for a bearish head and shoulders) or a lower low (for a bullish inverse head and shoulders), flanked by two "shoulders." These patterns are strong indicators of trend changes.
Morning Star and Evening Star: These are candlestick patterns signaling potential reversals. A Morning Star suggests a bullish reversal (potential *Call* option), while an Evening Star indicates a bearish reversal (potential *Put* option).
Weekly/Monthly Patterns: Observing patterns that repeat on a weekly or monthly basis can reveal longer-term trends and provide opportunities for higher-probability trades. Analyzing market seasonality is essential here.

Implementing the Strategy

Implementing Adherence to Tradition requires a structured approach:

1. Asset Selection: Choose assets (currency pairs, commodities, indices) with a history of predictable behavior. Major currency pairs like EUR/USD, GBP/USD, and USD/JPY are often preferred due to their high liquidity and established patterns. 2. Timeframe Analysis: This strategy is often most effective on higher timeframes (e.g., 15-minute, 30-minute, 1-hour charts). This filters out short-term noise and focuses on more significant patterns. 3. Pattern Identification: Identify potential trading opportunities based on the patterns described above. 4. Confirmation: *Crucially*, do not execute a trade solely based on pattern identification. Require confirmation from other indicators:

   * Volume Analysis: Increasing volume during a breakout or retest strengthens the signal.  Volume indicators like On Balance Volume (OBV) can be helpful.
   * Moving Averages:  Use moving averages (e.g., 50-period, 200-period) to confirm the trend direction.
   * Relative Strength Index (RSI):  RSI can help identify overbought or oversold conditions, potentially indicating a reversal.
   * MACD:  The Moving Average Convergence Divergence (MACD) can confirm trend strength and potential reversals.

5. Option Selection: Based on the pattern and confirmation signals, choose a *Call* option if expecting price to rise or a *Put* option if expecting price to fall. 6. Expiry Time: Select an expiry time that aligns with the expected duration of the pattern. Shorter expiries (e.g., 15-30 minutes) for faster patterns, longer expiries (e.g., 1-2 hours) for more extended patterns. 7. Investment Amount: Allocate a fixed percentage of your trading capital per trade (e.g., 1-2%). This is a key component of risk management.

Risk Management

Adherence to Tradition, while relatively conservative, still carries risk. Robust risk management is essential:

Stop-Loss (or Trade Selection): Because this strategy focuses on high-probability trades, a traditional stop-loss is less common. Instead, the focus is on *not entering* trades that lack sufficient confirmation. The selection criteria act as the primary risk control.
Capital Allocation: Never risk more than a small percentage of your trading capital on any single trade.
Diversification: Don't rely solely on this strategy. Combine it with other approaches and diversify your trades across different assets. Explore strategies like Range Trading or News Trading.
Emotional Control: Avoid chasing losses or deviating from your trading plan. Stick to the confirmed signals and resist the urge to speculate.
Demo Account Practice: Thoroughly practice the strategy on a demo account before risking real money.

Example Trade Scenario

Let's illustrate with a Support and Resistance example:

**Asset:** EUR/USD
**Timeframe:** 1-hour chart
**Observation:** Price has repeatedly bounced off the 1.0950 level (identified as support) over the past few weeks.
**Current Situation:** Price is approaching 1.0950 from above.
**Confirmation:**

   * Volume is increasing as price nears 1.0950.
   * The 50-period moving average is trending upwards.
   * RSI is approaching 30 (oversold territory).

**Trade:** Buy a *Call* option with an expiry time of 30 minutes, anticipating a bounce off the 1.0950 support level.
**Investment:** 2% of trading capital.

Limitations of the Strategy

Despite its strengths, Adherence to Tradition has limitations:

False Signals: Patterns can fail. Support and resistance levels can be broken, and breakouts can be false. This is why confirmation is critical.
Market Volatility: During periods of extreme volatility (e.g., major news events), patterns can be disrupted, and the strategy may be less effective. Consider Volatility analysis during these times.
Subjectivity: Pattern identification can be subjective. Different traders may interpret charts differently.
Time-Consuming: Identifying and confirming patterns requires patience and careful analysis.
Lagging Indicator Reliance: The reliance on indicators like moving averages means the strategy can sometimes lag behind price action.

Advanced Considerations

Combining Patterns: Look for confluence – situations where multiple patterns align. For instance, a breakout retest occurring at a significant Fibonacci retracement level.
Multiple Timeframe Analysis: Analyze patterns on multiple timeframes to gain a more comprehensive view of the market.
Backtesting: Use historical data to backtest the strategy and evaluate its performance. This helps refine the rules and identify optimal parameters.
Adaptive Strategy: Be prepared to adapt the strategy based on changing market conditions.

Conclusion

Adherence to Tradition is a solid, conservative binary options strategy that emphasizes patience, discipline, and respect for established market principles. While it's not a guaranteed path to profit, it offers a statistically sound approach for traders who prefer a lower-risk, consistent trading style. Remember that diligent pattern identification, thorough confirmation, and strict risk management are paramount to success. Understanding the limitations of the strategy and continuously refining your approach are also crucial for long-term profitability. Further research into technical indicators and market analysis will undoubtedly enhance your application of this strategy.

Recommended Platforms for Binary Options Trading

Platform	Features	Register
Binomo	High profitability, demo account	Join now
Pocket Option	Social trading, bonuses, demo account	Open account
IQ Option	Social trading, bonuses, demo account	Open account

Start Trading Now

Register at IQ Option (Minimum deposit $10)

Open an account at Pocket Option (Minimum deposit $5)

Join Our Community

Subscribe to our Telegram channel @strategybin to receive: Sign up at the most profitable crypto exchange

⚠️ *Disclaimer: This analysis is provided for informational purposes only and does not constitute financial advice. It is recommended to conduct your own research before making investment decisions.* ⚠️

Adherence to tradition

Contents