Market geometry is really the old fashioned way that traders used to perform technical analysis, going back to a time to when indicators and the other modern and fashionable trading tools were not popular or well known.
The principles of market geometry are based on being able to identify the areas of consolidation to the left of the chart and being able to project them to the right of the chart with the purpose of identifying the strongest levels of support and resistance.
However, it is also possible to use market geometry to find identical moves in terms of the speed at which the price in travelling when it is compared with a particular line. Some people believe that future price action will be based on the previous behaviour of the markets and if that is the case, nothing is more valuable to a trader than market geometry.
Recommended Binary Options Brokers
|Rating||Broker||Bonus||Min. Deposit||Open Account||Read Review|
|utrader||200%||$250||Open Account||Read Review|
|expertoption||100%||$100||Open Account||Read Review|
|finpariapproved||100%||$250||Open Account||Read Review|
|opteck||100%||$250||Open Account||Read Review|
How Does Market Geometry Work?
Market geometry is not about Elliott Waves Theory, or about looking at indicators or even counting waves, it is only about looking at the way the asset price has reacted during the past and then making an educated guess about the way it is going to react in the future.
In binary options trading, there is a saying which states that what appears on the left of a chart is free information and this must be projected to the right side to make a reasonable forecast about where the price is likely to go. This is entirely true, and is especially valid when taking into account the field of market geometry.
Market geometry is actually the original method that traders used in the past when they would look at prices and try to predict the changes that may occur. It is even often said that technical analysis is actually guided more by previous price actions than by any indicator that the traders may use.
What to Look for in Market Geometry
Something that should be considered when analysing a chart from a market geometry viewpoint is that areas of support and resistance are not just horizontal, they can form dynamic areas too. A trader should identify any isolated spikes that an asset price is forming, perhaps with an Andrew’s Pitchfork tool, and look for a pivotal area. Beginning with the lows of any time frame and identifying two further pivot points, a trader will find a bullish Pitchfork which means that its median line should attract the market price, acting as a pivotal area. A spike above this median line will give the trader the chance to measure it and project that outcome onto future prices. Once the market reaches that level, they should then purchase call options with an expiry date that is appropriate for the time frame on which they are performing their analysis. Of course, should the Pitchfork be a bearish one, the trader should do the same, but with put options instead of call options.
Market geometry is also applicable to patterns, which can also be projected to the right of the chart. For example, when measuring the time required for a particular pattern to form and then projecting it to the right of the chart, a trader can trade a counter trend, and once the time has expired and the levels have been reached, they can then trade options in the opposite direction.
It is also possible to use market geometry to attempt a trade when the market reaches round numbers. This is called quarters theory and requires a range to be divided into four smaller ones, with the outcome representing strong levels of support and resistance. It is normal that the asset’s price will react at these levels and act like resistance or support.
Other educational articles
- What is the Trend Following Binary Options Trading Strategy?
- Use the Straddle Strategy for a Possible Put and Call Double-Win
- How to Use a Risk Reversal Strategy to Avoid a Large Part of Your Risk While Trading Binary Options
- What is the Pinocchio Binary Options Trading Strategy?
- How to Use Hedging Strategy to Manage Risk Effectively in Binary Options Trading
- Using Fundamental Analysis in Binary Options Trading
- Is It Possible to Successfully Trade a Flat Market in Binary Options Trading?
- “Market Partitioning and the Geometry of the Resource Space 1.” Peli, Gabor, and Bart Nooteboom. American Journal of Sociology 104, no. 4 (1999): 1132-53.
- Multifractal geometry in stock market time series. Turiel, A., & Pérez-Vicente, C. J. (2003). Physica A: Statistical Mechanics and its Applications, 322, 629-649.