How do you trade a bear trap with OTM binaries and Cumulative Delta Volume Analysis? Earlier this morning I wrote about the bear trap setting up on the Nadex Market News site. In this video, Gail Mercer, founder of TradersHelpDesk, shows you how to identify these setups and then use an OTM binary to enter for maximum reward and low risk.
How to Trade a Bear Trap with OTM Binaries and Cumulative Delta
While there can many small bear traps on a 15-minute chart, I like to trade the bigger ones. In this example, the trap had been sitting up over the last 24 hours. Why did I know to watch for the bear trap? Because the higher timeframes were oversold and we have market news in the next 24 hours. The first low was formed yesterday morning around 7:30 am EDT. Price had went back to test this area multiple times but each time I noticed that buyers were coming in on the Cumulative Delta Volume Analysis chart. Unlike other volume indicators, the Cumulative Delta and Directional Volume indicator shows you the behind the price bar scenarios that are playing out (I spoke about this on the TFNN Bull Bear Binary Option show yesterday).
What happens when the buyers traps the sellers? A big move to the upside. In this case, the risk on the trade was $26.50 and the reward (as of 7:46) was $63. That is why trading these traps can be very lucrative for binary option traders.