The Knock-On Effect Strategy is the primary principal of all binary option strategies for trading binary options, a strategy that each and every trader should be developing. The Knock-On Effect Strategy goes also by the name Market Pull strategy, is a binary option strategy which makes a lot of sense and is very easy to understand.
Moreover, is this Strategy popular for being easily adjustable; by offering several adjustable ways for all types of underlying assets, which that every investor should develop; it offers numerous adaptive possibilities for all kinds of assets, and can be modified and embraced and adopted so can be configured to be shape-up for each traders personal preferences, needs and goals.
The Knock-On Effect Strategy is highly beloved with professional traders as well as newbies. Though in order to use this Strategy, the trader must have an extensive vision and understanding of financial markets and the Strategy must be implemented effectively.
The concept of the Knock-On Effect Strategy
The prices of the underlying assets are moving based on several things like news in the financial markets, political events, company’s announcements, reports and decisions made. Those broadcast and happening involve a number of perspectives of business and politics and it’s more common that a single event won’t affect the whole market rather than the price of a single underlying asset.
This is where the concept of Knock-On-Effect Strategy comes in place!
The 1st thing you need to do in order to apply this Strategy, is to build correlations between the 2 assets you want to trade because one large movement in the price of one underlying asset will automatically effect the price of one correlated underlying asset.
Here are a couple of the more common and strong correlations which include for example, the correlations between currencies and commodities like the US Dollar vs. Gold – When Gold is rising, the US Dollar is falling and the other way around. This Strategy can be used on any 2 given underlying assets you would like to trade. Those can be Stocks, Currencies, Commodities or Indices
What makes this Strategy so great, is that you can create your own correlations, based on what interests you in the market.
The Knock-on Effect Strategy Analysis
It’s crucial for you to know and understand the financial markets inside out previous to making your correlated estimations by using the Knock-on Effect Strategy.
The Knock-on Effect Strategy combines both technical and fundamental analysis. In the Fundamental analysis you need to identify a major event that will greatly impact the price of the underlying asset you chose and in the Technical analysis you need to compare the historical price range between the 2 underlying assets you chose. The longer you’ll monitor the 2 underlying assets you chose, the more accurate your prediction about their price movements will be.
What made this Strategy so popular among professional traders as well as newbies, is the double profit opportunity of this Strategy.