Support and Resistance Background
Technical analysis can play a key role in options pair trading strategy, and one of the most commonly used tools is based on dynamic support and resistance. Support and Resistance can be implemented to Binary and Pairs , this section will focus on pairs. Just like in trading single assets, the idea is to identify support and resistance levels for each asset of the pair, and to draw conclusions on the relative performance of the pair. The support and resistance lines are the levels the stocks have historically difficulty to fall below (support) or to go over (resistance).
Support and Resistance as a Pair Options Strategy
- When one stock hits a resistance level, and the other stock in a pair does not, it is likely that the stock that does not near resistance will outperform the other.
- When one stock hits a support level, and the other stock in a pair does not, it is likely the stock that does approach a support level will outperform the other.
How to identify Support and Resistance lines?
Identifying support and resistance levels can be done based on using technical charting software or by following the charts of Stockpair.