Binary Options Indicators

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5 Best Indicators for Trading Binary Options that you can’t afford to miss

When it comes to trading, there are numerous indicators of binary options available. With so many indicators available people often get confused about the best indicators for binary options. Many people don’t understand what an indicator is; mainly because of lack of information available it. With wrong information or awareness about indicators, it can often lead to making a wrong trading choice and indulging into Binary Options Scams.

This article will help you gain knowledge about indicators for binary options. Even though trading indicators are mainly built for Stock markets and Forex but still they can be used for binary options trading as well. At the end of this article, you will have a clear understanding of indicators for binary options and related Binary options FAQ.

What are Binary Options trading indicators?

Trading indicators for Binary options are mathematic values plotted in a chart. The value of prices can be of different levels. For example- Price can be 3 main levels namely opening price, closing price and High Low a.k.a. OHLC code. As you go through the article, various indicators are derived mainly from prices and there is no exceptional thing about indicators.

Use of binary option indicators

The investor must understand that market is never a straight line and is impacted by various ups and downs. The market follows the trend only 20% and keeps moving away from the market trend almost 80%. Hence, in such a market the best thing to do for safe investment is to follow different trends. However, the choice of a trend for studying the market is also important as based on these trends, the best market study can be made and investments can be done.

Technical indicators for binary options

The indicators are elements of technical analysis. These indicators work on an assumption that all information about the asset is related to price. Herein, past price movements are used as a basis to make future predictions with respect to the movement in the market.

Moving average convergence divergence

The difference between moving averages is plotted on the histogram, based on which forecast is made for price direction. It is best to use this indicator in a combination of other indicators. Like for example if you are able to see a buy signal on MACD and along with it a bullish crossover is seen, then it is probably the best time to purchase a call option.

Oscillators

It is considered as one of the excellent indicators of binary options trading, with the help of which overbought and oversold levels can be studied. A separate window is used for plotting and it is also plotted on different price calculations. During uptrends or oversold levels, it is preferable to buy a call option while in the case of a downward trend or overbought levels, purchasing a put option are feasible.

Volatility indicators

In most of the cases, it makes use of high or low and in some instances open and close prices. In this indicator, the binary options indicator is plotted on the chart and then overlaid on the price. One of the most famous examples of volatility indicator is Bollinger band. With this indicator, both support and resistance level can be calculated and used for trading in binary options.

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Cycle indicators

It is a bit complicated trend indicators, majorly because it is plotted on cycles, peaks, retracement dips, rallies and also the troughs. Often, users confuse this indicator with oscillators and treat it as an overbought or oversold indicator. It is quite useful for identifying start or end of retracements.

While above indicators represent the in-depth picture of the market and how trading in binary options needs to be done in the market, there are also indicators which can be followed by beginners to enter the market and begin by making small investments in binary options.

Zig zag indicator

It is one of the simplest indicators and can be used as a meta trader platform. The zig zag lines on the chart represents, ups and downs in the market which can be used by investors for investing or trading in binary options. It is quite easy to understand, which is why it is termed as an indicator for beginners.

Daily pivots indicators

It is a simple indicator which shows daily pivot levels in the market. With this indicator, S & R levels can be studied which are useful for making a correct investment in the market

Two Powerful Trading Indicators, and How I Use Them

Price is the ultimate indicator. Regardless of what indicator you use, it won’t tell you more than the actual price movement itself, because all indicators are derived from price. I prefer to trade without binary options indicators, since the price itself is what I trade. With that said, indicators do present price information in a different way, which can help us isolate moves or underlying strength or weakness we not see on the price chart. While I generally trade indicator free, but here are my two favorite indicators which I do use on occasion to clarify moves, hone in on high probability trades and help filter out the bad ones.

Average True Range (ATR)

By far the indicator I use the most. Simply put, ATR is the amount an asset moves in the day.

The indicator takes an average over a number of days (or bars), such as 10 or 20, to give you a representation of daily price movement of the asset. The average is based on the largest following number: Current High minus Current Low, Current High minus Previous Close or Current Low minus Previous Close. Luckily the indicator tool within your trading platform will calculate this all for you, so all you have to is look at the current indicator reading.

Figure 1. EUR/USD Daily with ATR

Source: Oanda – MetaTrader

Figure 1 shows the ATR over ten days–shown as “ATR (10)”– for the EUR/USD on Daily bars. Therefore, the current reading of 0.0099 means the EUR/USD is moving on average 99 pips per day. If you used a 5 minute chart, the reading you get would be a 10 period average of how much the EUR/USD moves in a 5 minute period.

So how does this reading help you make better trades? Assume it is near the end of the day, and the EUR/USD has already moved up 140 pips on the day and you want to take a long trade. Do you take it?

Maybe, but only if you believe something important is going on. Since the average daily movement is about 99 pips, it is quite likely that the EUR/USD is bit overextended (at 140 pips), having already moved well beyond average. That is not too say that if you go long/buy calls you won’t make money, but it does make you sit back and examine the trade to make sure it is worth taking.

I generally use this indicator as a filter. While wide ranging days happen (much larger than average), I like to trade based on statistics. If I get a signal to go long or short on an intra-day trade, and the asset has already moved well beyond the average, I will usually skip it and look for another trade which has more room to run.

Relative Strength Index (RSI)

Known as an oscillator, this indicator fluctuates between 0 and 100 and measures the speed and change of price. If you have watched business news or read some technical comments from traders, you will often hear the words “Overbought” or “Oversold.” While the speaker may be addressing something else, often technical analysts are referring to the current RSI reading when they use these words. A reading above 70 is typically overbought, while below 30 is oversold. Once an asset enters these area, a reversal is usually not far off.

But to me, timing is important and therefore standard overbought/oversold RSI readings are pretty much useless. For one, in a strong uptrend, the reading will be frequently above 70, but yet you want to be long most of the time. Same goes for a downtrend; the RSI will frequent the area below 30 and yet you want to be short/buying puts during downtrends.

I prefer to use the RSI in a “relative” fashion; comparing current RSI readings in uptrends to past uptrends, and current RSI readings in downtrends to past downtrends. This concept comes from Constance Brown’s book Technical Analysis for the Trading Professional. What the author finds is that in downtrends the RSI generally stays below 60, and that in uptrends it generally stays above 40.

Figure 2. EUR/USD 4 Hour Chart

Source: Oanda – MetaTrader

In figure 2, notice how the RSI shifts; during the downtrend it often touches below 40 and rarely gets above 60 (red line). But when the trend moves higher toward the right hand side of the chart, the RSI doesn’t move below 40 (green line) and spends much of the time above 60.

This is an excellent method for confirming trends, although some tolerance is often required. The RSI may squeak just beyond the levels mentioned, or the levels used may vary slightly by asset.

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Indicators are derivatives of price. Generally I do not use indicators very much, as I prefer just to look at the actual price chart. Indicators can only provide this same price information, but may present it visually in a way that is preferable, or summarize the data for easier use. ATR is one such summarizing tool. It quickly gives you a number–the daily average range–you can work with. If an asset has moved well beyond its daily average range, it’s possible something important is happening, but more often than not I find the trade should simple be skipped if it requires the asset move even further.

The RSI presents price information in a different way, which can be quite useful for confirming trends or catching trend reversals. The RSI has different tendencies during downtrends than it does during uptrends. Typically in a downtrend the RSI stays below 60, and in uptrend stays above 40. When you notice the RSI shift from one tendency to another, the trend has likely reversed.

Indicators for binary options

Indicators for binary options — are technical analysis tools, which are based on historical data and the developed equations allow to predict further behavior of the trend. They determine the strength of the market, signal a trend reversal, help to determine pricing levels, etc. Large part of the simplest indicators inherent in trading platforms and beginners are recommended to use them with the settings set to default values.

How to make money on binary options indicators?

Binary options indicators — are helpers of the trader, which automatically determine the best positions to enter the market. Most often signals are their intersection with the price chart after a certain number of rising or falling candles. Periodically, the indicators need to be revised, since the market situation may change. There are indicators that work well in trending market, some are running on the flat – this feature should also be considered when forming a strategy. Indicators, that are profitable, represent a strategy that could escalate into a trading system

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How to make money on the use of binary options indicators:

  • study the principle of operation of the indicator until the formula. Without an understanding of its work the blind use can cause harm. Pay attention on what market situations and on what assets it works best;
  • test binary options indicator on a demo account, the estimated minimum number of winning positions can be calculated according to the formula: 1/(1+x), where x — % of profit in case of successful prediction;
  • try to put several indicators and see which bundle gives the most accurate results;
  • use oscillators – indicators of the signal confirmation, they often help to determine how the signal to buy or sell is strong and what is the direction of the trend;
  • if binary options indicator brings a loss, try to change its settings in different directions and capture the result in Excel table;
  • you should not use many indicators at once, this will reduce the number of entry signals and not really affect their accuracy. Some traders manage to earn using 1 indicator, but the optimal number is considered to be 2-4 indicators.

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