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Binary options charts

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Binary options charts

Published on July 29, 2015

Binary Options Charts

By their nature, binary options are reasonably short-term investments that require a great deal of scrutiny and attention. Because of this, analysing and interpreting binary options charts is extremely important to the success of any trader, as it will be hard to be profitable without knowing the ins and outs of chart reading and technical analysis. Binary options charts do not have to be intimidating and you can be a successful trader by learning how to use charts to assist in your overall trading strategy.

Time frame

Since binary options trading is generally done in an relatively short-term time frames (generally days, hours, or even minutes), it is important to analyse charts in a given time frame that is in-line with your trading style. For instance, if you wish to trade a binary option for an asset that expires in one hour it is most likely not useful to look at a chart for that asset with a five year long time frame (though this is an extreme example, it illustrates the point). Charts can be broken up into timeframes as follows: 1 minute, 5 minute, 15 minute, 30, 45, 60, 90, daily, weekly, and monthly.

It can be advantageous to use multiple time frame charts when examining a possible binary option trade. When doing so, make sure to look at the longer time frame chart first because it will give you the overall longer term trend at which point you can then scrutinise in a smaller time frame chart, the exact entry point you wish to get in the trade. For example, if the daily chart is showing bullish signals but the weekly chart is showing bearish signals, wait for the daily to turn bearish before placing your trade. This way there will be less of a chance of the trade turning against your position, which could ultimately result in a loss.

Types of Binary options chart;

Candlestick charts

Traders have found that over time market trends generally are a reliable predictor of future events. Looking at these indicators on a candlestick chart will allow you to decide whether it is the right time to buy or sell your binary option. Candlestick charts are a great mix between a line chart and a bar graph, making a combination that presents more information than is typically available in a chart. The name “candlestick” comes from the thin bars at the top and bottom, that display the opening and closing price, as well as its high/low range (resembling the wick of a candle). These candles are arranged along a chart, similar to a simple line graph. The ‘wicks’ and their relative length, can add additional information about trader sentiment.

A candlestick chart does a great job of alerting traders to whether buyers or sellers are currently holding strong in the market of a particular asset. Additionally, utilising a candlestick chart along with several technical indicators can push your trading strategy to the next level.

Binary options charts

Chart indicators

There are so many chart indicators to choose from it can make your head spin. Technical analysis is a huge subject, and one with very few definitive answers. All charts are useful in their own way, so it is important to understand how and when they should be used in your trading strategy. Let’s take a look at a few of them to give you an idea of how they can be utilised in binary options trading. Moving averages – Many binary options traders utilise moving averages heavily. Some have even built trading strategies that revolve around asset prices crossing over moving averages over time. A moving average is a trend following indicator that is based on the historical price of an asset. Moving averages can be calculated in two ways, one in which all historical prices are weighted evenly ( Simple Moving Average ) or another in which more weight is given to more recent prices ( Exponential Moving Average ). Bullish and bearish signals are evident when the price of an asset crosses over its moving average, or when there is historical support of the price in relation to a moving average.

Moving average convergence divergence (MACD) – MACD is the trend indicator that displays the relationship between multiple moving averages of an asset (the most commonly used values are 12, 26, and 9 day moving averages). Over time the MACD can display strong bullish or bearish signals depending on when the price of the asset and the MACD indicator are diverging, the MACD is rising dramatically, or there is a crossover of the MACD indicator and the signal line.

Stochastics – An indicator that compares an assets closing price to its price range over a given period of time. The theory behind stochastics is that in an upward-trending market, prices will usually close near their highs, and during a downward-trending market, prices will close near their lows. Stochastics are generally displayed in a number between 0 and 100, or -100 and 100. Traders begin to take note, once values move beyond 80, or 20 – assuming the scale is 0-100.

A warning before trading with binary options charts;

While binary options charts can be extremely useful in determining entry points for binary options traders, and can provide valuable insight to the historical performance of an asset, they must be understood completely in order to be fully utilised. Additionally, charts should not be the only resource traders’ use when determining how they wish to trade. It is also important to not let emotions get in the way of what charts are displaying. If the moving averages have a significant trend to the downside such as a downward cross, don’t let your emotions tell you that this doesn’t matter. The indicators tell a story that as a trader you must listen to. Utilising charts can be very rewarding when done correctly, but you must first educate yourself and determine which patterns and technical indicators you prefer to use in your trading strategy . Each trading strategy will be as individual as the person using it, so there are few ‘right and wrong’ answers when it comes to charting.

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Written by: J.M. Porup

Novelist J.M. Porup is An American Dissident in Exile. Read More

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