Binary trading is all about making predictions regarding the future, short-term price movements of a given asset. In order to do this successfully you need to form an exact picture of an asset’s market movements – quickly and confidently. Lean all you need to know about price charts here.
Traders do this by studying price charts that map how an asset’s price has been moving. To the novice trader such charts can seem confusing and bewildering.
To the successful binary trader, they paint a compelling and informative picture that can point the way to great riches.
Continue reading below the table…
All price charts have the same aim: to let you see how the price of an asset has been developing. This can be done in a number of different ways.
There are many different types of price charts. They can contain different information, or they can display the same information in different ways.
Some of the most popular price charts used in binary trading are as follows:
This is the very most basic sort of chart. It is a diagram where the price of an asset is presented as a line.
As with all price charts you can choose different timeframes also for a line chart. The shorter the time frame, the more squiggly the line will appear as it will show the constant fluctuations of the market more clearly.
Whereas the line chart only tells you what the price of an asset was at any given time, presented as a squiggly line, a bar chart contains much more data.
This additional information is of great use to binary traders. Seeing as the line chart contains such limited data, it is generally of very limited practical application in binary options trading.
A bar chart shows you a series of vertical bars instead of a continuous line. Each bar on the chart represents a certain trading interval, for example 15 minutes, 30 minutes and so on.
The extension of the bar from top to bottom tells you the price range that the asset was traded for during this period. The top of the bar shows you the max price, the bottom the minimum price.
Each bar also has two small horizontal lines – one pointing to the left, and one pointing rightwards. These two lines tell you the opening price and the closing price during the trading interval, respectively.
In other words, one bar lets you know 4 important things about the price of the asset during the relevant timespan:
A knowledgeable trader will find these bits of information to be very valuable when making predictions about future price movements.
A candlestick chart is the most popular form a chart for use by binary traders. There are three reasons for that:
A candlestick is the same, basically, as a bar chart, only instead of a vertical line with two small horizontal lines, you have a body and a wick.
The body is a thicker line. It represents the distance between the starting price and the closing price of the asset within the chosen timeframe.
The wick is a thin line that can protrude from the top and/or bottom of the candle. A wick extending from the top represents the maximum price the asset was traded for, a wick at the bottom represents the minimum price.
If the price was moving down during the candlestick’s timeframe, its body will be black. If it was moving up, its body will be white. For a black (bearish) candle, the top represents the starting price, the bottom the closing price. For a white (bullish) candle the opposite is true.
Candlestick charts can contain any number of different candlesticks. By studying theses you can obtain a tremendous amount of useful information very quickly, and get an exact picture of ongoing price movements. Experienced traders can make very precise predictions based on complex candlestick charts.
This sort of chart originated in Japan, but has since become the standard graphical demonstration of price movements in many countries the world over.