Technical indicators are among the best tools when it comes to making correct predictions about market movements. In comparison with other tools that can be used for the same purpose, like trend analysis or candlestick charts, technical indicators in binary options come out on top because it is easier to learn how to use them. They can quite simply be grasped much more quickly. This, of course, makes them especially well-suited for inexperienced traders.
Technical indicators in binary options are data sets that are generated by computers. They evaluate previous market movements from one specific angle. If you, as a binary trader, analyze these data sets and how they perform over time, you can gain insights into what has occurred so far in the market. These insights can give you a good idea about what is likely to happen in the future.
There is a plethora of different indicators. They all rely on different data and use different methods for showing their analysis. Some indicators vary somewhat, whereas others follow a completely different logic of their own.
Here on our site, we will show you the technical indicators that will serve you best as a binary trader. Each indicator has an article describing its features, and explaining how you can benefit from it in our trading.
What you need to understand from the beginning, is that technical indicators form a part of technical analysis. They are based on the same fundamental premise, that the price of an asset encapsulates all that you need to know about the asset in order to make a good trading call. Through the analysis of previous price movements, technical indicators are supposed to make very precise predictions about what will happen in the near future. These predictions can be used by you to in order to win binary options trades.
With a view to explaining how this works, let us begin by using the moving average, a very popular technical indicator, as our example. The moving average is simple enough: it draws a line on a price chart showing you the average price for any given asset. This line represents some crucial truths about the market.
Trading the moving average can be done using a basic approach. Simply invest in a low option when the moving average changes its direction from upwards to downwards, and conversely invest in a high option when the moving average changes direction in the opposite way. Another possibility is to wait for the market to intersect with the moving average, and invest in an up / down option at this point.
Be aware that the moving average will react slower to changes in the direction of the price, the more previous price movements you include in the moving average. This is something you need to keep in mind because some strategies will require a more agile moving average than others.
There are binary strategies that involve the combination of more than one moving average. In such cases the moving averages will have different time frames. You can for example use one moving average with 45 candlesticks combined with a moving average of the last 15 candlesticks. By doing this your price chart will have two lines than will intersect on a regular basis. This will provide you with binary signals:
This is a very simple sort of strategy. You simply need to make sure to use an expiration time that fits with the time frame you operate with for your price chart. Otherwise, signals generated in this way are reliable with little chance of errors being made.
This is in contrast with trends and candlestick formations where there is room for interpretation as to whether a trend or a candlestick formation has really been formed by the market. With technical indicators it’s either there or it isn’t. No wiggle room. No ambiguity. That’s why they are so easily understood and interpreted. You simply have to know how to make the signal and to respond accordingly. You won’t find an easier binary options strategy than this.
Technical indicators in binary options must be calculated using a software solution. You can obtain this service in one out of two ways:
When you decide between these two options, you really need to take your level of experience and knowledge of technical analysis into consideration. If you have a lot of experience, it might be a good idea to enjoy the higher degree of control you have when you do your own analysis. For novices, subscribing to a signal provider might be a better fit.
You can read more about technical indicators in binary options in other articles on the site.