The indicators are a visual tool of technical analysis of the market. Even if you start with earnings based on the acquired signals, it is important to understand how trading systems that use them were created. By gradually gaining experience and developing an understanding of the principles of forecasting, you might want to become independent and increase revenue. The technical forecast is based on charts that are analysed with the help of various indicators. Signals discussed above stand out when using such tools. The intersection of several indicators or crossing a line of the graph, visually and mathematically represent a high probability of occurrence of an event, such as raising the price of gold. Therefore, they are signals based on which a trader will select the parameters of purchased options.
Choice of trading indicators
There are general principles of work with the indicators that allow dividing them into groups for an easy reading and sorting. They will become the basis for your successful trading.
For a better understanding let’s analyse another basic concept of exchange – trend, which is a certain tendency, pattern. For example, the rise in price of the euro against the dollar. Most of the indices are based on the trend. Each category of assets at a time can be expressed as a trend, as well as come unbalanced and difficult to predict as for the development and the outcome. In the absence of trends, there are other quite reliable method of analysis, there are special indices.
Indicators of trends
As their name implies, this type of indicators are linked to the existence of a trend, i.e. they help to calculate their own direction. We can assume that this is the more important of their kind. Trading by the trend, in principle, is a more sound strategy. It consists of betting on the decrease in prices at the time when the latter is already decreasing. And vice versa, when the price increases – buy an option for its further increase. The indicators provide a visual sign about the direction of the trend.
The indicator of Bollinger
This indicator exists for a very long time. This does not prevent it from being relevant and widely applicable today. It is convenient to build directly on the price chart. Three wavy lines forming it, at the intersection of the price, show the nature of the trend. If the topmost curve is crossed – the trend is up. If it goes past the bottom line- the trend is down. When it is in the middle, the market is stable. For most traders, the third option is a waiting period. Transactions are delayed until any new dynamics.
This indicator can be presented as such or as MACD histogram. Usually it is not much different in appearance from the Bollinger lines, it is also positioned on the price chart.
MACD histogram is especially useful for long-term options. In a small time interval it is irrelevant, it can even give a false signal. It looks like an independent chart, which is a set of vertical bars of various heights, crossing the horizontal line that displays the trend. Vertical lines length indicates the intensity of the trend. The more they rise above the horizontal line, the greater the price rise. The lower they go under, the lower will be the price.
It is more difficult to use, but the effort will pay off with high accuracy. Ichimoku indicator consists of five lines, which generate signals by their intersections. It is also placed on the chart and when crossing it, it shows important information. To be used for selection of the options, its signals must indicate the same. And, again, it is more precise for a longer time interval. The bigger the trend, the more reliable signals about it.
Indicators used off trends
Such indicators are called oscillators. They work well for binary options and are not really suitable for Forex traders. They do not give a clear picture of the rate of change in asset value. They will not tell you how many points will take the price. An oscillator only helps determine whether the price will go up or down. This is called “trade in the channel”, i.e. taking into account only the direction of movement. This is enough for purchasing profitable options.
It is perhaps the most simple and obvious indicator in binary options. It is also suitable for other markets. It compares the current prices with the price at the closing of the preceding period. Importantly, it shows the dynamics of prices in advance, allowing you to be “proactive”. Understanding the signal of the indicator is very easy. If its line after comparisons went up, it is a signal to buy, if it went down – for sale. In case of binary options, directly determined by the progress of indicator line, you have to select the increase or decrease in prices accordingly.
Stochastic can be applied only in a situation where there is no trend. Be sure to first check the trend indices. Otherwise, the received stochastic data will be unreliable and purchase based on them will lead to losses. On the chart the indicator is represented as a channel defined on both sides by the lines. Its result is also quite illustrative. When the price chart crosses the top border of the index it means the price is going down and the market is “overbought”. Crossing the bottom line shows that the market is “oversold” and the price goes up.
Indexes are good tools to assess the situation with the assets and to identify trends. They even allow trading in the absence of such. Having mastered them, the trader will be able to become independent and to get a stable income on the binary option market.