How To Properly Use Technical Analysis in Binary Options

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Top Binary Options Broker 2020!
    Best Choice For Beginners and Middle-Leveled Traders!
    Free Demo Account!
    Free Trading Education!
    Big Sign-Up Bonus!

  • Binomo
    Binomo

    Trustful Broker. Recommended Only For Experienced Traders!

Using technical Analysis in Binary Options

Once you start trading Forex more frequently, you will realize the importance of using technical analysis as one of your go-to tools for successful trading. I know, you are already aware that there is no way to accurately predict the way the market will move in a given time unless you are following the data releases, reading the current news, and doing your own market analysis.

All of these steps are vital ingredients to a successful trading method and technical analysis is one of them as well. You don’t have to be a professional or an experienced trader to use technical analysis to your advantage. All it takes is being focused on the task ahead of you and knowing what you need to look for when you are doing your analysis.

What is technical analysis?

The shortest and simplest definition of technical analysis is examining the past performance, identifying the trends, and using that information in order to predict the future movement of the market. Traders who use technical analysis in their everyday trading firmly believe that the history repeats itself and that they will be able to make a correct assumption as to where a trend is heading.

So, the final goal of technical analysis is not even focused on the current state of a trend, but solely on the steps you will take in the future, once you find and identify a pattern of movement. Yes, technical analysis requires patience and focus, but it is definitely one of the best ways of analysis out there. Learning how to apply it to your Forex trading will be valuable.

How to use technical analysis?

After you collect all the data you want to analyse and put it in front of you, you need to start examining the history of a certain movement. Besides these charts, you will also need additional information about the reasons the trend you are studying was moving in a certain direction. Therefore, combining the technical with the fundamental analysis is a must if you want to be correct with your predictions.

So, how do you properly use technical analysis for successful trading? First of all, you need to start with the last six months of data and information about a trend you are examining. Yes, even if you are a day trader or you only use scalping techniques. Having a solid insight is a must and even though it might look like a daunting job, it simply has to be done.

Secondly, after you have examined the charts and found the movement you were searching for, you need to compare it to the data about the volatility of the market at a given time. Perhaps there was a major event that made a trend act unusually. Or maybe an economic data release? And finally, once you have everything laid perfectly in front of you, you are ready to use those identified patterns in your future trading.

Technical analysis can be very precise and mastering it is not so hard. Of course, you need some time to learn how to conduct it in the best possible manner, but eventually you will realize that history truly repeats itself.

Technical Analysis

Binary options trading is popular in online investment world thanks to possibility to achieve high payouts while trading with assets, such as stocks, currencies, commodities and indices.

Traders in South Africa have on their disposal opportunity to use either technical or fundamental analysis to increase the chances of winning in binary trading.

In this article we will take a closer look of importance of technical analysis in binary options trading.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Top Binary Options Broker 2020!
    Best Choice For Beginners and Middle-Leveled Traders!
    Free Demo Account!
    Free Trading Education!
    Big Sign-Up Bonus!

  • Binomo
    Binomo

    Trustful Broker. Recommended Only For Experienced Traders!

How to Use Technical Analysis in Binary Options Trading?

Technical analysis is often used in binary options industry primarily because it is based on financial charts. Key element of successful trading with focus on technical analysis is having more knowledge regarding binary trading signals. If traders wish to achieve high returns, they should be able to identify the market trend and stay on the right track.

Trading on technical strategy can be awarding for traders in South Africa if it is used properly. First thing is to educate yourself to have enough trading knowledge to know when to place a trade and how to use different charts in the trading process.

If you are serious about trading binary options, then you need to be quite prepared for the trade itself. It is very true that only proper preparation can help you to earn a lot of money. That is why a lot of traders depend upon the technical analysis.

This is the analysis of the asset prices in order to find out about the future movement of the market. It is not something very easy, but if you are capable to do that, then you will be able to guess better. Your prediction will translate into better earning and a more money.

There are a few type of technical analysis available for the help of the traders and you are about to discover about them.

Trend Following

This is the type of technical analysis where the historical trend is followed to find out about the trend of the market.

It is thought that if the historical movement if the market can be read properly, understanding the present market will become a lot easier. Your prediction will have more depth and more confidence.

Momentum

Momentum in technical analysis is also known as the moving average convergence divergence. Under this method the price of the asset is determined by the parent of its rising and falling within a certain time period. It can be a long time or a short time.

Both the ways, you will have an average reading of the market which will help you to guess about the price movement better.

Mean Reversion

This is the type of technical analysis where the mean of an assets rather the price of an asset is identified. If you are having problem in understanding then a little explanation will make things simpler.

The price of an asset is rising and falling all the time, so there is a need to find out the mean and if the price is going to settle down by that point. This one will help you to find out a strong point based on which you can guess better.

Pattern Recognition

This is the type of technical analysis which will help you to recognize a pattern among the current trend. If a pattern can be identified, then it will become easier for the trader to make his prediction better and take more risks.

Support and resistance

Although they cannot be identifies as technical analysis, but nonetheless they are quite important.

For instance, support is that level which makes sure that the price does not go under it. If somehow the price goes below this level, it will come above very soon. Resistance is the level which will ensure that the price does not go beyond this level.

So how to set up support and resistance strategy?

Traders should know that this strategy is helpful in evaluating where to enter or exit when establishing the positions. Also, in case resistant or support line breaks, it doesn’t mean it is deleted. Once crossed upside, resistance becomes support.

The thing regarding this strategy is that they necessarily don’t reveal direction of asset price. However, they help traders to define important positions and right timing for Call or Put position.

Learn to Use Technical Indicators Correctly

Have you ever caught yourself applying multiple indicators to your chart, the more the better, hoping for a positive outcome? Have you ever wondered if you are using the right combination of indicators?

If you are still confused about what indicators are there for, how to use them and when it is better to apply one or another, this article is for you. Let’s break it down, making it as easy as possible to start applying technical analysis to your chart right now.

Why to use indicators?

Technical indicators are applied to the price chart in order to analyze the past price movements and predict the future ones. Each indicator is basically a set of mathematically defined functions and conditions, their results then project on the price chart itself or on a separate area beneath it.

Technical indicators are of great use for short-term traders. As they are not capable of keeping track of fundamentals (earnings reports, news, socio-economic changes etc.), they are of limited use for long-term investors.

It is important to understand how to classify indicators and how to combine different types correctly. Proper application of indicators can help get a more accurate prediction of the future price movement. In general, it is essential to understand how indicators work, what are their limitations and what you need to consider when using them in trading.

Two major categories of indicators are trend-following indicators and oscillators.

Trend-following indicators

Trend-following indicators smooth out the price noise and locate the trend line on the price chart itself. They are based on the past performance of the asset. They can also help in determining the trend strength.

Alligator smoothes out the price patterns and makes them easier to follow

True to their name, trend-following indicators can help traders determine the direction of the future trend and make a decision regarding the entry. Most popular trend indicators include Moving Averages, Bollinger Bands, Alligator, Parabolic SAR, and Ichimoku Cloud. It is easy to tell trend indicators from indicators of different types, as they are usually displayed on the chart itself, whereas oscillators are located below the chart.

Oscillators

Oscillators, in turn, help traders determine short-term overbought or oversold levels. They are useful at finding trend reversal points, as the asset price has a tendency of leaving overbought or oversold areas after a while.

Oscillators excel at spotting trend reversal points

Oscillators are not as effective in a trending market and they are best used when the chart is not showing a strong trend in either direction. They generate entry and exit signals at the moments when the asset price strays too far from its current range. The most popular oscillators include RSI, Stochastic and Awesome Oscillator.

How to combine?

In order to combine indicators successfully, you have to define the type of the indicator you are about to use. Why? Because by using several indicators of the same type you end up with duplicated signals — and more is definitely not better in this case, as those signals cannot be used to confirm one another.

The rule you may want to remember is that the optimal combination involves indicators that complement, not repeat each other. Using more than 3 or 4 indicators on one chart may be unnecessary. So choose fewer, but do it wisely. And don’t forget that no matter what indicators you use, they can provide false signals from time to time. It is your duty as a trader to distinguish true and false signals.

You may also combine your indicators with fundamental analysis for a more complete picture.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.

GENERAL RISK WARNING

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
87% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Top Binary Options Broker 2020!
    Best Choice For Beginners and Middle-Leveled Traders!
    Free Demo Account!
    Free Trading Education!
    Big Sign-Up Bonus!

  • Binomo
    Binomo

    Trustful Broker. Recommended Only For Experienced Traders!

Like this post? Please share to your friends:
Binary Options: How To Start Trading
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: