Charts – Binary Options trading strategies and indicators

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Charts

In general, binary options are relatively short-term investments that require research and technical analysis. 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. These trading 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

As binary options are frequently traded on relatively short-term time frames (Often end-of-day, hours, minutes or even 30 seconds), it is key to analyse charts within a given time frame that is in keeping with the trading style or analysis. For example, if trading an asset that expires in one hour, it is going to be of little value to look at charts with a five year time frame. Similar time frames might back each other up, confirming a trade, but there is a limit to the use of unrelated time-scales. Charts can be broken up into timeframes as follows: 1 minute, 2 minute, 5, 10, 15, 30, 45, 60, 90, daily, weekly, and monthly.

As mentioned above, on occasion, it might 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 – this should provide the overall longer term trend. From there, you can then scrutinise a shorter time frame chart, and establish an entry point you wish to get in the trade. As an example, if the daily chart is showing bullish signals but the weekly chart is showing bearish signals, traders may wait for the daily to turn bearish before placing your trade. The longer term trend will then hopefully be less likely to work against the shorter term trade.

Live Chart

Types of Binary options chart

Candlestick charts

Many technical analysts believe that market trends are a reliable predictor of future events, but also provide entry and exit points too. Looking for indicators on a candlestick chart will allow you to decide whether it is the right moment to open any calls or puts. Candlestick charts are a visual mix between a line chart and a bar graph, making a combination that presents more information than is typically available in a more traditional chart. The name “candlestick” comes from the thin bars at the top and bottom, that display the high/low range of the day, plus opening and closing price (thus resembling the wick of a candle). These candles are arranged in the same way as a basic graph, with a new ‘candle’ for each unit of time. The ‘wicks’, and more importantly their relative length, can add additional information about trader sentiment.

A candlestick chart can alert traders to whether buyers or sellers are currently “winning the argument” in terms of the market of a particular asset. Utilising a candlestick chart along with several technical indicators can push your trading strategy to the next level.

For more in depth analysis of candlestick patterns, see our full article.

Binary Chart indicators

There are so many chart indicators to choose from it can make your head spin. (See why price action is important) 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.
  • Stochastic Oscillators– 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.
  • Fibonacci numbers – Fibonacci was a mathematician who identified a sequence of numbers that were repeated throughout the natural world. More recently, analysts have noticed similar patterns often occur within the trading markets as well. They can often be used to try and establish support and resistance levels.
  • Volatility – Not strictly a price chart, but the VIX measure of current volatility is a useful graph to keep an eye on. Particularly if the trading ‘greeks’ are important within your trading strategy. Boundary and Ladder options will be particularly sensitive to volatility, in terms of judging value.
  • Relative Strength Index (RSI) – A momentum oscillator which measures the change and speed of price movement. It allows traders to spot overbrought or oversold assets, and ‘failure swings’. It moves between 0 and 100.

Binary options charts strategies in real time

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. 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. Demo accounts can be a good place to experiment with trading strategies and see what works.

The Most Important Technical Indicators For Binary Options

Consider the following bets:

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  • Pay $45 to bet that the price of gold will be above $1,250 at 1:30 p.m. today. Get $100 ($55 profit) if you win, lose $45 otherwise.
  • Receive $81 now to bet that NASDAQ US Tech 100 index will go below $2,224 at 2 p.m. today. Keep a profit of $81 if your prediction comes true. If it does not, lose $19.
  • Pay $77 to win $100 if the USD-JPY forex rate goes above 78.06 at 2 p.m. today; you lose $77 if it does not.
  • Gain $33 if you bet on the price of bitcoin will go below $379.5 at 3:00 p.m. today. If it doesn’t drop that much, lose $67.

Welcome to binary options. All or nothing, one or zero, these securities are available on Nadex and the Chicago Board Options Exchange (CBOE). Binary options allow traders to make time-bound conditional bets on predefined values of stock indices, forex, commodities, events, and even bitcoin values. Like a standard exchange-traded option, each binary option has an option premium ($45, $81, $77, and $33 in the examples above), a pre-determined strike price ($1,250, $2,244, 78.06, $379.5), and an expiry (1:30 p.m., 2 p.m., 3 p.m. today).

The differentiator is the settlement price that remains fixed at $0 or $100, depending on the option condition being fulfilled. It keeps the net profit (or loss) fixed. The option premium also remains between $0 and $100. (Related: Guide to trading binary options)

Calculating Probability

Since binary options are time-bound and condition-based, probability calculations play an important part in valuing these options. It all boils down to “What is the probability that the current gold price of $1,220 will move to $1,250 or above in the next four hours?“ The determining factors include:

  • Volatility (how much and is it sufficient to cross the threshold/strike price?),
  • The direction of the price move, and
  • Timing.

Technical indicators suitable for binary options trading should incorporate the above factors. One can take a binary option position based on spotting continued momentum or trend reversal patterns. Let’s look at some of the popular binary option technical indicators:

  • Wilder’s Directional Movement Indicators (DMI) Average Directional Index (ADX): Composed of three lines, namely ADX, DI+, and DI-, and their relative positions, this indicator aims to capture the strength of an already identified trend. Here is the table for interpreting the trends:

Position

Momentum

ADX Value > 25

ADX Value

Here is an illustration, using 3M Company (MMM) stock:

Image courtesy StockCharts.com

Depending upon the identified momentum and trend strength, an appropriate buy/sell position could be taken.

  • Pivot Point(in conjunction with support and resistance levels): Pivot point analysis helps determine trends and directions for any given timeframe. Because of the flexibility in timing, pivot points can be used for binary options, particularly for trading highly liquid major currencies. A good example (with calculation and graphs) is included in the article Using Pivot Points in Forex Trading.
  • Commodity Channel Index (CCI): The CCI calculates the current price level of a security relative to the average price during any given timeframe. The average price level is usually the moving average. Time periods can be selected as desired, allowing the trader flexibility in choosing when a binary option expires. The CCI is useful in identifying new trends and extreme conditions of overbought/oversold securities. It is very popular among day traders for short-term trading and may be used with additional indicators such as oscillators. In the below formula “price” is the asset’s current price, “MA” is the moving average of the asset’s price, and “D” is the normal deviation from that average. High values above +100 indicate the start of a strong uptrend. Values below -100 indicate the start of a strong downtrend. The CCI is computed with the formula:
  • Stochastic Oscillator: In an interview, the creator of the Stochastic Oscillator, Dr. George Lane, said “it follows the speed or the momentum of price. As a rule, the momentum changes direction before price.” This important underlying detail indicates extreme cases of overbuying and overselling, allowing reversals for bullish and bearish phases to be identified. The crossover of %K and %D values indicate trade entry signals. Although a 14-day period is standard, binary option traders can use their own desired timeframes.

%K = 1 0 0 ( C − L14 H14 − L14 ) where: C = most recent closing price L14 = low of 14 previous trading sessions H14 = highest price traded during same 14-day period \begin &\text <\%K>= 100 \left ( \frac < \text– \text > < \text– \text > \right ) \\ &\textbf \\ &\text = \text \\ &\text = \text \\ &\text = \text \\ \end ​ %K = 1 0 0 ( H14 − L14 C − L14 ​ ) where: C = most recent closing price L14 = low of 14 previous trading sessions H14 = highest price traded during same 14-day period ​

Levels above 80 indicate overbought, while those below 20 indicate oversold.

  • Bollinger Bands: Bollinger bands capture an important aspect of volatility. They identify upper and lower levels as dynamically generated bands based on recent price moves of a security.

Commonly followed values are 12 for simple moving average and two for a standard deviation for top and bottom bands.

Contraction and expansion of the bands indicate reversal signals that help traders take appropriate positions in binary options. Overbought situations are indicated if the current market price (CMP) is above the top band. While overselling is indicated when the CMP is lower than the lower band.

A challenge in binary option trading is correctly predicting the sustainability of a trend over a given period. For example, a trader may take the right position for an index, predicting it would hit 1250 at the end of a five-hour period, but the level was achieved in the first two hours. Constant monitoring is needed for the rest of the three hours if the trader plans to hold the position until expiry, or a predetermined strategy should be executed (like squaring off the position) once the level is reached.

The Bottom Line:

The technical indicators discussed above should be used for timely actions with constant monitoring. One major disadvantage with technical indicators is that the results and calculations are based on past data and can generate false signals. Traders should practice caution with detailed backtesting and thorough analysis for high-risk, high-return assets like binary options.

Binary Options Trading Strategy – Best 60-Seconds Strategies

Today we are going to share our binary options trading strategy with you. This strategy is designed to help you identify whether you’ll like trading binaries and teach you how to trade binary options the right way. If you prefer to play it safe over gambling, you’ll need a strategy or tactic to help you master binary options and other trading activities. This is where our TSG team comes to the rescue. We will provide you with the best binary options strategy.

The main reason we’re interested in learning about trade binary options is the fact that binaries simplify what we’re already doing in Forex. At the same time, binary options also allow us to make more money in the process. We are also controlling the risk.

Binary options are easy to understand. This is coming from someone who has little or no experience in the area. If your favorite approach to trading forex is to jump in on a fast price movement and ride the intraday trend for as long as the momentum lasts, you can learn how to make money trading binary options very quickly.

When we first discovered binaries, the light bulb in our heads turned on. We figured out the same thing that we’ve been doing in Forex can be done. But walk away with 75%, even 95% winning trades because we only needed to get the direction right. No need to worry about how many pips we could grasp in the process.

And that, my friends, is the real beauty of binary options.

What are Binary Options?

Binary options are a form of derivatives that have a fixed profit or loss. Trading binary options is simple. All you need to do is ask yourself a simple yes or no question. Will the price of the underlying asset be worth more than the strike price at the expiration date?

Now, let’s start by understanding how binary options work.

Essentially, we can trade binary options for any type of instrument. Whether it be commodities (Gold, Oil or Silver), Forex exchange currencies (EUR/USD, GBP/USD or USD/JPY), or stocks (Amazon, Tesla or Twitter).

So, the first thing you need to decide upon is to select the asset to trade.

Second, before submitting our trades, each of these instruments has a current value at any given point in time. How to trade binary options depends on our trading skills. It is used to predict where the current value will be some time in the future. In other words, we must use our skills to predict the market direction. This will determine our success in trading binary options.

The market can only go up or down. If we believe the current value will go up in the near future, then we buy a Call option. On the other hand, if we believe the current value will go down in the near future, we buy a Put option. Read more about call options vs put options.

Third, we need to determine what the most critical aspect of trading binary options is. The expiration time will ultimately determine if you’re making a profit or not.

Trading binary options require you to correctly forecast two things:

  1. Whether the market will rise or fall.
  2. Your forecast needs to be accurate during a certain time frame – called the expiration time.

If you’re right on the market direction by the time of the expiration time, you earn a profit. Being wrong means you incur a loss. The way binary options works is that if you’re right on the market direction, you’ll get a percentage of what you initially invested in.

Typically between 75% and 95% and in some cases, even 100% of your initial investment, depending on your Binary Options Broker.

Supposing we’re wrong on the trade, then we’re going to lose the whole amount invested in the short term.

We have made a nice infographic that highlights the four steps on how to master binary options trading.

Now we’re going to focus on step two, which is how to predict the price movement. If you manage to figure this out, then knowing how to make money trading binary options will be a piece of cake for you.

Now, before we’ll outline a method on how to make money trading binary options, we always recommend taking a piece of paper and a pen and take notes on the rules of the best binary options strategy.

In this demonstration, we’re going to look at the buying Calls.

The Best Binary Options Strategy

Our team at Trading Strategy Guides is ready to share with our beloved trading community our 60-second binary options strategy. We don’t just hope this strategy will make you money, we’re certain it will. The mathematical model behind this binary options trading strategy has a proven market edge.

The only tool you need to trade binary options successfully is the RSI indicator.

Even the RSI indicator is not good enough if it doesn’t have the “right” settings. The RSI default settings need a little bit of adjustment if you want to master the 1 minute time frame. We use a 3-period RSI to trade binary options profitably.

Naturally, a lower RSI period means that the indicator will tend to be noisier than normal. But it is more responsive to the immediate price action. Along with the RSI settings adjustments, we also played around with the overbought and oversold readings. We found out that by using an 80 RSI reading for overbought and 20 RSI reading for oversold condition, we get more accurate day trading signals.

*Note: Make sure you adjust the RSI settings before you jump into the binary options trading strategy.

By changing the RSI overbought and oversold line, we have eliminated the noise. So now we’re ready to highlight our binary options step-by-step guide:

Step #1: Find an instrument that is showing a low the last 50 candlesticks. Use the 60-second chart (1 Minute TF)

The 1-minute binary options or the 60-seconds time frame is the best chart for trading binary options. In other words, the best binary options expiration time is the 60 seconds time frame.

We recommend highlighting the starting point on your charts. And the ending point of your 50-candle low that you have identified. Simply draw two vertical lines on your chart through the starting point and ending point of your 50 candle low.

When you count the 50 candle low, you should always start from the current candle. Then go from the right side of your chart to the left side of your chart. If you manage to count 50 candle low, obviously the starting candle point will be your 50 candle low.

Moving forward, it’s time to put the RSI indicator in use and spot if we have extreme oversold reading or not.

Step #2: At the moment the 50 candle low develops, we need an RSI reading of 20 or below

Since this is a reversal trading strategy we need the RSI indicator to show a bullish reversal signal. An RSI reading below 20 shows that the market is in oversold territory and it can potentially reverse.

In our example below, the 1-minute EUR/USD chart is satisfying the two conditions.

Keep in mind that in order to move to the next step, we need the 50 candle low. We also need an RSI reading below 20 to happen at the same time.

We added one more factor of confluence that needs to be satisfied. If used in conjunction with the previous two conditions, it will make you a money maker binary options trader.

Step #3: Look for a bullish divergence to develop between the RSI indicator and the price.

When trading reversals, you need to be as precise as possible. The more confluence factors you have in your favor the more accurate the reversal signal is.

What we need to see here is for the price to continue moving lower after the 50 candle low was identified. At the same time, we need the RSI indicator to move higher in the opposite direction.

If the price moves in one direction and the momentum indicator moves in the opposite direction, it means they are diverging from each other. This signals a potential reversal signal.

Now it’s time to highlight how to find the right entry point for the binary options trading strategy.

Step #4: Buy a Call Option after the first candle that closes above the high of the 50 candle low

The first thing you need to do is to mark on your chart the high of the 50 candles low with a horizontal line. The first candlestick formation that breaks above this high is your trade entry signal to buy a 60-second Call option.

It’s that simple!

After you decide the amount to invest and pick the 60-seconds as your expiration time, it’s time to sit back and wait 1 minute before hopefully collecting your profits.

Step #5: You collect your profits if the next candle closes higher than your trigger candle

If at the expiration time, the price is higher than the price you opened your Call binary options, you’re lucky because you’re about to check-in a big payout.

For example, if you’ve invested $1,000 and your binary options broker offers you an 85% payout, it means that you accurately predicted the outcome of a trade. You get back your initial investment of $1,000 plus the 85% payout which in our case is $850 in profits.

If you want to buy Put binary options, use the same binary options guide, but in reverse.

Conclusion – Binary Options Trading Strategy

Before learning how to make money trading binary options you need a great Binary Options broker. You can’t start hitting home runs right out the gate without making sure you have a binary options broker who wants you to succeed. Secondly, you need a strategy based trading technique to reveal the market direction. You only need to forecast if the price will be up or down during the next 60 seconds, making it very convenient.

We use a heuristic approach to speculate on which way the price is going to move during the next 60 seconds. At the end of the day, traders are looking for a reliable binary options system that will help them make money from trading.

The good news is that the best binary options strategy is exactly that system. Our team is built of many traders with experience in the industry, including binary options traders who know how to make winning trades. We’re ready to help you with every step of the way.

Thank you for reading!

Also, please give this strategy a 5 star if you enjoyed it!

Don’t forget to read our guide on regular options trading for beginners here.

(58 votes, average: 4.29 out of 5)
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  • Binarium
    Binarium

    1st Place! Best Binary Broker 2020!
    Best Choice for Beginners — Free Education + Free Demo Acc!
    Sign-up and Get Big Bonus:

  • Binomo
    Binomo

    2nd place! Good choice!

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