You might have heard traders talking about the relevance of indicators in driving their trading decisions. Every investor dreams of earning huge profits from trading. To make profits, a trader needs to develop appropriate trading strategies.
A trader can build appropriate trading strategies only when using technical tools and indicators in trading. A blend of adept risk management strategies and indicators can help investors ace trading.
Let’s get an insight into the meaning of the IQ Option indicators.
What you will read in this Post
Professional and experienced traders make reading the indicators a part of their trading schedule. On the other hand, many beginners wonder about the relevance of indicators in trading.
It does not matter whether you wish to deal in forex, commodity trading, Cryptocurrency, or binary options. Using technical analysis in building your trading strategy can help you reap various monetary benefits.
If you are wondering what these trading indicators are, they are nothing but some mathematical calculations. You can see these calculations plotted on the line price chart as lines. Indicators are like a graph of the price of an asset that lets you see the trends in prices.
Different types of indicators offer you different information and signals. Generally, two types of indicators are beneficial in determining the trends in the market.
These indicators include lagging indicators and the leading indicators. A leading indicator will help you predict the future price of the asset. On the other hand, the lagging indicator will give you access to past trends.
IQ Option offers its client many trading indicators which they can use to formulate a perfect trading strategy.
Below are the 10 best IQ Option indicators.
Moving average (MA)
The moving average, also known as the simple moving average, is one of the best indicators in the market. As you might be aware, indicators get affected by short-term price spikes. But, this indicator will help you determine the direction of the current trends without any interference from price spikes.
This indicator will use a combination of price points of financial instruments. It will combine these price points for a specified period. Now, dividing it by the total number of data points will show a single and easy-to-decipher trend line.
The moving average will use the data depending upon its length. For example, A Moving Average of 400 days will require data for 400 days. This indicator is best for studying the support and resistance levels. It is also helpful in seeing market history to determine the possible future patterns.
Exponential moving average (EMA)
It is another moving average indicator. In the simple moving average, we read that this indicator compiles the data from past days to build a trend line.
However, the exponential moving average indicator uses the recent data points. As a result, the data becomes more receptive to the new and recent information.
When a trader uses this indicator with other indicators, it will help you predict significant changes in the market. As a result, you can gauge and evaluate the legitimacy of other indicators.
You can use 12 days or 26 days’ indicators for short-term averages. However, 50 and 200 days’ indicators are best for determining the long-term averages.
The stochastic oscillator is also on the list of best IQ Option indicators. This indicator helps you build your trading strategies based on comparing the asset’s specific closing price to its price during different times.
With this IQ Option indicator, you can judge the trend strength and the asset’s momentum. If this indicator shows you reading below 20, it will signify that the market got oversold. On the other hand, a reading above 80 will signal an overbought market.
Moving average convergence divergence (MACD)
The MACD is one of the best IQ Option indicators because it helps the traders determine perfect buy and sell opportunities. This moving average indicator discovers the momentum changes due to the changes in simple moving average and exponential moving average indicators.
The words convergence and divergence have significance in these IQ Option indicators. If the averages converge, they are coming together, signaling a decrease in momentum.
On the other hand, diverging indicators move away from each other, causing an increase in momentum.
If you wish to know the price range in which the asset trades, the Bollinger band will give you a perfect idea. In this indicator, the width of the band will increase or decrease depending upon the recent volatility in the market.
If the bands are closer or narrow to each other, it will mean that the volatility of the asset is low. On the contrary, a wide gap between these bands will point toward the high volatility of the financial instrument.
With this IQ Option indicator, you can easily know which asset is trading beyond its usual trade value. Bollinger bands are also beneficial in predicting price movements in the long run. If the asset’s price overruns the upper parameters of the Bollinger bands, it could mean that the asset is overbought. The dropping of the price under the lower parameters could mean the overselling of the asset.
Relative strength index (RSI)
IQ Option indicators include the relative strength index to predict the warning signals and market conditions. The range of the relative strength index lies between 0 and 100. If the range of an asset is 70 or above, it means that the asset is overbought. Likewise, a range of 30 and below indicates its overselling.
An overbought signal on the relative strength IQ Option indicator means that the short-term gains have possibly reached their maturity. On the contrary, the oversold signal on the relative strength indicator suggests the maturity of the short-term decline.
IQ Option offers the Fibonacci retracement indicator to the investors to know the degree of change in the market. Retracement is also called a pullback, and it means the market is taking a temporary dip.
When a trader suspects any movement in the market, he uses IQ Option indicators to confirm it. The most reliable indicator to confirm this situation is the Fibonacci retracement.
You can also determine support and resistance levels with this indicator. Fibonacci retracement is beneficial to predict upward and downward trends in the market. With this IQ Option indicator, you can easily decide where you need to apply limits or stops. It also gives you a clear picture of when to open or close a position.
Another indicator in the IQ Option indicator list is the Ichimoku cloud indicator. It helps you come up with a perfect technical analysis. It will help you identify support and resistance levels to come up with a decision regarding your trade.
The term Ichimoku means ‘one look equilibrium chart’ and can help the traders find a lot of information in one place. You can use this indicator to estimate the price momentum as it serves as a ‘one look equilibrium chart’ for the investors.
This indicator also helps you identify the market trends and forecast the results.
If you want to determine the size of the price change, the standard deviation indicator is the perfect tool for that. Standard deviation will help you know how the volatility will affect the asset price.
You should note that the standard deviation will not help you know whether the asset price will increase or decrease. It will only tell you how the market volatility will affect its price.
You can compare the current price trends with the past trends with the help of this IQ Option indicator. Many traders strongly believe that the small price moves follow the big price moves and vice versa.
Average directional index (ADX)
The average directional index, or ADX, will help you know about the price trend strength. The range of the average directional index lies between 0 and 100. A range of 25 on the average directional index shows a strong trend. On the other hand, a number below 25 indicates a drift.
This IQ Option indicator helps a trader gather information on the upward or downward trend of the price.
The average directional index is nothing but a moving average of the price of an asset for 14 days. Here, one noteworthy thing is that it does not show you how the price trend could develop. This indicator will be beneficial only in analyzing the strength of the price trend.
The Average Direction Index rises when the price falls, indicating a strong downward trend.
Considerable things before using any indicator
These IQ Option indicators are perfect for helping you build adept trading strategies and financial decisions. However, paying careful attention to these things before using them is necessary.
- Keep away from the temptation of using too many indicators at one time.
- Avoid using only one technical indicator. Instead, choose a combination of indicators.
- Try to focus on your requirements and select the best-suited technical indicator for the job.
- Always confirm the signal and not lose sight of your trading plan.
Indicators are a great way to build your trading strategies. The right type of technical analysis can be beneficial in formulating the appropriate trading plans. You can use these IQ Option indicators to check the market trends and price fluctuations.
A trader who does not realizes the importance of indicators in trading loses too much in the long run. Using the IQ Option indicators specially designed for traders can protect you from such losses.