How to use Candlestick Charts to help you with your Binary Options trading?

How to use Candlestick Charts to help you with your Binary Options trading?

Binary options trading is becoming more and more popular. Therefore, many traders ask themselves what strategies they can use to achieve the highest possible success rate. One common binary options trading strategy is to evaluate candlestick charts.

An excellent binary options trader should always know how to read and interpret candlestick charts. Here we will look at how this works for binary options.

What are Candlestick Charts?

An example of a candlestick chart

Candlestick charts are charts that show the market movements. Unlike the classic line chart, the candlestick chart displays even more information that the trader can use.

They are originated in Japan and were developed in the 18th century. Candlestick charts used not only in binary options trading but also in forex trading, stock trading, and for trading CFDs & ETFs. So, you can apply them even if you trade other financial assets.

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What does a candlestick chart show?

Example of a candlestick chart

It is essential for a trader to understand what a candlestick chart shows.

The candles on the chart show the difference between the opening and closing prices within a given time period.

If prices have risen in the time frame under consideration, a green candle is displayed. On the other hand, if they have fallen, a red candle is displayed. Some online brokers also show white or black candles, but the principle remains the same. Candles help you see how a financial asset’s opening and closing price behaves and point out possible market trends.

It is good to know that individual candles have expiration times and can turn out differently when looking at different periods. This means that a candle always refers to a fixed defined time unit.

Also, when trading binary options, you can set the time frame you want to look at the chart. For example, you can jump to the 60-second view or get a more consistent overview in the 1-day chart. It is recommended to keep switching to get a better picture of the market situation.

The candles in the chart always consist of a candle body and a candle wick. The candle wick always shows the high and low prices of the time period under consideration.

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Types of candlestick charts

A Typical example of how candlesticks look in binary options trading
Candlestick trading strategy

You can distinguish between:

  • Bullish Candles
  • Bearish Candles
  • Doji Candles
Candlesticks in binary options trading

A Bullish Candle (usually green) indicates that the price has risen in the time period under consideration. The lowest end of the candle wick indicates the price low of the respective time period. On the other hand, the lowest end of the body shows the opening price, and the highest end of the body shows the closing price of the time period under consideration. The top end of the wick shows the price high.

It is different from a (red) bearish candle. Here the lowest end of the candle body shows the closing price, and the top end of the candle body shows the opening price.

Candlestick Doji
Candlestick Doji

A special case is the Doji Candle. Here the opening price is equal to the closing price. In other words, there was no price change in the period under consideration. Nevertheless, the candle wicks in the Doji Candle also show that there were market movements. From them, you can read the extent of the market movements.

How to read a candlestick chart as a beginner?

Candlestick Chart Quotex
Candlestick Chart on Quotex

Many methods to evaluate candlestick charts are based on complicated mathematical calculations and are rather something for professionals. In my experience, this is not always necessary. I want to introduce you to simple and helpful methods that you can use both as a beginner and as an advanced trader in binary options trading.

You can read our other articles if you are also interested in methods.

Proven candlestick chart strategy for beginners

I introduce you to two proven candlestick strategies for trading binary options. I often use them when I recognize that the market is taking a turn.

Support and Resistance trading

The first strategy I like to use in 60-second binary options trades. I want to illustrate it with a practical trade.

In this example, I trade the EUR/USD. First, I set the timeframe to 60 seconds. Then I switch between the 60-second and 5-minute charts and take a close look at the support and resistance levels and the trendlines. This strategy aims to predict the next candle to generate profits with a short 60-second trade.

For a better overview, I draw the support and resistance levels.

Drawing support and resistance levels of a candlestick chart

This strategy assumes trade within the ranges of support and resistance. I guess the price will rise, but I don’t start the trade yet and am waiting for a confirmation candle.

Confirmation candle in a candlestick chart

As you can see in the picture above, there is a Hammer Candle. The hammer is a good signal that the market will move up.

Before I start the trade, I consult the RSI indicator and Bollinger Bands. This must be done quickly because trading is short-term. Both trading indicators suggest that the market will make a short-term move up. Because there is a hammer candlestick pattern that confirms my assumption, I open a buy order.

A simple trading strategy, with which I made 955 euros from 500 euros in this trade. The strategy is simple but effective because we have 3 times the confirmation that the courses will run as assumed. The RSI indicator, as a momentum indicator, helps predict a trend’s speed and direction.

An RSI value above 70 often indicates that the financial asset is reversing its trend. I refer to it as it suggests and confirms a low in the short term. The Bollinger Bands, on the other hand, show standard deviations. I use them to indicate that they are indeed support and resistance areas.

What do I have to pay attention to in candlestick charts?

Downtrend on a candlestick chart

As a beginner, you should always open a trade on time and look whether you find an uptrend or a downtrend. Especially when trading binary options, this can be very risky. Therefore, I recommend that you familiarize yourself with the procedure.

Also, you need to know that charts can never give you a 100% guarantee that your trade will succeed. Instead, they serve as a guide for you to make a more thoughtful trading decision.

So be careful and, at best, use other trading indicators to support your decision. On this site, we present many helpful strategies that you can use in binary options trading.

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About the author

Percival Knight
I am an experienced Binary Options trader for more than 10 years. Mainly, I trade 60 second-trades at a very high hit rate.

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