Binary options trading is different from other trading options. How? Because here you have to be specific on your decisions. Either YES or NO will be your final selection, according to which your profit or loss will be calculated.
To trade on a specific answer, first, you need to be confirmed about the asset’s striking price. Whether the price will rise or go down will depend upon the current situation of the market and the latest incidents.
The indicators are essential to assuring you about your trading decisions,
Here, in this article, you’ll take a deep dive into indicators. The name of the five best indicators is given here, along with their using strategies. So let’s check it out.
What you will read in this Post
What is an Indicator?
An indicator is a technical tool that helps in indicating the rise and fall of a market. The primary purpose of the indicator is to find out the market situation, giving information regarding all the essential facts, and providing an outline of the stocks or trades, by predicting the future.
However, there are a lot of variations that you can see. For example, some indicators will show you the price chart, and some will present graphical representation with a separate display window, etc. Some advanced tools are giving the exact notation for you to consider.
As you can see, indicators don’t have only one task. According to the functions, indicators can be categorized into five types. Later it will help you to understand the functions of the five best indicators. The common indicators are:
1. Trend indicators
Trend indicators are helpful to check the strength of a trend. Sometimes especially with beginners, often it happens that they can’t understand the base of an asset. In those cases, the trend is helpful.
Commodity Channel Index, Average Directional Index, Ichimoku Kinkõ Hyõ, Know Sure Thing Oscillator, Detrended Price Oscillator, MACD, Parabolic SAR, Trix Vortex Indicator, and so on, are prime examples of trend indicators.
2. Volume indicators
Volumes are always helpful to know the worth of the assets. It generalizes the records of a particular investment. Second, if you know the volume, it will help you select the best stocks or trades.
The examples of volume indicators are Forex index, On-balance Volume, Put/Call Ratio, Volume Price Trend, Ease of Movement, Negative Volume Index, and others.
3. Support and resistance indicator
Support and Resistance indicator is the most common and straightforward. The oscillator’s position will guide you. The oscillator will run between 0-100. The values near 100 will show Support, and near 0, it will show Resistance. The direction of the tip of the graph is everything here.
Pivot Point, Top, Bottom, Fibonacci Retracement are the most common examples of Support and Resistance indicators.
4. Volatility indicators
Volatility Indicators are best to measure the strength of a particular asset. In most cases, it is used in binary options trading to verify the strength on a specific basis. However, other than binary options, ladder options and boundary options can be measured too.
Market Volatility Index, CBOE, Bollinger Bands, Average True Range, Keltner Channel, Donchian Channel, and standard deviation are some of the best examples.
5. Momentum indicators
Momentum is the last on our list. Momentum is beneficial when the duration is short. Within a short period, the impact of the particular asset will decide the result. So, to know the direction of the momentum of the assets, this indicator is used.
Relative Strength Index, True Strength Index, Money Flow Index, Stochastic Oscillator, Ultimate Oscillator Williams %R, and others are prominent momentum indicators.
Note: The most common alternate term to define an indicator is the oscillator. An oscillator is a measuring tool with values between 0 to 100. The values will help you understand the past performance, future predictions, and the asset support & resistance condition.
How can indicators help in Binary Options trading?
Indicators have bands that help in binary trading. Contraction and expansion are two bands that indicate the overbought and overselling situation of a market. The top band position and the lower band positions are the factors that help in reading binary trading.
If you want to ace the trade market and are willing to win every binary trading, you should use indicators. Binary Options Indicators have become the need of the hour. Let’s see how to use indicators for binary trading efficiently.
#1 Analysis of price action
Analysis of Price Action is the most desired thing for a trader while doing binary trading because the trader needs to assure about the up and down of the price concerning Striking Price.
Depending on the given asset price, one fixed limit is decided for a limited time, known as the Striking price. More than the striking price will be a win, and less than the striking price will be a loss.
Long charts and values are always confusing. As a trader, you need the indicator to show the essential values. An indicator specializes in delivering the filtered results to shake off convenience.
#2 Indicators take less time
As you are related to binary options trading, you know some special hours when binary options trading becomes highly beneficial for the traders. For example, American, British and Japanese stock exchange binary trading follows these hours-
- American- 8.00-17.00 EST
- British- 3.00-12.00 EST
- Japanese- 19.00-4.00 EST
Trading on stock options on these particular hours is always best. Due to the overlapping of the hours, traders with multiple stocks get benefited.
That’s why you need to be very specific at the moment. Losing a single second can be a danger. The Binary Options Indicators are helpful in these moments. Within very little time, these will show you the necessary information and help you to predict.
#3 Faster than our brain
A technical tool is always faster than our brain, even though the sharp brain of human beings has made those applications. In the end, we all have to be dependent on those tools. As mentioned earlier, special hours become the prime focus of the traders.
A technical Indicator is always helpful in this matter. It can verify Millions of databases, current movements in the market, a slight change in the charts, and others within seconds.
#4 Indicators provides assurance in trading
Though you are a pro trader, you can’t give 100% assurance before investing in specific options. Even after trading while watching the movements, many things distract you from your strong base. It is natural for human beings.
However, when it comes to advanced AI, then it will give only specific answers. For example, if you are wondering about a particular trade, you can use an indicator to check the worth because it is not stable. It will simply evaluate the past results, market values, support- resistance, and the risk.
While Using a technical tool by yourself, you can find many benefits from indicators, but these 4 are the most common benefits. As you are well aware of these now, let’s jump to the center of the topic.
What are the 5 best indicators you can use?
Indicators can be divided into two groups according to their functions. These are leading indicators and lagging indicators. The five names that you’ll know from this article are part of these two indicators.
What is a leading indicator?
Leading indicators are those which help know the future of an asset or an option in trading. It is mainly used before starting the trade on an alternative. It is helpful because it will show you all the possible outcomes of a particular trade. Moreover, it will show the duration. So you can easily conclude whether any options trading is going to be beneficial or not.
What is a lagging indicator?
Lagging indicators are those which help you to know the past condition of a particular options trading. Many options are repeatedly coming over time, so traders, especially beginners, start with these indicators. An excellent lagging indicator can tell you whether it is good to go by checking the past results or not.
As you know the types of indicators, now it is time for you to know the names. Professionals mostly use these indicators. The system, fastness, and accuracy level will amaze you and secure your investment. So let’s see about them.
#1 Commodity Channel Index
- CCI or Commodity Channel Index is a leading indicator.
- CCI runs an exceptional theory. It simply tells that when a particular asset becomes the center of attraction, and many people are trading on that, it has to be turned back. Because in the end, no one will be there to push the market in the desired direction.
- When the value is over 100, it means the asset can move high 1.015 times. When the value is under -100, the option value reduces 0.985 times.
- Traders should wait before investment when the value is more than 100 and less than -100. You need to wait for the price to fall and rise respectively from its prime position in both cases.
- The trend is a lagging indicator. It always shows the zigzag movement. The zigzag motion implies the actual condition of the market. Trends are explained through the fall and rise of the market and the particular push of momentum to boost up.
- Trends have a specific mean line. The upper portion is an uptrend, and the lower part is a downtrend. Uptrend represents higher highs and lows, and downtrend represents lower lows and highs.
- The indication symbolizes that when the curve is in an uptrend, traders have to trade on rising prices, and in case of a downtrend, traders have to trade on falling prices.
- It will give you the past results and give future predictions according to the few last results.
#3 Relative Strength Index
- It is a leading indicator. It helps in understanding the overbought and oversold areas of a specific asset or trade. It follows the oscillator rules and will give you information from 0 to 100.
- RSI or Relative Strength Index is following the theory of price change. It evaluates every single trade by checking every period equally.
- RSI will give you the indication by the values between 30 to 70. The oversold value will be shown above 70 and below 30. The reverse thing will happen with the overbought, but the values will be between 30 to 70.
#4 Moving Averages
- Moving Averages is a lagging indicator. Its prime goal is to focus on evaluating the mean value. Whether stock or option is going to rise or not depends on the average value. So it takes out the mean average by calculating the last few prices.
- The representation is quite good. All the points will be denoted and joined with candlesticks. The model is quite perfect to understand the up and down of the market.
- If the Moving Average point is in an upward direction, it denotes that the market is upward. Conversely, if the Average moving point is downward, it indicates that the market is falling.
- As it is a lagging indicator, you can understand the market quickly. If the point is an uprising, it means the market will go upward too. The opposite will happen with the below-moving average.
#5 Money Flow Index
- The most popular leading indicator is MFI or Money Flow Index. It is beneficial in measuring the strength of the trade.
- When the oscillator shows the value between 0 to 100, it can tell you the volume of the trend. If the value is near about 100 and upward, then it is showing a rising period. If the value is below 0, then the price is falling. If it is 50, the condition is balanced.
- Some different conclusions can be drawn, like Extreme values (more than 70 and less than 30). From this conclusion, you’ll see the convergent or divergent rate of the market.
- If you know the values of the oscillator and can read those, it will be easy for you to conclude easily. Thus, among all other indicators, it is still on the top in giving good prediction values.
Always depending on the indicator while trading is not a good idea. Being a trader, you need to know the respective field of trading. So first, you have to know the market, gain knowledge, verify by yourself, and then assure yourself by verifying indicators. Thus, you can have a good trading experience in Binary Options by using these advanced indicators if you speculate the market well. All the best for your next trade.
(Risk warning: Trading involves risks)