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Binary option Trading tools and indicator | Forexing24

It can be confusing when you see how many indicators and tools are available for trading. Some of them are good but some are also bad and not that good. That is why you can check here descriptions of top ones that would be recommended for binary options beginner. If you learn all of the below listed, it will definitely provide you with solid foundation for future trading strategies that are more advanced.

Top Binary Options Technical Indicators for New Traders 

Not all tools are good and not all good tools are good for all traders. In trading, as with everything in life, there are entry level as well as advanced tools for trading options. This articles give a brief description of some top strategies recommended for new binary options traders.

One of the biggest obstacle to a new traders success is all the conflicting information and news, what I call market noise. The market is full of noise and there are dozens of tools and strategies that claim to reduce that noise. For a new trader it can be just as hard to choose which tool to follow as it is to use that tool successfully. In order to help newcomers choose a good tool or set of tools I have gone back through our recommended strategies and compiled this list. It includes tools I use every day, and tools I have found to be extremely useful for new traders. These strategies all have a few things in common such as simplicity and reliability, they also provide a good foundation to build a more advanced trading strategy on.

Japanese Candlesticks

Japanese candlesticks are the best way for binary options traders to view their financial charts. This system is hundreds of years old and will likely endure into the future for another thousand years or more. Candlesticks provide a way to view price information that jumps of the page. There is no more squinting at charts to see if prices opened higher or lower than they closed, each candle is easy to see and the color coding makes identifying up and down days as simple as black and white. Imagine the difference between watching a cartoon in black and white versus color. You can see a lot more in the color picture I bet, the same is true with candlesticks. If you haven’t begun your education into the subject of binary options trading charts then you definitely need to start here.

Fibonacci

If you don’t know who Fibonacci was I suggest you learn, the story and theory are very interesting to say the least. Basically, Fibonacci was a mathematician who recognized that nature was ruled by a set of simple ratios. He was able to find these ratios everywhere and in everything. His formulas are so intrinsic to nature that Renaissance artists used them to lay out their masterpieces and those techniques are still used today in art and engineering. Fibonacci numbers are used in several ways to measure the markets, the most simple and useful for new traders is the QuickFib retracement tool. This tool will measure a rally or bear market, divide it according to Fibonacci ratios and provide some very good predictions of support and resistance. I like to use this tool to confirm/deny support and resistance lines I draw on my own.

MACD Tool

Momentum is one of the basic principles of technical analysis and trading. MACD is one of the best tools, and my tool of choice, for measuring momentum. The tools utilizes 2 moving averages and measures the distance between them. When the two averages move closer together they are converging and when they are moving apart they arediverging. This convergence/divergence is displayed in two different ways; the oscillator and the histogram. Both tools are useful and effective means of measuring market momentum, identifying support/resistance and providing entry signals.

Time Series Forecast Indicator

The Time Series Forecast, otherwise known as TSF, is the culmination of a verycomplicated linear regression study. The good news is that this form of linear regression indicator is very easy to use and provides a clear signal for short term trading. The other good news is that when combined with other tools like the ones listed here it becomes even better. The Time Series Forecast uses multiple linear regressions, a tool that predicts likely movement into the future, and provides a sort of moving average of those predictions. In an uptrend a cross above is a signal, in a downtrend a cross below is a signal, simple as that.

The Force Indicator

The Force Index is an oscillator indicator created by Dr. Alexander Elder. He is a commodities and futures trader and author of the book “Trading For A Living”. The Force Index is also a type of momentum indicator based on direction, extent of movement and volume. This indicator is another one that I have used for a long time and one that can provide a number of different signals. Force Index analysis can help determine support/resistance, pin point areas of reversal and provides good trend following signals.

Top Binary Options Technical Indicators for experts

When I first found out about the existence of technical indicators, I thought “Wow, now trading is going to be really easy. I’ll just follow these indicators”. Well, I wasn’t exactly right because trading as a whole is not easy, but indicators sure were a big help. Of course, there are hundreds of indicators but I still believe the Big Names, the old school indicators are the most useful. That being said, today I’m going to present you with a Top 5 of my favorite indicators:

The Fibonacci tool

Some traders cannot trade without this tool but well, everybody is entitled to their opinion so I’m gonna give you mine: I don’t like Fibonacci. In fact I like it enough to put it in this Top 5 but it only makes it to the last position. Now here’s why: Fibs, as it is widely known, is a tool which offers support and resistance and tries to identify a place where a retracement (pull back, correction or relief rally) might end. As a tool they are better for giving a target level for signals to appear and a way to measure the strength of a signal than they are as a signal themselves.
You will find a more complex description of the Fibonacci tool for binary options here. The problem I have with this indicator is the fact that using it involves a lot of subjectivity. The trader has to identify a swing low and a swing high and that is where its subjectivity enters the picture. I can choose a certain swing high while another trader can choose a different one. This will make us have different levels for our Fibs and this can generate different outcomes for our trades. On the other hand, when you have clear swings on the charts, the subjectivity is not such a big issue and that’s when Fibs become a more accurate tool. Another pro, Michael Hodges, swears by them and discusses how to use them moving averages in the Geek’s Moving Average Pivot Strategy.

Bollinger Bands

The bands are used to measure volatility but they are so much more. They are also as a trend indicator and tool that provides a handful of very tradable signals. More info abouthow to use Bollinger Bands for binary options can be found here. Overall this is a good tool and that’s why it made the Top 5, but to be honest I never used it that much, but only because my own system was already pretty set. Whenever I do though it seems to match an confirm the indicators I do use.
In a ranging market, this tool is nothing short of awesome and you can expect price to bounce inside the channel with picture perfect accuracy. That’s why a lot of Binary Options Strategies make use of this tool with success. But once a trend starts, price will break either the upper or lower part of the Bands and all strategies that work outstanding in ranging markets will fail miserably. The good news is that breaking the outside lines, or crossing the mid line, are all great signals too, only for trending markets.

Moving Averages

Taking the last place on the podium are the Moving Averages. Why is this tool higher in my top than Bollinger bands and Fibonacci? One reason is because there are so many combinations of Moving Averages that you are sure to find one that works for you. Some of the best strategies will use several, the Guppy System uses two bands of 6 MA’s and is quite effective. Basically, MA’s are one of the most basic tools, used by the most number of traders, have the most kinds of permutations and still give some of the best signals.
Let’s see, you have Exponential MAs, Linear Weighted MAs, fast ones, slow ones, shifted or not, simple, adaptive… I cannot possibly mention all of them. Let’s just say there are a lot of Moving Averages and some of them give you a smoother representation of price, eliminating all the noise. Another reason why the Moving averages have a place in Top 3 is because I use them every day and I don’t like giving a high score to a tool I don’t use. On top of that, a lot of other custom indicators are based on Moving Averages so you might be using them even if you don’t know you do… oh and by the way, Bollinger Bands use Moving Averages. The center line is a moving average, the outer lines are based on standard deviations of the center line. The most basic way to use it is described here, inthe Simple Moving Average Strategy.

The Relative Strength Index (RSI)

To be honest, the difference between First and Second place is tiny, almost insignificant but I tend to use more frequently the indicator in the top spot. Sorry, RSI! Ok, a few words about this tool: first of all, you should know it’s an oscillator, meaning that it moves (oscillates) between given boundaries which cannot be exceeded – more infohere. The main use of the RSI is identifying overbought and oversold conditions of an asset but it can also be used to find Divergence. However, this is an advanced technique which is difficult to grasp by the majority of traders and the only reason why Divergence doesn’t take First place with a comfortable lead is because I wanted to keep this Top strictly about indicators. If you think you have what it takes to master Divergence, readthis.

Stochastic

Alongside the RSI, Stochastic is always on my charts. It is another oscillator indicator and it gets top spot because if I were to use only one tool, I would go for Stochastic as I find it the most versatile. With the right settings, this tool can be amazing for both ranging and trending markets but I must admit that its true power is unleashed when you use a Multiple Time Frame (MTF) version. For a detailed review of the MTF Stochastic, this link is where you need to go. Basically, stochastic can find support, resistance, trend, range, and gives dozens of types of signals in both market directions.

Best Binary Options Technical Indicators for both experienced and new traders

Japanese Candlesticks

Candlesticks basic trading – Japanese candlestick are one of the best ways that you can view the charts and get an idea where it will go. It gives you the most information. It is more then hundred years old which means it will not die in near future. You can see that each candle represent where it was opened and closed and they are also colored so you can identify if the price is up or down. If you are not familiar with them, then this is a must read for you.

Fibonacci tools

Fibonacci miracle trading – If you are not familiar with who Fibonacci is then i can suggest that you should leanr about it since it is very interesting. If we make this story short for you, he was a mathematician who has seen that nature around us was rules with a set of simple ratios. He found them everywhere around him in everything. His numbers are nowadays used to measure the market in several ways but most useful for new traders is definitely fibonacci retracement tool.  When you activate this tool on your charts it will show some good prediction of support and also about resistance based on the provided chart you are looking at that moment.

MACD tools

Moving average tool – There are many trades that are successful that use momentum for their trading profits therefore this is one of basics when it comes to technical analysis principals. This is definitely one of top tools if you want to meausre momentum. It utilizes two moving averages and then it measures the distance that is beetwen both of them. With this as we said you will easily identify also support and resistance and when to enter a trade.

TSF indicators

Time Series Forecast Indicator – This many sound complicated but it is actually easy to use since it provides you clear signal for trading short term. But if you use this indicator and combine it with others it can become even better. THe indicator uses multiple linear regression which will show you the movement for future. A signal is simple as croosing above or below.

FORCE indicator

Force indicator – This is an oscillator which was made by Alexander Elder.  He is a trader that is trading commodites and also a book author such as “trading for a living”. This is indicator that showy you momentum but based on volume and direction. It can help you to determine support or resistance and also trend.

The bottom line 

You need to go through all of them in order to be a good trader that has a good base of knowledge. Based on these you can go into more advanced strategies later on. Also do not forget to join our community.

Indicators are of great help to traders once they understand that all these tools are far from perfect. A hammer doesn’t hit the nail on its head by itself; it has to be used by a guy who knows that his finger must be kept far away from the nail’s head when the hammer comes down. Also, the hammer doesn’t do the work for you, just how a Stochastic or a RSI will not give you outstanding results if you don’t have a set of other skills, but that’s another story…to help with that I suggest reading this article,Connecting The Dots To Becoming A True Binary Options Trader!

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Binary Option Collage

All Lessons in Part 1: Technical Analysis
Lesson 1: Technical Analysis in Binary Option Trading
Lesson 2: MT4 Binary option trading
Lesson 3: Binary option Trading tools
Lesson 4: Binary option Trading indicators
Lesson 5: Binary Option Charts and Analysis
Lesson 6: Choose the Right expiry time for Binary option trading

About the author

David Richard

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