Binary Options Oscillator Indicators

Binary Options Oscillator Indicators

Submitted by adil on Mon, 05/12/2014 - 05:18

When a trader devises a binary options strategy or designs a plan for that matter, he takes into account a lot of technical indicators, such as, oscillator, momentum and lagging indicators. There are different types of oscillator indicators and understanding their difference can be helpful in the long run as it enables the traders to decide which oscillator indicator to use when devising a strategy for trading in the binary options market.

BASIC UNDERSTANDING

Therefore, a trader should know that oscillator indicators move up or down the centerline and between the numbers that represent the current market state of the underlying asset. Following are the types of Oscillator indicators:

Centerline Oscillators

It is one of the most common oscillators that are used by traders when they are trading in the binary options market. Moving Average Convergence Divergence (MACD) and Rate of Change (ROC) are commonly used centerline oscillator indicators. The MACD is also known to be a trend following type indicator and is very effective when traders use trend following trading strategy. On the other hand, the primary function of Rate of Change or ROC indicator is to calculate the percentage change in price over a certain period of time. If the percentage result is higher than the centerline, the asset is said to be bullish, but asset shows bearish attributes if the percentage is lower than the centerline.

Centerline oscillators are also helpful in defining and showing the comparative strength of direction that can be seen during the asset price movement, which is why it is best to use when you are trend trading.

Banded Oscillators

Banded oscillators have been increasingly popular over a period of time. The reason behind their popularity is that they help investors and trader to anticipate whether the asset under observation is showing any extreme movements or not. The primary function of this oscillator is to identify if the asset is over traded in the market. Therefore, one of the benefits of banded oscillators is that you get to understand the market situation of this asset, which helps you decide whether you should place a trade in the binary options market or not.

There are two types of banded oscillators in the market, a stochastic oscillator and a Relative Strength Index or RSI indicator. These indicators determine whether the asset under observation is over traded in the binary options market or if it’s neutral. However, there is another type of band oscillator which does not show the market condition of the asset under observation. That indicator is known as Commodity Channel Index or CCI indicator. It is an unbounded oscillator because it doesn’t show the figures that represent the condition of the asset in the market; instead it sends out signals displaying the direction in which the asset will continue to move.

Technical oscillator indicators are very useful for traders who are trading in the binary options market and understanding their basics will help these traders to identify which indicator is suitable for them in designing a trading strategy.