Technical Analysis - The Basics

Technical Analysis - The Basics

Submitted by adil on Thu, 01/23/2014 - 10:49

Different traders use different strategies to technically analyze the binary option market. However, technical indicators you use in binary options are the same you see in traditional markets such as Forex because all of them offer similar assets to trade with. Therefore, you will have access to same analyses and statistical tools and charting data in binary options that trader use in other markets.

Every trader knows that there are two types of analyses, technical and fundamental. This post is all about familiarizing you with technical aspects of binary trading analyses and how to use them to find accurate trade entries. Technical analyses mostly consists of predictions based on obtained information, repetitive trends and charting data

Categories of Technical Analysis:

We can categorize technical analysis of binary options trading into three categories.

• Technical analysis using price actions.
• Technical analysis using charting data such as patterns and candlesticks.
• Technical analysis using technical indicators.

Important Technical Indicators:

Following are some of the most important technical indicators you should use.

• Line Charts
• Pivot Points
• Candlesticks Charts
• Line Charts
• Resistance
• Bollinger Bands
• Trend Lines
• Supports
• Commodity Channel Index
• Average Directional Index
• Accumulative/Distribution Index
• Relative Strength Indicators
• Open High Low Close Chart

Using Price Action for Technical Analyses:

The use of Price Action can considerably improve the accuracy of technical analyses. However, you must have access to level II pricing system in order to accomplish the task. Unfortunately, most of the brokers do not offer this feature to average traders and therefore, you should verify from your respective broker whether they provide this service or not.

Price Action allows you to monitor the trading volume generated by a specific asset. You can also obtain details about other trader’s actions such as whether they are selling an asset or buying it apart from total trading volume. For instance, an asset will probably decrease in value if a lot of people start trading it simultaneously. Furthermore, the asset’s price will probably follow its direction if it is trading in large volumes and moving in a particular direction. If the asset is being sold, its price will decrease and vice versa.

Using Charts Information:

If you already have knowledge of how to read charts, then chart analysis is relatively easy to conduct. For instance, you can easily predict the price movement of a particular asset by interpreting information provided by candlesticks. As candlesticks can provide information about past, present and future trades, they are the best indicator for any trade as they also form specific patterns. There are many different types of candlestick patterns that can help you predict precisely. Similarly, some traders also use a combination of candlestick and other technical tools to improve their predictions.

Using Technical Indicators:

You do not always need to use technical indicators but they can help you to predict more accurately. Mostly, traders used them in combination with candlesticks as discussed earlier. This is because they either oppose or support the prediction of candlesticks. There are basically two types of technical indicators that are Momentum Indicators and Trend Seeking Indicators.

Conclusion:

You need to check whether the broker you are registering with provides access to important charting tools and technical indicators as most of them do not. In fact, you can considerably increase your chances of placing successful traders using technical indicators and therefore, it is imperative for you to take maximum advantage of tools provided by your broker.