Trading binary options using oscillators

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Indicators and oscillators for binary options trading

When working in financial markets with the help of any technical trading tool, the investor needs to solve one basic task – to correctly predict the price movements of the underlying asset. It is an effective forecast, calculated by a set of indicators, can bring a market contract for profit. In this issue, binary options are certainly not an exception. In the trading algorithm itself, the binary option is the rate, specifically on the direction of the market, therefore forecasting and analysis here are the most important technical point of profitable trading.

To generate high efficiency forecasts for trading, professional and private traders use a wide range of tools, the main technical tools in this list are indicators. These specialized services are able to automatically evaluate the technical indicators of the price and form on their basis visualized and relatively accurate signals for opening trading rates. It is the automation of technical analysis that makes indicators such a popular tool for analysis. However, in professional trading options, as, indeed, in other areas of stock trading, there are a lot of skeptics who talk about the ineffectiveness of automatic indicators.

Undoubtedly, indicators give advantages to the trader, but at the same time in the trading environment there are many opponents of these funds. They give a completely logical justification for the inefficiency of indicators, which we simply have to talk about. The fact is that any algorithm for automatic market valuation is nothing more than a reflection of past market indicators or a projection of smoothed market movements. Therefore, as skeptics of work on indicator systems believe, there are simply no methods on the market that can generate forecasts based on indicators for future market movements. The dispute over the performance of indicators has been going on for a long time, and so far traders who are actively using market appraisal programs in their trade win this issue – and this is confirmed by their trading result.

In general, it is worth noting that even the technical rationale for the work of automatic tools, which skeptics lead, allows you to get fairly effective trading indicators when working on indicator strategies. Even the projection and accounting of past market indicators allow making effective conclusions about the development of market trends, which is a signal for trade.

We moved away from the main topic of the article, and decided to discuss professional opinions of investors is not accidental. Analyzing the work of indicators and oscillatory market analysis services in binary trading, it is necessary to talk about the advantages and disadvantages of tools so that potential users can clearly understand the positive and negative factors of work for certain services. We offer you a list of standard and highly effective indicators, which are most often used in binary trading. And the choice of the most attractive and convenient for trading – is yours.

Indicator MA

High-precision trend indicator – Moving Average. In the algorithm of his work he uses the average statistical values ​​of the asset value in the period of market fluctuations established during the settings. Thus, the indicator in automatic mode generates a dynamic level of trend movement on the chart, which identifies trends directions of any construction duration. In the principle of market analysis, this service imposes the market’s desire for balance, that is, the quotes of the asset, despite impulses and trend movements, always tend to balance at a certain level. This makes the indicator work technically sound and accurate in terms of generating forecasts.

Classical signals when using the average in binary trading are:

• The direction of the construction of the indicator moving, which determines the current trend

• Breakdown of the indicator level by quotations of the asset in a certain direction. This signal format characterizes the reversal of the price trend.

In this simple way, traders can generate signals on the chart with relatively high forecast accuracy.

Benefits of the service:

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• Simple operating mode on the liquidity chart

• Relatively good efficiency

• On narrow market valuation ranges, the indicator is not able to react quickly to price movements

• For a long evaluation period, the indicator signals are significantly delayed

MACD indicator

The main algorithm of this indicator is combined analysis approaches. Here, with the help of different periodic moving averages that make up the oscillator part of the indicator, signals of the turning points of trend movements are formed, and the direction of such a fluctuation is determined. In addition, the MACD indicator has a histogram – its task is to determine the impulse strength of trend market fluctuations using a complex calculation model. This indicator is used in high-frequency trading options with a narrow range of expiration. As a set of signals, it is customary to identify such service indicators:

• Crossing removals among themselves in a certain direction

• Breakdown of the centerline of the technical scale of the indicator by oscillator lines in the direction of a new trend

• The indicator of the divergence of the oscillator lines between each other

• The histogram columns are raised or lowered relative to the zero level and the histogram of the level indicator 0 intersects.

In addition to the classical signals of the instrument, a set of specific indicators is proposed here, which can also be considered as signals of the MACD strategy:

• Construction of trend levels with oscillator lines

• Divergence of the oscillator – the discrepancy between the direction of movement of the indicator lines and the market movement of quotations

This list of technical indicators allows you to maximize the amount of information on the market situation on the chart of quotations and generate an accurate forecast on market trends.

Advantages of the indicator:

• Rapid reaction to market movements

• The widest possible range of signals and estimated indicators

• High efficiency at work on all ranges of market valuation

• Late reaction in the time of high, impulsive market volatility

• Increase in the number of false signals on the minimum market ranges

Indicator of Bollinger Wave

The analysis tool is a mode of combined use of 3 moving averages, where the standard deviation of removals is applied. This technical tool allows you to form on the quotations of the asset dynamic price corridors of fluctuations in the asset market. At the same time, the Bollinger Wave indicator allows you to obtain a large amount of information for analysis: the level of market volatility, the boundaries of trend fluctuations, the points of price reversals in the formation of new trends or corrective movements.

Classical signals of the indicator are considered to be:

• Bounces from the boundaries of price corridors

• Intersection of the centerline of the indicator when the direction of the trend is changed

• To determine the level of volatility of the current market trend, divergences of the indicator’s boundary lines relative to its central moving

This type of indicator generates signals with a forecast accuracy of up to 90%, which leads the user to a high level of technical results in the binary market.

Benefits of the tool:

• Clear signals that determine the turning points of the market

• Good level of reaction to global trend reversals

• Highly effective forecasts

• A large number of false technical forecasts for flat movements of quotations

Alligator indicator

The service, created by the recognized financial market authority Bill Williams, is a classic indicator analysis tool. In his technical algorithm of work, the adoption of the use of different periodic and multi-format moving averages is incorporated. When the tool is working, traders can clearly identify how the trend movement zones, as well as moments of flattening and consolidation. This list of indicators makes it possible to clearly identify coins for the emergence of trend oscillations, which is an effective signal for the design of binary options. The classic indicators for trading on the indicator are the turns and intersections of service removals with each other in a certain direction:

Indicator Alligator is considered a classic high-precision tool for analyzing quotations when trading in a binary market, and allows you to get the highest possible trading results.

Benefits of the service:

• Formalization of signals

• Accuracy of reaction to trend movements of the market

• Relatively low false signals

• A belated reaction to the increase in volatility, which is demonstrated by the market with the emergence of fundamental drivers of market movement

RSI indicator

A technical tool whose task is to define a wide range of indicators: the relative strength of the trend movement, the direction of the trend, the zone of market extremes (the level of oversold and overbought assets). This set of indicators allows us to use the indicator RSI as an independent highly effective strategy. The signals of the RSI indicator are:

• Crossing the levels of extremes of the market by moving an indicator

• Directivity of construction of the trend line of the technical means of analysis

It should be noted that the RSI indicator is often used in trading strategies as a filter for false trading signals of other indicator analysis tools.

Benefits of the service:

• Large volume of market indicators

• Accuracy of forecasts

• Easy operation of the service

• In moments of low volatility of the market and the flat, the service provides many false trading signals

In principle, this is a fairly comprehensive set of automatic indicators for creating highly professional and accurate trading strategies, which are most often used by traders in the binary market. All the rest is derived from these technical means.

It is worth noting that, despite the effectiveness of these tools as mono-indicator market assessment systems, professional investors use them as tools for creating highly specialized highly effective strategies. Simple combinations of this list of indicators and the use of authoring settings based on their own experience in trading make it possible to form an infinite number of trading systems for binary trading.

Let’s follow simple example.

When an asset of a simple analysis tool set consisting of the SMA trend indicator and the MACD and RSI oscillators is installed on the liquidity schedule, we get a classic strategy for high-performance trading in the binary market. At the same time, the template for markup graphics has a simple and understandable mode even for the beginner:

The signal system of this strategy also has a simple formalized regime and allows you to receive up to 86% of the effective rates while operating on the market, which enables investors to expect a stable and high financial result:

We offered you an optimal set of effective indicators for creating trading strategies of any complexity and efficiency. Of course, the full list of the indicator tools available today in the network includes hundreds of titles, dozens of approaches for assessing the market and allows you to create an unlimited number of trading systems. You only need to make a choice and experiment to get the best possible result.

“General Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.”

Awesome Oscillator for Binary Options Trading

Bill Williams introduced the Awesome Oscillator. In his book the financial genius called the AO the best momentum indicator available in the stock and commodity markets” for simplicity and elegance. Basically, it is a 34-bar simple moving average subtracted from a 5-bar simple moving average. It can be applied across different markets; be it stocks, commodities, indices, and currencies.

Only experienced traders know that there is a huge profit potential in trend reversals while beginners are scared of sudden changes in market. However, when you trade in binary options your profit or loss is does not depend on the points of the price. It depends on whether you predicted the trend correctly. Binary options depend on the outcome of a “yes or no” proposition, hence the name “binary”. The gain or loss on the trade is automatically credited or debited to the trader’s account when the option expires. Traders receive a payout if the binary option expires in the money and incur a loss if it expires out of the money.

Traders rely on the Awesome Oscillator to predict trend reversals. If you trade in Pocket Option trading terminal you can find the AO among standard indicators. To install it find it on the list and click “+”.

About the Awesome Oscillator and settings

The oscillator received the name “Awesome” because what it can do is a miracle. Bill Williams wrote that it is the best oscillator he ever invented. He also introduced such indicators as Alligator, Accelerator, Percent Range, Fractals and many others.

Like most oscillators, Awesome Oscillator is displayed in a separate window under the price chart. It looks like a histogram located on both sides of the zero level.

In simple words, AO looks at the last five bars in comparison with the wider time frame of the previous 34 bars. The value of the Awesome Oscillator indicator is calculated as the difference between moving averages over these two time frames. Rather than using closing prices, though, these simple moving averages use the midpoints of the bars (i.e. halfway between the high and the low).

If you trade in the Pocket Option terminal and you want to change the settings, you need to go to the Indicators/Active menu, then select Awesome Oscillator and click on the pencil icon.

When you tune the settings and see that everything is working, you can apply it in your binary options trading strategy.

How to apply Awesome Oscillator in Trading Strategy?

The awesome oscillator will fluctuate between positive and negative territory. A positive reading means the fast period is greater than the slow and conversely, a negative is when the fast is less than the slow.

The AO histogram crossing above the zero line indicates bullish momentum. Conversely, when it crosses below, it is indicative of bearish momentum.

When you trade in your terminal, you can see the signal of a trend change in color in the Awesome Oscillator.

Generally speaking, the basic rules are as follows:

  • The CALL option when the histogram moves from the bottom to the top with a new bar formed above the zero.
  • The PUT option when the histogram moves to the lower part and a bar formed below the zero level.

The Awesome Oscillator works with any timeframes. It is also good for turbo options however you will get a lot of false readings during a choppy market.

The recommended expiration period should be more than the time of formation of two candles.

Awesome Oscillator can predict divergence and should be used as an additional signal for opening a transaction. However, you as a trader need to be prepared for the harsh reality of trading. Beginning traders should read more about the AO indicator altogether and prepare to combine the AO with other indicators. Find out for yourself if you understand the AO and give a try to a demo account with the Pocket Option.

Advantages of Trading Binary Options With Oscillators

Advantages And Disadvantages of Trading Binary Options With Oscillators

Trading binary options require understanding the technical analysis and the market fundamental to maximize the trader profits. There are several instruments, which are used to facilitate and speed up the information analysis. This article will describe the advantages and disadvantages of trading Binary option with oscillators

What is an Oscillator?

An oscillator is a technical, analytical instrument, which identifies an asset’s market momentum. The oscillator can process and compare the enormous amount of information such as asset’s price, market situation, and trade trending patterns for long periods. It accurately identifies and anticipates the next asset’s price movement direction by recognizing the market momentum. The oscillators are computer’s programs or software developed to ease and speed up the Binary Options trading technical analysis. Oscillators assigned to the studied asset a numerical value from 1 to 100. The assigned value will indicate the current market momentum, and it allows anticipating the asset’s price moving direction accurately and market condition.

Advantages of Trading Binary Options with Oscillators

·Oscillators process large amounts of data in just seconds giving valuable market insight and recognizing the market momentum.

·Oscillators analyze and compare longer periods reducing the misinterpretation and increasing the specificity of its results.

·Oscillators are excellent identifying divergence points giving an edge for brokers to recognize a strong trend or an imminent market reversal

·Oscillators give a numerical value to the asset making simple to understand the market momentum and the next asset’s price moving direction

·Oscillators can be graphically represented in two lines to speed up its readability and its data delivery capacity.

·Oscillators are reliable indicators for trend trading and/or market reversal increasing the trader profits potential.

·Oscillators are pivotal for asset overbought or oversold state identification anticipating the market reversal.

·Oscillators confirm a trending trade and its strengths by assigning a numerical value to the asset market.

·Oscillators parameters can be adjusted this feature is used to analyze longer or shorter periods as well as to increase or decrease its specificity.

·Oscillators are diverse you can select the best oscillator for your trading plan or your assets, all of them are easy to use and share the basic functions.

Disadvantages of Trading Binary Options with Oscillators

·Select the right oscillator you need to select the right oscillator for your assets since there are many it can be a little challenge at the beginning and rookie trader could use the wrong one.

·Oscillators values sometimes can be ambiguous without a strong market signaling, requiring the trader to use others tools or analysis to anticipate the price direction accurately.

·Oscillators’ graphical representation may vary from two to three lines for different oscillators requiring the trader to be aware of which one is using to avoid misreading.

·Oscillators can be specific some oscillators are useful only for some markets and assets they can not be used universally or interchangeable. Traders need to select the best for them and the assets they are trading.

Oscillators in Binary Options

Oscillators in Binary Options. Oscillators are a type of indicator very helpful for any trader with a trend-following approach. They help a trader define short periods of market extremes and indicate trends losing momentum. Oscillators are preferred by traders as they offer a visible perspective to trading in the sense that divergences can be used when compared with the trend indicators category where divergences are useless.

Oscillators in Binary Options Present a Clear Strategy

Trading forex with oscillator has the advantage that the trader knows exactly when to enter the trade, not like trading with trend indicators as in that case one needs to look at things from a relative point of view. With oscillators, for example, I want to buy a call option/place BUY contract on any dip of the relative strength index (RSI) into the 40 level after it reaches the 50. It is a clear strategy and this is possible only when using oscillators. On the Metatrader platform one needs to go on the upper tabs list, choose Insert, then Indicators, and from that list, there is a category called Oscillators.

On the JForex trading platform on the other hand, the oscillators are being called momentum indicators as basically there is a momentum that is building before the oscillators are breaking. If you want, the difference between trend indicators and oscillators is the same like the difference between technical and fundamental analysis. One cannot trade without both categories to be considered. Trading can be done solely on the back of oscillators or indicators, but chances that the option will expire in the money are clearly smaller than taking into account both categories. The same is valid for technical and fundamental analysis: while technical analysis is showing the target, basically where the price should go, fundamental analysis is giving the reason for why the price is moving in that direction.

Reliability of Oscillators in Binary Options

This doesn’t mean that trading is not possible only by using technical or fundamental analysis when making a trading decision, but it shows merely that a combination of the two leads to more success in trading than otherwise. Oscillators are considered to be more reliable than price because they take into account more candles before plotting the level on a chart. For example, the RSI (14) is plotting a value on a chart that takes into account 14 candles prior to the current candle that is opened. This is valuable information sometimes not even the trend indicators are offering.

7 Binary Options

The 7BO Binary Options Education already dealt with the issue of when markets are not trending. Trending is not the dominant factor and occurs only 35% of the time, and the other 75% of time fall back onto prices which remain steady within the levels, i.e. in consolidation and does not come close to break either resistance nor support. As an advanced trader, you do not need to wait for the trends, but you can equally use the ranges to your advantage if you know how to track them down. You may buy at the lows and sell at the highs and still be on the right track.

One of the perks of trading options is that the time when prices are in consolidation is not necessarily wasted time. traders should not only wait for intensive trend movement to make a move, but they can also make profitable trades as long as the price is higher than the striking price within the expiry period (when they placed a call option), or when the price is below the striking price within the timeframe when they traded a put option.

High-quality Oscillators

In a consolidated market, an oscillator can help you significantly to pull through the period by identifying ranges. The oscillator RSI (the Relative Strength Index) is one of the best-known oscillators and we have already mentioned it in our previous lessons, and hope that you already started to use it from time to time. As the binary options market is booming, many platforms offer a series of oscillators and many traders select them by their own preference or based on knowledge they have acquired so far.

Oscillators imitate or copy price movements, and moreover, they are even more accurate than the prices itself (regarding many false price displays), and traders can simply use the oscillator to avoid false prices by not looking how the prices move, but the oscillator.

Use Oscillators When Trading

Oscillators are characterized by their skill to make divergences usable when the market moves within the levels, as opposed to an aggressively moving market when divergences are better to be left out. Oscillators are a kind of automated little helpers and that is what launches them to the top of the most desirable trading tools.

A trader needs to reach a certain level of trading experience in order to know when the oscillator is of use and when it should be avoided. Traders need to know that there is no universal tool which is so diversified to cover all market conditions. All of the tools are good for some situations where they would be a complete failure in others. Oscillators too, have two sides and sometimes even combining multiple oscillators will not bring the desired results. It is more about estimating the right situation for the right tool.

They are good to indicate oversold and overbought markets, and by the time it reaches one of these two points, all of them show the same. The signal must be obtained from other indicators or by something else.

The Oscillator as a Strategy Tool

The greatest benefit of trading with an oscillator is certainly the hint when to enter a trade, which is not the case with trend indicators. A strategy with using an oscillator can be presented as follows: one may buy a call option on a dip of the Relative Strength Index into the 40 level, but only when it reaches 50 level.

The many trading platforms feature the oscillator indicator almost by default, and you can find it mostly on the menu. But, it might be put in other places as well, like on the Meta Trader platform, which is used by millions of traders, where you can find the oscillator options by clicking the Insert button, after which you click indicators after which the oscillator indicator can be accessed.

Another renowned platform, the JForex trading platform calls the oscillator a momentum oscillator, drawing on the association that prior to oscillators’ breaking, there is always a momentum.

Trend indicators differ from oscillators in the same technical and fundamental analysis differ. There is no successful trading if one only focuses on one part. Both have to be taken into consideration as fundamental factors of a strategy. Still, may traders focus on one or the other, but they usually mismatch the price and timing which results in losses. Similarly, technical analysis serves to predict where the price is moving, its direction, but fundamental analysis explains the reason behind the price movement.

How Much Can You Rely on the Oscillator?

The above-given example does not allude that one cannot be performed without the other, sure it can, in practice and theory, but the point is that more optimal trading results can be achieved by combining the two strategies, as well as combining oscillators and trend indicators.

When it comes to the reliability of oscillators, they are considered more reliable than prices. The secret lies that oscillators analyze more candles before displaying a level on the graphic. The RSI (14) is most commonly used, and offer more accurate hints than trend indicators sometimes.

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