TREND INDICATORS FOR BINARY OPTIONS
In order to determine the trend, it is necessary to use the appropriate tools. Among them, one can note trend indicators for binary options.
Why does a trader of binary options know the direction
In this part of the article, we’ll talk about what a trend is and how to work with it. Above we have already noted that understanding the direction of the movement is the half of the matter in trading in financial markets. The importance of the trend is determined by the fact that the trader can make the right decisions knowing, for example, where the price of the underlying asset will go in the next 5-10 minutes, hour, day and so on.
There is a huge number of tools to understand what the market will be a trend. This includes, for example, entirely the whole of the fundamental analysis, graphic patterns, candlestick analysis or a price action system. A separate place is occupied by trend indicators for binary options, which help to answer the question – what market trend is in now.
Advantages and disadvantages of trend indicators for binary options
What are the advantages of this kind of algorithms? First and foremost, their main advantage is the ability to indicate which trend is on the market now. Knowing this, a trader can join the current movement and earn. As soon as the trend changes, he will be able to buy the contract in the opposite direction and also earn money.
Trend indicators give very simple and understandable signals. For example, when the moving average is pointing upwards, there is an upward trend in the market. Therefore, when it is directed downward, the market is a downward trend.
However, they have their own shortcomings. For example, trend indicators for binary options are late. That is, they show the trend already when it develops. Consequently, they are late and with reversals. That is, the trader has only information that at some current time in the market upward or downward movement. But the trader does not know when it will end. A signal to change direction will only come when this event already happens.
Of course, such a drawback can be tried to level through the settings. Making the indicator more sensitive, we will get more signals and the algorithm will respond better and faster to market changes. However, in this case, we risk getting a large number of false signals, which will indicate not about the trend, but about local fluctuations.
How to correctly use trend indicators for binary options
Those traders who understand all the advantages and disadvantages of trend indicators know how to use them correctly. There are several key points that we would like to draw attention to. Unfortunately, as we already noted above, adjustments of a particular indicator are not achieved with a positive result.
For this reason, two options are suggested: either add another indicator as a filter or, as with the moving average, add one more curve to the chart, but only with different settings. There are even such strategies that are built on receiving signals from the intersection of two moving averages with different periods.
As a filter, you can add, as a trend indicator, and oscillators. It all depends on what kind of result the trader expects. The most important thing is that any filter should be added with a certain logic, and not just so, in order to “clutter up” the schedule. Today, on the Internet, you can find a huge number of strategies, which use two or three indicators that do not complement each other.
The same Bollinger bands trading stratagy or moving averages can be used together with candlestick analysis or price action. In this case, the basis of the system will be candle patterns, and the trend indicator will only confirm the arguments of the trader and act as a filter.
List of trend indicators for binary options
And now it’s time to list the most popular indicators for binary options that help determine the trend. In particular, they include:
– Moving averages;
– Bollinger bands;
– Alligator Bill Williams;
– ADX (indicator that measures the strength of the trend).