Binary options are known for their simplicity. One doesn’t need to learn a lot of things about this type of derivatives in order to engage in trading. There are plenty of tools that can be used by trader to succeed. Technical indicators are among the most popular ones as they don’t require much knowledge from traders.
Technical Indicators Basics
There are two main types of technical indicators that one can use when trading binary option contracts: trend and momentum ones. A technical indicator allows traders to get the general picture of the current market situation and find the entry points.
Trend following indicators allow traders to see the current trend as it comes from their name. This is an opportunity for a binary option buyer to understand the general tendency. As for the momentum ones, those indicators are designed to show the areas where the price may reverse being overbought or oversold.
Is it Worth Using Binary Options Indicators?
There is no guarantee that any particular tool that traders use in their daily trading routine is effective enough. Everything depends on various conditions, including a trading strategy, money management, etc. Anyway, using Binary Options indicators may be useful as a trader can get a general picture of what is happening with the price. Moreover, indicators are also useful in predicting future market quotes.
Also Read: Indicators for Day Trading: 7 Optimal Choices for Every Trader
The Top Binary Option Indicators to Try
Below, our readers can find a list of the most popular and effective indicators for binary option trading:
1. Moving Average. This is a trend following indicator that can be useful if a trader wants to see a general tendency in the market. It is also known as an “overlay” indicator as it is built over the price.
2. Bollinger Bands. This is another trend following indicator that envelops the price. It shows the current trend and market volatility.
3. Parabolic SAR. This trend following indicator builds dots below and above the price depending on the current market situation. It is considered a strong analysis tool that can be used to find the approximate trend ending points.
4. RSI indicator. The Relative Strength Index is a momentum indicator that can be used to find overbought and oversold areas. It is considered a useful tool to find entry points during market reversals.
5. ATR indicator. This is a volatility indicator, showing traders the range of the price fluctuations for a particular period. One can use it in combination with trend following or oscillators to build a strong trading strategy.
Also Read: Best Forex Indicators: Which of Them Will Help You Earn Good Profits?
Final Words
Indicators are very important in Binary Option trading as they allow traders to find entry points or to find out more about the current market tendency. There are plenty of indicators that can be used to perform those tasks. Nowadays, skilled traders create their own technical analysis tools based on those classic Forex indicators.