There are many ways to trade binary options. I prefer more automated methods, like systems and traders that can send me signals for me to trade. Yet, early in my development as a trader I spent a lot of time with technical analysis, and so that’s what I’m writing about today.

In order to trade binary options more effectively, you just need to know the basics of technical analysis and be able to apply them. Technical analysis is applicable for any kind of trade. Analyzing will help you to determine what direction the price will move, which will in turn help you profit.

The analysis carried out by traders, can be two types: technical and fundamental. Each trader generally picks one type of analysis, the one that fits their trading style best. However, for the most complete view of the movement of prices it is necessary to use both types of analysis.

Technical analysis can help to investigate the dynamics of the market. This is done using graphs to help make forecasts about the direction of price changes in the next time period. This knowledge is essential for successful binary options trading.

For an easier trading approach I recommend you check out the guides available on Binary Today, as they don’t require any manual analysis at all.

Basics of technical analysis

One of the features of technical analysis is the fact that prices are not static, they always have a certain direction of movement. If the price moves in a certain direction for a sufficient time frame, it is called a trend. There are three varieties of trend. Bullish trend – it’s a long climb rates, bear, as opposed to a bull – long-term price movement down. Flat or sideways trend, it is indefinite price movement in a specific range.

Our software, Binary Brain Wave, takes advantage of ranging conditions, so when it’s flat or sideways.

Technical analysis helps to find out which trend exists at the current moment. Also using such analysis can be found period of its validity and to determine the amplitude of price movements. Upon availability of all this knowledge, the trader will be able to significantly reduce the risks, as well as get a very big profit.

There are three basic types of charts for technical analysis

Every graph has its own characteristics that allows to apply various strategies of technical analysis to trade binary options.

Line graph – is the simplest form of the graph, which can be applied for technical analysis. It is represented as a line formed by connecting points that reflect the level of the asset value at closing time. To construct points using the closing price, as accepted that it is one of the most significant indicators. Many traders are related disparagingly to line graphs, and believe that they are not suitable for technical analysis, but they are not quite right. If you prefer to trade on short positions, or even you can call this an ultra-short-term trading, the most powerful tool for you will be a line graph.

Bar chart is more popular among traders, as it reflects the more detailed market information than, say, a line graph. It shows both the closing and opening price, as well as the upper and lower extremes (minimum and maximum price). Recommended when using a bar chart to choose the time intervals greater than 5 minutes.

Candlestick chart is very similar to bar chart, since it has the same characteristics – it represents the opening price, closing price, and, in addition, the max and min price for a certain timeframe. Its main feature is the ease of interpretation and, therefore, assessment of the market situation. Just look at the color of the candles and will be immediately clear we are dealing with a bearish or bullish tendency in the market. In white or green are colored bullish candles and bearish – in red or black.