Lesson 4 - Trading strategy in binary options WHAT TO USE AND WHAT TO AVOID FOR TRADING SUCCESSFULLY? So, we’re getting to one of the main components of a successful binary options trading, namely the ability to read charts. Those charts, displayed on the broker website are not suitable for analysis. To begin with, we need to know where to find charts for analysis.
There are special websites that can be used to get these charts. For example: finviz.com, tradingview.com and the alike. We recommend using charts from tradingview.com. Why these charts are good? There are a lot of tools and settings that will help in your technical analysis. And of course you can add standard indicators. You might use Metatrader trading terminal that is completely free and can be found at any Forex broker.
HOW TO READ THE CHARTS All beginners are scared of these complex shapes and numbers that appear on the charts, but it’s not that scary. After a couple of minutes you will see it. open in browser PRO version
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These graphs show the price movement in a certain period of time. The price is displayed in a form of candles or bars. Look at the two pictures below. One uses candles, the second uses bars, but they both show same information.
Candles or bars carry the following information: One candle or bar denotes selected asset price movement in a certain period of time. You can adjust the timeframe, which is displayed in the chart: minute, hour, day, week, and month. Later on we’ll describe how to do this. In each candle you can see the opening price, closing price, the maximum and the minimum value of an asset price in a selected timeframe. The maximum price is called - the upper extreme, the open in browser PRO version
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minimum price - lower extreme. Extremes in candlesticks, usually seen in the upper or lower tails (aka - the shadows), which go beyond the candle body. The chart color Color of the candles is also important. If you were interested in financial markets, then probably heard the words: bulls and bears. So if you see a green or a white candle, it's a bullish candle which means that the price goes up. The bear candle is either red or black color and means that the price goes down in a given timeframe. Open/close price
Charts are displayed from left to right. If the chart is displayed in bars, then regardless of the bar color, the opening price is on the left, the closing price is on the right. What is the opening and closing price? Opening price - the price at which an asset first trades at a start of the period. Closing price respectively the price at period end. If it’s a candlestick bar, opening and closing price is defined in a different way. In bullish candle (white or green): the opening price is at the bottom of the candle body (excluding shadow or tail), while the closing price at the top of the body. In bearish candle it’s completely opposite, at the top of the body - the opening price, and at the bottom - the closing price. More detailed information about the settings will be published in our facebook group. Use the option that you like best. If you decide to use Metatrader, then you might really want to automate the trading process as much as possible. Currently there are a lot of trading strategies and indicators offered. open in browser PRO version
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Extremely rare you will find those that produce a good result. Do not waste your time and money. If I'll get a decent system, I'll let you know after testing. CHART TIMEFRAMES AND SETTINGS Specified time period is often called timeframe. We'll talk later about the best timeframes for trading. In the meantime, let’s learn how to change timeframes and customize the chart.
On the chart above, 5M timeframe is chosen. Each candle reflects the price movement within selected period of time. For example one candle would reflect the price movement between 12:00-12:05, next candle would reflect the price movement between 12:05-12:10. open in browser PRO version
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In the next lesson we’ll talk about importance of a “trade journal” when working with binary options. And we’ll get to know what the best time for trading is. Today we will finish without homework, at the same time choose the most convenient tool for technical analysis for you from those described above.
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Want to know more? Subscribe to my YouTube channel, where I publish useful video examples, how to trade binary options.
Sincerely, Abe Cofnas Professional trader
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