Among all the tools to help you trade on the binary options market and Forex trend indicators allow to make most orders without loss, based on the received signals.
If trading in the trend direction, most of the trades will close in profit than in loss. This rule is verified by years of practice, on all assets.
In this article we will discuss the concept of trend and how it is applied to markets of binary options. Also give analysis of the most famous trend indicators for binary options market.
- 1 How to identify a trend and use them effectively in trading
- 2 Analysis of key trend indicators
- 2.1 Description of Scalper MA indicator
- 2.2 Description of Stepma indicator
- 2.3 Description of MTF Candles indicator
- 2.4 Descripton of 4 MA Strength indicator
- 2.5 Description of Bbands stop indicator
- 2.6 Description of OsMA indicator
- 3 Summary. It is not easy to know your power.
How to identify a trend and use them effectively in trading
The main problem with most traders is that they, not being able to determine the trend in the market, open trades. And then wonder why the deposit is merged.
Note that trading in binary options is based on the same principles as Forex.
Binary Options strategies work the same way as Forex. Apart from profitable trading tactics is important not to forget about the rules of money management, as well as the likely risks.
No need to think that binary options is a game where you must guess the direction of movement of the asset. You should not trade for all the money you have.
In order for deals to be closed with money in most of the cases, you need to properly conduct fundamental and technical analysis of current market.
Quotes are moving in the market at first glance chaotic, but this is the only way, it seems. In fact, price makes the same figures of technical analysis. This allows you to look at history, where in the future it may move the price.
If you look at the chart of any currency pair, it is immediately obvious where the price is moving up or down or is on sideways. The price movement up and down is called ascending and descending trend or like some traders call— trend.
So, the market may have three-state rates:
- downtrend (bearish) – price movement for a long time is down;
- uptrend (bullish) – price movement for a long period of time is up;
- sideways or flat (the price is moving within a border up and down).
Description of the indicator
So, we gradually came to the question of determining the trend using the indicator. If to trade, not knowing what trend is in the market – the deposit is doomed to sink.
The first thing you need to do to profitably trade with binary options is to open a trading terminal Meta Trader 4. Then, choose a currency pair where you will enter into potentially profitable deals.
For example, select the currency pair GBP/USD.
Further we are interested in the installation of trend indicator for profitable trading in options. To manage this is very simple.
Go to indicators, then “Trend”, then we need to choose the indicator called Moving Average.
Below are two screenshots with the settings of slow and fast MA:
Next we need to choose the trend indicator MA, however, set a period of 5.
For determining of the trend in the market it is enough to set the two moving averages MA (Moving Average):
- one with a period of 5;
- the second with a period of 20.
Here is how two moving averages set on the chart look.
The larger the timeframe, the more precise indicator of trend.
Confirmation of the downtrend
If the fast MA crosses slow one down and two candles closed below the two MA, this means that the market has the downtrend.
Example of downtrend
Confirmation of the uptrend
In the case where the fast turquoise line crosses the slow (red) from the bottom up, and two candles closed above the two MA, then we can say that this is certainty the uptrend.
The important aspects of trading by trend with binary options
The main thing to remember, you should never trade against the tendency, that is, trend.
If you see that on the D1 chart there is the uptrend, all transactions need only to be opened on the CALL, not PUT. Even when it seems that the trend here is about to unfold.
If you at the same decide to trade on the timeframe M5-M15, be careful, as due to market noise, you can quickly lose your deposit.
Downward (bearish) trend, has always been more powerful, but however, it is short-term, what can not be said about the upward (bullish) trend.
It is easy to confuse a downtrend correction. The price, which goes slightly in the opposite direction from the main trend is called corrective movement.
The trend can be considered valid only when after crossing the slow moving average MA by fast MA second consecutive candle opens in the direction of the trend.
Always remember these rules, and the trade will be profitable.
Analysis of key trend indicators
In fact, the trend indicators for binary options are developed in different interpretations and types. Let us analyze the most popular indicators, showing a trend in the market. This will help to determine for yourself the best indicator for trading binary options.
Below we will present analysis of the best (by our view) indicators of the trend for BO and Forex market, namely:
- Scalper MA.
- MTF Candles.
- 4 ma strength.
- Bbands stop.
Description of Scalper MA indicator
Trend Scalper MA indicator is used by many scalpers in the Forex market. Hence its name. However, it is also applicable in the options market.
This indicator can be considered as a complete trading strategy. As it shows the trend of price movement in one direction or another. Based on this you can buy the options of PUT and CALL. The presence of a dial indicator Scalper MA further simplifies the process of determining the direction of the price. As you could understand, blue line of this indicator suggests that the trend is bullish, the red indicate a bearish trend.
To increase the signal quality, it is recommended to enter immediately after the signal, and after 7 candles after the arrow appears, up or down. Expiration: 5-6 candles.
Visually it looks this way:
The advantages of Scalper MA trading indicator
This trend indicator has a number of advantages:
- accurately shows the trend in the market;
- has sound alert after the appearance of the red and blue arrows, so the trader do not have to constantly stare at the monitor;
- it is not redrawn, it shows the direction of the current price.
Disadvantages of Scalper MA indicator
As with all Forex indicators Scalper MA also has its drawbacks. Among the disadvantages of working with it should be noted:
- a lot of false signals during flat;
- after a long signal candle a long pullback is possible, but not the fact.
Description of Stepma indicator
This indicator excellently monitors the trend. Indicator Stepma is applicable absolutely to any asset. It is better to trade with the timeframe of H1 and above. It is easy to understand its signals: if the price is under the indicator line, then trend is bearish, and while the price is above the indicator line – the trend is bullish.
The advantages of trading with Stepma indicator
- The indicator is easy to use;
- it is not redrawn;
- shows a clear trend.
Disadvantages of trading with Stepma indicator
- The long-bodied candles that change the trend, sometimes, can dramatically roll back in the opposite direction.
Description of MTF Candles indicator
This trend indicator shows the trader the true trend by its bands. Blue bar indicates a bullish trend, the white – bearish trend.
Advantages of MTF Candles indicator
- Demonstrates the current trend;
- it is not redrawn;
Disadvantages of MTF Candles indicator
- Ineffective on flat areas.
Descripton of 4 MA Strength indicator
If the bars of the histogram are directed upwards and turned green, in this case, the market has obvious trend, if the columns of the indicator look down and stained a crimson color, then the market is flat. The strength of the trend can be understood by the height of the bars of the histogram. The bigger they are, the stronger the trend.
Advantages of 4 MA Strength indicator
- Accurately shows whether the market has trend;
- detects the flat.
Disadvantages of 4 MA Strength indicator
- Not showing what trend the market has (an upward or downward).
Description of Bbands stop indicator
Two-tone dots indicate bullish and bearish trend. The indicator Bbands stop can be considered a modification of the standard indicator Bollinger Bands. It is present in each MT 4 terminal. If green – market has trend. The appearance of orange dots indicates flat.
Advantages of Bbands stop
- Indicates the presence of a clear trend;
- shows flat price movement;
- doesn’t draw values.
Disadvantages of Bbands stop
- Does not demonstrate what the market trend is (bullish or bearish);
Description of OsMA indicator
Standard OsMA indicator represents the histogram of the columns located in the basement of the terminal. Best signals for this trend indicator can better be seen on higher timeframes. If the histogram bar is below zero, this means that the market has the downward trend. Conversely, upstream from the zero column indicator indicates an upward trend.
Advantages of OsMA indicator
- It is not redrawn;
- shows rising bullish and bearish trend;
- no lag.
Disadvantages of OsMA indicator
- A lot of false signals on flat market, especially in narrow range.
Summary. It is not easy to know your power.
So, we have considered different trend indicators for binary options. Some of them are worse and some better. It all depends on the preferences of the trader. Also we have considered the pros and cons of trend indicators for the binary options market that will allow the trader to identify which of them should be applied in trading.