What Indicators Should You Use for Binary Options Trading?

If you have done your research regarding binary options, you probably know that you are going to need a strategy in order to be successful. You have potentially realized that you need indicators in order to create and utilize your strategy.

This means that you are probably trying to figure out what indicators you should use for binary options trading. Well, then you are in the right place. Here are some of the most important indicators that you should be relying upon:

Wilder’s Directional Movement Indicator’s (DMI), Average Directional Index (ADX)

Yes, this is quite a mouthful but in most instances it is simply referred to in terms of DMI and ADX. For this indicator, you will need to be aware of the three parts – the ADX, the Plus Direction Indicator (DI+), and the Minus Direction Indicator (DI-).

In short, you will need to look at the DI+ and the DI- in correlation to the AVG. For instance, imagine that DI+ is above DI-. This means that the momentum is uptrend. If DI+ is below DI-, then the momentum is downtrend. If the ADV value for either of these scenarios is more than 25, you can determine that this trend is strong.

If it is below 25, the trend is weak. 

Pivot Point

The Pivot Point is a little easier to understand. Essentially, it can be used to identify the general trend of the market for different time frames. Simply put, the pivot point is the average of the high, low, and closing prices that were recorded on the previous day.

If the trading for the current day is above this pivot point, then it is assumed that there is a bullish sentiment. If trading is less than the previous day, however, it is understood to be a bearish sentiment. This has proven to be particularly helpful in the trading of major currencies.

Bollinger Bands

Bollinger Bands are used to determine the level of volatility that the market experiences. There are two bands, one indicating the upper level while the other determines the lower level. When the market is particularly volatile, the bands contract, moving closer together.

This can sometimes mean that there are trading opportunities ahead. If the bands widen, however, it is a sign that the volatility is decreasing. It is important to understand that Bollinger Bands do not act as trading signals. They cannot tell you when or how a price may change.

Stochastic Oscillator

This indicator compares the closing price of a particular asset to the range of its prices over a specific period of time. The Stochastic Oscillator measures the level of the closing price comparative to the high-low price range of the asset.

The sensitivity of the indicator can be reduced by one of two ways. You can choose to adjust the period of time or take a moving average of the result.

These are the most important indicators that you should use for binary options trading. While there are others, it will be quite beneficial for you to master these, above others.

Page Updated: 1 March, 2017