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Should You Use Technical Indicators

There is no single “best” technical indicator. Different indicators have different strengths and weaknesses, and many of them may work well for one type of asset, and be awful for another. They also will differ in effectiveness depending upon what kind of timeframes you trade–something that is especially useful for binary options traders.

Here are some basic things to consider. Start out by looking at the assets you will be trading. Some assets are approached differently by different traders/investors. For example, indices are considered to be long term investments. Stocks are, too, although not to the same degree since there are day traders out there that focus on short term fluctuations in stocks. Commodity futures are used for trading, but you can buy futures that are a year or longer in term, so these can be position trades, of sorts. The Forex market, in general, is comprised of short term trades just because of the way most brokers have their platforms structured. All of these are available in the binary market, but this is the reality of how these things are traditionally traded–something you should definitely keep in mind since binaries are pretty new and not yet a widely used method of trading. And because binary trades do not influence prices in any way, you need to pay attention to what works with traditional methods.
The Use of Indicators
For binaries, you typically want to look at priced based indicators since these will help you to determine where future prices are most likely to go just based upon mathematical evidence. A good place to start is with something that is adaptable. The MACD is a personal favorite of many traders. This stands for Moving Average Convergence/Divergence, and it can be customized to fit different time ranges. It’s a lagging indicator because it is based upon moving averages, but these are powerful in that they can show when prices are moving toward overbought and oversold conditions. When something is in the middle of a definite trend (either up or down), the lines created by this indicator can let you know when prices are getting set for a reversal.

One other thing to remember is that momentum is key in any sort of binary trading. The more momentum something has, the more likely an option is to be successful, regardless of direction. A 60 second binary option faces a little more random chance than longer term options, but when momentum is on its side, trading in that direction increases your odds of success. You can sometimes find long term momentum just from looking at a chart quickly, but you can also quantify this with technical indicators, too. The Strength Index (RSI) is a good way to start approaching this topic. With this, you plug in a timeframe for an asset (the default is usually 14 days, but shorter terms are better for short term options), and you can get started. This will give you a number from 0 to 100. The extreme numbers indicate a pronounced amount of momentum. The closer to 0 it is, the more exaggerated the downswing is, and the closer to 100 it is, the more obvious it is that the asset is going up. Momentum can show us two things. One, when it’s high, that means that prices are going up–that’s pretty obvious. But it also means that the asset is being overbought, and that means that a price reversal could be imminent. Both of these things are important pieces of information for traders.

Technical indicators are just one part of a very complex puzzle. They are very good for short term trades, but really you need to be looking at other indicators, too, as they are most effective when used in conjunction with fundamental and sentimental indicators in order to get a more complete picture of the asset in question.
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