what's the best indicator for binary options

Price is the ultimate indicator. Regardless of what indicator you use, it won't tell yous more than the bodily price movement itself, because all indicators are derived from price. I prefer to merchandise without binary options indicators, since the price itself is what I trade. With that said, indicators do present price information in a dissimilar way, which tin help united states of america isolate moves or underlying strength or weakness we not run across on the price chart. While I by and large trade indicator free, only here are my ii favorite indicators which I practise use on occasion to clarify moves, hone in on high probability trades and help filter out the bad ones.

Boilerplate True Range (ATR)

By far the indicator I use the nearly. Only put, ATR is the amount an nugget moves in the twenty-four hours.

The indicator takes an average over a number of days (or bars), such as 10 or xx, to give you a representation of daily cost movement of the asset. The average is based on the largest following number: Electric current High minus Current Low, Current High minus Previous Shut or Current Low minus Previous Shut. Luckily the indicator tool inside your trading platform will summate this all for you, so all you take to is look at the current indicator reading.

Figure one. EUR/USD Daily with ATR

Source: Oanda – MetaTrader

Figure one shows the ATR over ten days–shown equally "ATR (10)"– for the EUR/USD on Daily bars. Therefore, the current reading of 0.0099 means the EUR/USD is moving on average 99 pips per mean solar day. If yous used a 5 minute chart, the reading you get would be a 10 period average of how much the EUR/USD moves in a v minute menstruum.

So how does this reading help you brand amend trades? Assume information technology is near the cease of the twenty-four hour period, and the EUR/USD has already moved upward 140 pips on the mean solar day and you want to accept a long trade. Exercise you take it?

Maybe, only only if you lot believe something important is going on. Since the average daily motility is about 99 pips, it is quite likely that the EUR/USD is bit overextended (at 140 pips), having already moved well beyond average. That is not besides say that if you lot become long/buy calls you won't make money, merely it does make you sit back and examine the trade to make sure it is worth taking.

I generally utilise this indicator as a filter. While broad ranging days happen (much larger than average), I similar to trade based on statistics. If I get a signal to go long or brusk on an intra-day trade, and the asset has already moved well across the average, I will usually skip information technology and expect for another trade which has more room to run.

Relative Strength Index (RSI)

Known as an oscillator, this indicator fluctuates between 0 and 100 and measures the speed and change of price. If yous have watched concern news or read some technical comments from traders, you will oftentimes hear the words "Overbought" or "Oversold." While the speaker may exist addressing something else, often technical analysts are referring to the current RSI reading when they use these words. A reading above 70 is typically overbought, while beneath 30 is oversold. Once an nugget enters these area, a reversal is usually not far off.

But to me, timing is of import and therefore standard overbought/oversold RSI readings are pretty much useless. For ane, in a stiff uptrend, the reading volition exist frequently to a higher place 70, merely yet yous want to be long well-nigh of the time. Same goes for a downtrend; the RSI will frequent the surface area below 30 and yet you want to be short/ownership puts during downtrends.

I prefer to use the RSI in a "relative" fashion; comparing current RSI readings in uptrends to past uptrends, and current RSI readings in downtrends to past downtrends. This concept comes from Constance Brown'due south book Technical Analysis for the Trading Professional. What the author finds is that in downtrends the RSI generally stays below sixty, and that in uptrends it more often than not stays above 40.

Figure ii. EUR/USD 4 Hour Chart

Source: Oanda – MetaTrader

In figure 2, detect how the RSI shifts; during the downtrend it often touches below forty and rarely gets above 60 (ruby line). But when the tendency moves college toward the right hand side of the nautical chart, the RSI doesn't motility below forty (light-green line) and spends much of the time above 60.

This is an first-class method for confirming trends, although some tolerance is ofttimes required. The RSI may squeak but beyond the levels mentioned, or the levels used may vary slightly by asset.

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Final Word

Indicators are derivatives of price. Generally I practise not utilize indicators very much, as I prefer just to look at the actual price chart. Indicators tin can only provide this same price data, just may nowadays it visually in a style that is preferable, or summarize the data for easier use. ATR is 1 such summarizing tool. It rapidly gives you a number–the daily average range–you tin work with. If an asset has moved well beyond its daily average range, it's possible something important is happening, only more than oftentimes than non I discover the trade should uncomplicated be skipped if it requires the asset motility fifty-fifty further.

The RSI presents price data in a unlike mode, which can exist quite useful for confirming trends or catching trend reversals. The RSI has unlike tendencies during downtrends than information technology does during uptrends. Typically in a downtrend the RSI stays below threescore, and in uptrend stays to a higher place 40. When you notice the RSI shift from i tendency to another, the trend has likely reversed.