There’s no question that part of what makes the most successful financial traders is the thrill of success that comes from being able to track even the minutest of details in order to get on the right side of that oh so thin edge between success and failure. The Forex market is by far and away the largest in the world, with a trading volume that absolutely dwarfs the commodities, stock, and bond markets combined.
With binary options making the scene, it should come as no surprise that such a potentially powerful trade would draw the top traders and find a natural home within the ever-volatile Forex market. If you want to know the important of binary options signals in trading this intriguing type of trading, you first need to understand technical trading and how the Forex works. Without this knowledge, succeeding in binary options trading will be extremely unlikely – if not outright impossible.
Just What Are Binary Options?
Binary options are a very specific type of trade that have become extremely popular. Binary options are sometimes referred to as an “all or nothing trade” and binary options positions are often even referred to as “bets” because in many ways they resemble gambling bets.
With a binary option the amount you can win off a position depends on the likelihood the market puts on the result you’re betting on.
For example: If they believe there’s only a 20% chance, then you would not only get your investment back, but you’d make 80% on top of that.
On the other hand if you take a safe bet and the market thinks there’s an 80% chance you’re correct, then you only get 20% profit on top of your bet.
However, if you are incorrect when you bet on a position you lose your entire amount. This is why binary options is often referred to as gambling because if you’re wrong you will lose it all.
Why Technical Signals Are so Important
When it comes to figuring out which binary options signals are best to follow in order to build a long-term successful trading strategy. When you look at binary trading, you also have to look at the market where this trading is taking place. Since the far majority of binary options trading goes hand in hand with the Forex market, that’s the market you need to understand.
Generally speaking, the most successful binary options traders use candlestick charts, since this allows for extremely detailed information on where a currency pair is trending day by day, hour by hour, or even by every few minutes. Seeing the average range of daily highs and lows, and where the average comes out to, gives a lot of data to see how a currency pair tends to move, especially over time.
This will allow a trader to make a better educated look at the potential patterns developing in moving trends and decide whether to trust what they are seeing or whether you need to have caution that this might be a false flag. The more information you can get in a glance, the better your chances for changing successfully.
Technical analysis is critical. With the high risk and high reward setup of binary options, you need to be able to look at charts and see where trends are heading. The next section goes over the most important signals and tools that can help with that.
Identifying Trends & Counter Trends
There are several tools that can give a hint as to what is happening on the trading charts. Trends and counter trends can be spotted from tools such as the following.
Bollinger bands are classic among traders of all kind, and they should be used with binary trading on the Forex, as well. These bands could indicate where the upper and lower limits may very well be.
Pivot points are another crucial signal you simply cannot ignore if you want to profit. Used with your preferred bands, a pivot point can indicate when a currency pair is in an unusual place outside of the current trend lines, giving the indication that a strong reversal could be on the way.
Directional Movement Indicators (DMI) go by several similar names, including Wilder’s Directional Movement Indicators, or Average Directional Index (ADX). These are a major part of technical trading, and tools you will want to use in order to make sure you’re seeing how the long-term movement is going.
Other very popular and very common binary options signals that can help you trade effectively include the flag & pennant model, Stochastic Oscillators, cup & handle, wedge, and even a variety of “triangles” that can indicate likely potential movements ahead.
If you have the ability to master a number of these quality binary options, then you are in a much better place to profit from the inevitable market movements that will come.
Can Automatic Trading Software Work?
One of the stickier questions that comes up with binary options signals is whether or not they can be automated to the point where a software trading program or robotic program can be programmed to trade based on when certain signals show up.
There are several programs out there that claim to do just that and many people have claimed a large number of successes. Then again there are almost others who claim to be disappointed. The most important thing with binary options is remembering that a loss wipes out that position, so most traders will want much more power and control over their trading positions.
The most important thing is to remember you have to have enough money invested to weather losing streaks as well as profit from the winning streaks. A long-term outlook will always work better whether you control your own positions or go with an automated trading system.
Binary options are extremely exciting, and it’s hard to argue with the potential that is there for traders who can study technical charts, spot the trading signals, and have the courage to make the trade.