Even the best indicators for binary options and price chart templates are the cornerstones of trading. Developers and brokers did not reach consensus on the best technical tools, oscillators, and the analytical system as a whole, which evaluate the market conditions of the asset and accurately predict the next direction of price movement. Nevertheless, experts conducted an extensive review of oscillators and pulse identifiers, the most widely used by successful traders. Since the selection criteria depend on the strategy or analytical methods of the broker, only those technical instruments will be reviewed that have been proven to be effective in determining and predicting the next direction of market movement.
Below is an overview of the best indicators for binary options, which will help you improve your trading style. In general, technical tools are often used in short-term trading to help the trader determine:
- Range of motion (how much?).
- Direction of movement (in which direction?).
- Running time (how long?).
Since such parameters are subject to temporary decay, the retention period matters. A stock trader can hold a position for an indefinite period, while a binary options market participant is limited by a short validity period determined by the expiration date of the option. Given time constraints, impulse calculation tools that tend to determine overbought and oversold levels are most popular among option traders. We can say that these are the most effective indicators for binary options.
Relative Strength Index (RSI)
Relative Strength Index is a measure of momentum that compares recent gains with recent losses over a given period of time to measure security and price movements in an attempt to determine overbought and oversold conditions. RSI values range from 0 to 100, with a mark above 70 usually considered as indicating overbought levels and a value below 30 - oversold.
RSI is best suited for binary options, as opposed to indices, since they show the above metrics more often than indices. Options on highly liquid and extensive assets will allow you to organize excellent short-term trading based on RSI. Many experts agree that these are the most accurate indicators for binary options. As already noted, it will help in identifying categories such as overbought and oversold (RSI chart). Overbought is a condition in which an asset becomes much higher from a normal level, and perhaps we will have a fall. Overselling is the opposite. An asset is much lower than normal levels, and you may have market growth.
Zig Zag Indicator
This indicator is very simple, and you can find it in the MT platform when built. It can help traders see clearer tops and lows of the market. However, it cannot be argued that this is the best indicator for binary options, since it displays only general data.
Barry
Barry is a simple indicator that displays the level of support and resistance. Drawing these lines is "mandatory" for bidding, but many beginners have difficulty with this. Thus, this tool can help them and find out where the support and resistance levels are at the moment. Some argue that this is the best basement indicator for binary options, but this is a moot point.
You do not need to do something complex and voluminous to get started. Just install this indicator on your platform and after that move it to your chart. You will immediately understand that the red lines are resistance, and the blue ones are support. Of course, this indicator cannot determine future S&R levels. He simply receives data on how this happened under similar conditions.
Bollinger Bands
A very useful and effective indicator created by John Bollinger. It helps determine support and resistance levels. There is a simple moving average, usually consisting of 20 periods, and two bands (up and down) that can act as S&R levels for the price. Undoubtedly, this tool is included in the list of the best indicators on binary options for scalping and some other strategies. This is explained as follows.
All options traders recognize the importance of volatility, and Bollinger Bands are a popular way to measure it. Price groups expand as volatility increases, and decrease as it decreases. The closer the price is to the upper band, the more overbought can be observed, and, conversely, the closer the price is to the lower band, the more oversold.
A price movement outside the band can signal that the conditions for a reversal are ripe, and optional traders can position themselves accordingly. For example, after a break above the upper band, you can initiate a long or short call position. Conversely, a break below the lower band is an opportunity to use a long signal or a short strategy.
Also keep in mind that it often makes sense to sell options during periods of high volatility, when prices rise, and buy during periods of low value when they become cheaper.
Daily Turn Indicator
A simple indicator that calculates and shows you daily Pivot levels in the market. This is very important because the line of support and resistance changes many times many times at these levels. Undoubtedly, this is a good indicator of binary options for MT4.
Harmonic Pattern Indicators
Harmonic patterns are an advanced lesson in technical analysis, so a trader needs to spend time learning how to draw them. There are tools that automatically build harmonic patterns, such as ZUP.mq4 or KorHarmonics.mq4.
Fibonacci
This is one of the most important indicators. It is recommended to use it every day for many reasons, but mainly for determining failures and kickbacks. You can find it on the MT4 platform in drawing tools. The following levels are available for adding: 38.2, 78.6 and 127. All other important levels already exist in the default settings. This is one of the best indicators for binary options.
Intraday Index Index (IMI)
Intraday Momentum Index is a good technical tool for option traders who want to bet on intraday moves. It combines the concepts of candlesticks and RSI, thereby providing a suitable range (similar to RSI) for intraday trading, indicating levels of overbought and oversold. Using the IMI, you can identify potential opportunities for initiating bullish trading in the upward market with an intraday correction, or you can start a bearish one in the downward market with price fluctuations.
A trader can independently choose the number of days for settlements, but the number 14 is the most common time. Like RSI, if the resulting number is greater than 70, stocks are considered overbought. And if the total figure becomes less than 30, the asset is considered oversold.
Cash Flow Index (MFI)
The cash flow index is an indicator of the amount of movement that combines data on prices and volume. It is also known as RSI with bulk density. The MFI indicator measures the inflow and outflow of money into securities over a certain period of time (usually 14 days) and is an indicator of “trading pressure”. A value of more than 80 indicates that the market is overbought, and an indicator below 20 indicates that it is oversold.
Due to the dependence on volume data, MFI is better suited for trading options in stock markets (as opposed to indexed ones) and long-term transactions. When an indicator moves in the opposite direction with a stock price, it can become a leading indicator of a trend change. Thus, it is the best indicator for long-term binary options.
Call Transfer Rate Indicator (PCR)
The put-call coefficient measures the volume of trades in put options compared to call options. Instead of the absolute value of the coefficient, changes in its value indicate a change in the general mood of the market.
When there are more marks than signals, this ratio becomes higher than 1, which indicates a bear market. When the signal intensity is above a given volume, the ratio becomes less than 1, which indicates an increase. However, traders also see the put-call coefficient as the opposite.
Open Interest (OI)
Open interest indicates open or outstanding contracts in options. The OI does not necessarily indicate a specific uptrend or downtrend, but it gives indications of the strength of a particular movement. An increase in open interest means a new inflow of capital and, consequently, the stability of the existing trend, while its decrease indicates a weakening trend. This is not to say that this is the best arrow indicator for binary options, but it is able to provide significant assistance to the trader.
News indicator
Many people pay much more attention to the technical part of trade, but it is necessary to spend some time on the fundamental side. That is why you should constantly look for useful information in the news, because an informed trader is the best player in the market. For this purpose, the best indicator for binary options is the News Indicator. It displays all the data that becomes known during the day, showing many different events. The best part is that it even has an alarm that goes off 10 minutes before the actual release, and thus does not allow you to miss important information. Despite the fact that this indicator does not show a clear direction using colors or arrows, it is still a great tool.
Without it, the data you receive may be incomplete. For example, you make a deal that looks exclusively from a technical point of view, but at the same time you missed some important news, and the price suddenly moved against you. Thanks to the News Indicator, all important events will be displayed directly on your chart and, at least, you can stop trading until a certain point.
How to install a new indicator?
You must remember how to set a custom indicator on the Meta Trader 4 chart. The steps for this should be the same as for other custom tools: download the indicator from a page on the network and copy it to the appropriate folder on the Meta Trader 4 platform. The full path should look something like this: C: \ Program Files \ Your broker's name_ MT4 \ experts \ indicator. Once this is done, close and reopen your MT4 platform, and then click Paste - Indicators - Custom - IndicatorName. Now you need to do a few extra steps before you can use them.
Using the News Indicator as an example, the indicator setting for binary options is as follows. After you complete the above steps and click on the “News Indicator”, a window will appear with some settings that you need to make. The first and most important thing that you must do is check the option “Allow DLL imports”. If you do not, the indicator will not work.
Now we move on to the Inputs tab, where you need to take care of two things. The first one is related to the font size. For many, the sixth default size is too small, so it’s worth setting 10 or even 15 so as not to peer at the monitor, guessing what the next event will be.
The second thing you must decide is the source of the data that you will be displayed. It’s better not to use the default resource. So just set it to false. To do this, scroll down, click true, and a pop-up menu will appear, select false. Another data source will then be used automatically.
What else can be noted?
In addition to the aforementioned technical indicators, there are hundreds of other instruments that can be used for various trading options (for example, stochastic oscillators, average true range and cumulative tick). In addition, there are variations with methods to smooth out the resulting values, averaging the principles and combinations of various indicators. Which indicator is better for binary options? An options trading specialist should choose the tools that are most suitable for his own style and trading strategy, after a thorough study of mathematical dependencies and calculations.