Binary Options Charts
Learning how to read and analyze binary options charts is an important part of successful trading. This guide will cover how candlestick, line and bar charts can be used in binary options trading as well as how historical and real-time information can aid strategy development.
Best Binary Options Brokers for Charts
In our broker reviews we found that these are the top 3 binary options brokers with trading charts:
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Binary Options Charts Explained
Binary options charts are used to show both historical and real-time price changes for a given asset. Accessing live charts is key for binary options trading as they can help you decide when to enter a position and whether you place a put or a call.
Usually, brokers provide their customers with free access to binary options charts, but they may restrict certain indicators and signals. Information such as price fluctuations, order book history and performance indicators can all help you to make predictions for future trends. And while an asset’s price history is no guarantee of future performance, it can still be useful when planning your trades.
Types Of Binary Options Charts
There are a few different types of binary options chart configurations and while they all show essentially the same information, the way that they are presented will vary.
Japanese Candlesticks
Candlesticks have been used to show market data for centuries and are an ideal way to convey a lot of information on binary options charts. The image below is an example of how a candlestick chart looks. Each candlestick has the same width, as this relates to the chosen time frame.
The central box shows the price at the entry for the time frame and the price at the exit. The colour shows the direction the market moves during this time where green signifies an increase (entry is less than exit) and red a decrease (entry is greater than exit). The two wicks that are above and below the central box indicate the highest and lowest values that the asset reaches during this time period.
There are instances where the typical candlestick shape is not present. For example, the absence of an upper wick means that the exit price was the greatest value in that time period. Additionally, no central box at all means that the entry price and exit price are the same.
Bar Charts
Bar charts, or ‘open high low close’ charts, are also popular for binary options trading. They are very similar to candlesticks but present the information without using colour.
Again, the upper and lower wicks show the maximum and minimum traded prices during the time period. Rather than a central box to show entry and exit, bar charts use small branches. The branch on the left of the central bar shows the entry price and then the branch on the right shows the exit price.
Line & Mountain Charts
These differ from candlestick and bar charts as they only show a continuous closing price history, rather than indicating opening, high and low prices. This is the simplest method of reading price information as you only need to look at where the line is on the vertical axis to determine the value at a given time. Line charts and mountain charts are essentially the same as they both plot the same lines. The only difference is that mountain charts include shading beneath the line.
How To Analyze Binary Options Charts
An important aspect of binary options trading is knowing how to read the information that the charts present. You could have an abundance of data but it will be irrelevant if not combined with proper analysis.
What Is On The Horizontal Axis?
One of the main parts of binary options trading is the consideration of an expiration time whereby you need to predict what the price of an asset will be at a specified time. On the x-axis of all binary options charts is time, which can be scaled using different time frames. These time frames can be anywhere from 60-second steps all the way to entire years.
It is important you select a time frame that is suited best to your strategy so you can focus on the most important information. For day trading, you need short term time frames such as 1 minute, 2-minute, 10-minute, 30 minute and maybe even 60-minute steps.
Tools & Indicators
Listed below are a few examples of tools and indicators you can use to analyze potential assets and support your binary options trading strategy. This is not an exhaustive list and so you should complete your own research to find what suits you best.
Comparison Tool
This is a helpful tool to show the performance of a chosen asset relative to another. Simply, the price history of one asset is overlaid onto the price chart of the other, as seen in the image below. In this example, the traded price of natural gas is compared with that of oil. This is useful if you wish to adopt an arbitrage strategy between any two linked assets, for example, the strength of JPY and the price of oil.
Bollinger Bands
Bollinger bands are a type of indicator that can be added to binary options charts. To create these signals, a moving average for an asset is calculated. The upper and lower limits of these bands are found by calculating two standard deviations away from the moving average at all times. This indicator is used to show when an asset is being oversold or overbought, which can influence whether traders make a put or a call.
Average True Range
The average true range (ATR) is an indicator of volatility. When the market is highly volatile and there are sudden and large swings in an asset’s price, the ATR value is greater. When the asset is less volatile, the ATR is lower. You can use the ATR to identify when you should enter a binary options trade or when you should avoid them entirely.
Moving Average Convergence/Divergence
The moving average convergence/divergence (MACD) indicator is used to show trends for an asset’s price. It involves creating two different lines called the MACD line and the signal line, both of which are derived from historical data. The two lines can be used as alerts for when to buy or to sell an asset according to the distance between them. This distance is indicated using a histogram.
In the example below, the MACD line is blue, the signal line is purple and the bar chart is green and red. Green indicates that the MACD line is increasing at a greater rate than the signal line and red indicates vice versa. The greater the bar chart’s value, the stronger the trend, which means it is more likely to continue. When the MACD and signal lines intercept, the market trend swaps direction.
How To Start Trading With Binary Options Charts
Once you have done some research into the charts you wish to use, you can start following the below steps to start trading with binary options.
- Determine the strategy, or strategies, you wish to use for binary options trading. This will impact the way you will be interpreting charts and so it is important that you first establish criteria for analysis.
- Create or sign into a brokerage account. Ensure that the broker you chose offers binary options trading as regulators in some countries prohibit their sale to retail traders. Examples include the Financial Conduct Authority (FCA) in the UK and the Australian Securities and Investments Commission (ASIC).
- Search for suitable assets and opportunities. Technical analysis using signals and indicators can help you to find the optimal assets that suit your trading strategy. Furthermore, you may favour trading one financial instrument over another, for example, commodities rather than forex. In this case, focus on what you are most comfortable with.
- Determine the type of binary options trade you wish to make. There are several to choose from such as high/low, boundary, ladder and touch/no-touch. This also is likely to be influenced by your choice of strategy.
- Fund your trading account. Your broker will likely facilitate deposits via bank transfer, e-wallets and debit/credit cards. Make sure to look out for any transaction fees.
- Begin trading once you are comfortable with your assets and strategies. If you’re a beginner or trying out a new strategy, test out your skills in a risk-free demo account first.
Final Word
It is important that you invest time and effort into learning how to use and analyze binary options charts. Indicators and signals can aid your trading strategy and potentially boost your profits by showing real-time data. If you are unsure which type of graph you prefer, you should use a demo account to try out candlestick, bar and line/mountain charts to find which is best for you.
FAQ
What Are Binary Options Charts?
Binary options charts allow you to analyze price data when making call or put trades and can facilitate various strategies. Binary options are speculative products that follow an ‘all or nothing’ model. This involves a trader choosing between one of two possible options and making an investment towards this prediction. If the prediction is correct, then the investor will earn the full, predetermined reward. If the prediction is wrong, however, then the entire initial investment is lost.
Are Binary Options Charts Legal?
The use of forex charts in general is legal, as long as you are using a trusted and regulated platform. Furthermore, the legality of offering binary options contracts to retail traders varies between countries. Some financial regulators, such as those in Australia and the UK, prohibit retail traders from trading binary options. There are, however, many countries that still do, such as the USA and India.
What Are The Different Types Of Binary Options Chart?
The main types of binary options charts are candlestick, bar and line/mountain. Candlestick and bar charts show entry and exit prices, as well as the highest and lowest prices reached during a given time frame. Line and mountain charts simply show a continuous price history of an asset.
Do I Have To Pay For Binary Options Charts?
On almost all brokers, access to binary options charts is free for all users with an account. You may, however, be restricted to certain indicators and signals depending on your account type.
What Are The Best Indicators For Binary Options Charts?
There are many indicators to choose from that can provide deeper graph analysis for binary options. As well as the aforementioned indicators, there are price and momentum oscillators, the relative strength index, pivot points, moving averages and Ichimoku clouds. This is not a complete list of indicators and so you should perform your own research to find what works best for you.