Fundamental Analysis for Beginners

Although binary options trading differs from traditional trading in that you are trading against the price of an asset, rather than buying or selling to make the best profit from the price itself, understanding how to carry out analysis of financial markets remains a crucial part of being a successful trader.Traders who do not learn about understanding the financial markets or how to carry out analysis reduce binary trading to little more than a gamble. We must be clear that binary option trading in and of itself is not a form of gambling, but as with any investment, if you haven’t dedicated the time and effort to understanding how best to trade it and analysing your chances of success, then you are simply blindly placing your money wherever you deem most attractive.One of the most confusing aspects of getting started with binary trading or indeed with any type of finance-based trades is that there are so many ways to analyse things. Conducting a search on Google of financial analysis methods will lead you to some useful tools as well as a number of blogs that contradict each other. Although this can be difficult for new traders to understand, it communicates an important message: the way you conduct analysis is down to you, there is no truly defined right or wrong way to analyse a financial market. Yes, there are ways to misinterpret the data, but if you are carrying out thorough analysis it comes down to whatever method you find is easiest for you to understand, and whichever one, over time, leads to you making the highest profits.Elsewhere on Bank of Trade, we cover how beginners can gain a basic understanding of finance markets and technical analysis of trading charts, and how you can build these into your binary option trading strategy. Here, we cover fundamental analysis, what it is, types of fundamental analysis, and ways in which you can build it into your overall strategy plan.

What is Fundamental Analysis?

Whereas technical analysis involves spending time looking at the hard data presented in front of you in financial charts and using a number of techniques for spotting trends and binary trading opportunities, fundamental analysis looks at the “bigger picture” for factors than can influence trading conditions. Intangible factors, such as what you feel to be the true value of something, or predictive analysis and news reports that you have read, could also be considered fundamental analysis.If you wanted to sum up fundamental analysis in one sentence, you would say it is a means of considering every factor, both directly and indirectly related to the financial markets that can influence them.At this point, you are probably thinking carrying out such a level of analysis is impossible. When will you have time to trade if you are looking at so much depth and detail? Your concerns are understandable, and many traders have battled with this conundrum themselves. The answer for many of them is to use an economic calendar, which highlights when big announcements are going to be made, whether this be company results or government economic policy updates. Even those with a very basic knowledge of financial markets know that they will shift both in the build up to and in the aftermath of such announcements. All that is then needed is to couple what we know with some technical analysis of previous times, to see what happened and to what extent we can perform binary trades and make a healthy profit.Fundamental analysis can be broken down into two main sub-categories that, when put together with what you have learned already, give you a clear picture of what, where, and how to trade: quantitative analysis and qualitative analysis.

Quantitative Analysis

Quantitative analysis uses mathematical and statistical modelling techniques to create a prediction of how the price of an asset will differ from a certain point. Although with binary trading you do not need to work out the high or low price in terms of profitability, it is worth knowing so you can continue to place call or put trades – forecasting a price is going to increase or decrease – with a high level of confidence.Individuals who prefer making statistic-based decisions will often employ quantitative analysis, although it is mainly a technique used by experienced brokers and traders in high-value trades and transactions. While as a beginner with binary trading you need to know what quantitative analysis is, you should ideally stay away from doing calculations yourself until you have become experienced. Working with a binary options broker and getting expert advice from Bank of Trade will enable you to learn about quantitative analysis and become competent at carrying it out.The easiest way to look at quantitative analysis is as a measurement of the price. Traders of foreign currency and stocks and shares would often use quantitative analysis to decide whether an asset was worth buying. As a binary trader, you only need to use it to work out at what point you should stop trading against a particular assets’ performance. From this perspective, quantitative analysis can be an excellent risk management method for binary traders.

Qualitative Analysis

Qualitative analysis can often be controversial, as unlike quantitative analysis there are no statistics to back up what you believe you see. This type of analysis is what you do when you carry out fundamental analysis based around external events. It is important to note that qualitative analysis is subjective. This means you probably won’t do a lot of it at the start of your binary trading career, but as you get to know binary options, understand the financial markets better, and build up a pattern of trading that leads to profits, you will start to do your own analysis without even thinking about it.The easiest way to define qualitative analysis is as anything that is related to a financial market that cannot be seen in the numbers. We separate this from bona-fide fundamental analysis by only looking at things directly involved with a specific market. For example, say you were looking at a business called “My Example Company.” Your quantitative analysis of My Example Company tells you that the price of something is likely to rise, therefore meaning you should be able to confidently place call binary trades on the share price of this company. However, your qualitative analysis might tell you that the CEO or a key stakeholder of My Example Company has a history of growing companies’ share price before presiding over a crash. You wouldn’t know this from just looking at the raw data related to a particular market, but it would be something valuable to factor into your decision making.Another form of qualitative analysis is to use what you believe the price of something to be as a guide. For example, if you think a company’s share price should be $20, but it is currently $10 following a period of sluggish trading, you might take out a longer-term binary option where you forecast the price will rise back to the level it should be at. You can blur the lines of qualitative analysis with such examples, by looking at previous history using financial charts.

Which Analysis Works Best?

As already alluded to, no type of analysis works spectacularly better or worse than another. All you need to understand is that carrying out analysis is better than not carrying out analysis, as this reduces binary options trading to little more than a careless gamble. Speak to binary traders from around the world and they will all have a different take on options trading strategies that work. Most of the time they will be talking directly about what has worked for them, which is why you will encounter a lot of conflicting information and contradictions.Over time, you will discover which forms of fundamental analysis, coupled with technical analysis and knowledge of the general financial landscape shapes market performance and works best for you. At Bank of Trade, you can use our tools to carry out all of this analysis and discover the best binary option trading strategy for you.

Understanding Binary Options Indicators

Trading indicators can be divided into categories of default indicators and custom indicators. Traders generally understand the default indicators as those provided as standard on software such as the MT4 trading platform, which includes the ‘heavyweight’ indicator tools such as Bollinger bands, moving averages, RSI and MACD. These are some of the most popular and time-tested indicators and also those which a large number of traders rely on as the basis of their market analysis. Custom indicators, on the other hand, are often less well-known (having not been around as long) but they can also be highly effective in providing unique opportunities to make profits through trading.Since there are many hundred and possibly thousands of default and custom indicators combined, it is important for binary options traders to decide which of these are most likely to benefit their trading. Since many software programmes, such as the MT4 platform, were originally designed for forex traders and several of the default indicators work best on stocks, it is worth being selective in those indicators which can assist individual binary trading strategies. However, one factor which benefits binary options traders in using third-party charting software is the provision of many binary options markets within these. For example, the rise in popularity of commodity and index trading has resulted in many traditionally forex-only brokers incorporating these on their MT4 platform and thus allowing binary options traders to use them to apply their custom indicators.Custom indicators are always evolving due to the ability of traders with individual strategies to code these directly into the charting software. The custom indicators which result from these have evolved with the demands of the trading community and, in more recent times, have begun to focus on developing indicators that can be applied to binary trading strategies. There are now a handful of very good custom indicators with the specific aim of being applied to binary options. These attempt to cater for the unique differences that binary options offer, such as the irrelevance of a stop loss or take profit level and the simple notion that the timing and the broad direction of the trade need only to be taken into consideration to provide a profitable outcome. Trading binary options can therefore require a much simpler approach to trading, with the requirement of only a fractional change in the price to reap rewards or inflict losses rather than a focus on the degree of the price movement on a chart.

Introducing several custom indicators which can benefit binary trading strategies

The News Indicator

Some traders may argue that they don’t require an indicator to tell them what major news releases are planned for the coming day. Many fundamental traders will have already prepared for this and, depending on what underlying assets are being traded, will have a good grasp of the forthcoming major news releases on any given day. However, for those who generally enjoy trading from a technical perspective, using charting and binary trading strategies based on technical setups, the news releases are not necessarily going to be the highest priority. Whilst all traders should have a general idea of the daily news events, especially the large ones such as interest rates and US non-farm payroll data, it is impossible to be alert to everything when trading an individual strategy.Fortunately, there is a very useful and convenient custom indicator which has been designed to alert traders when a major news release is imminent. Not only is this valuable for traders who focus on fundamental trading and may actively look for news releases for trading opportunities, but it can be an important indicator for technical traders with very little interest in market fundamentals. For those who have experienced a sudden, detrimental price spike whilst trading directly from the charts, the news indicator will be particularly useful. This indicator not only highlights the news events directly on to the charts throughout the day but it offers 5 and 10 minute alarms before the event.Although this indicator is designed to highlight news events, its most effective function may be alerting people when not to enter the market. For non-fundamental traders who may not have assessed the impact that a particular news release may have on the market, the news indicator can provide good advice of when not to be exposed in the markets. Avoiding large news releases in the minutes before their release is simple with this indicator and it is likely to save technical traders the anguish of getting caught out trading with an unforeseen, but entirely avoidable, news event.

Paint the Town Red Indicator

This is another custom indicator which is appealing to binary options traders, not only for its simplicity and effectiveness, but also the fact that it works well alongside other indicators. The Paint the Town Red indicator provides a great visual signal of the trend. The background of the chart simply turns red or green depending on when the price moves above or below the moving average. Although this sounds fairly basic, it is particularly effective when used in conjunction with other indicators or chart patterns and levels to confirm the trade. Additionally, this indicator keeps traders aware of the trend, which is an important factor for all binary trading strategies.Since binary options only require that price closes fractionally higher than the original strike price, the short-term rise and fall of markets can be traded very effectively. Although the problem with this may be that it can be considered overly-simplistic, it is most effectively used when combined with the other chart-based trading tools. Two examples of these are incorporating the main support and resistance levels as well as some basic candlestick analysis in order to determine when to purchase binary options based on this indicator. Avoiding trading into potentially congested support or resistance, as well as looking out for reinforcing candlestick patterns to confirm a trade can be used very effectively with the Paint the Town Red indicator.

The support and resistance tool

As a custom indicator, this may not light up your charting screen like some of the indicators available to binary options traders, although it is arguably the most powerful indicator available. The support and resistance indicator shows a trader where the most popular levels of support and resistance have historically occurred on a chart. Whilst this is not a mind-blowing creation, the importance of support and resistance for binary options traders cannot be underestimated. Using an indicator which simply guides a trader to where these areas of support and resistance exist not only reduces the amount of preparation time required to plan a trade but also acts as a standalone identifier of a trade entry.It is important to begin by understanding what makes areas of support and resistance important in trading and, particularly, for binary trading strategies. These areas are created at technical points on the price charts of all forex, stock and commodity charts. They can be seen as the points where the price stops moving in one direction and reverses in the other. This occurs because of the existence of clusters of market orders and a collective response by traders at these significant points. As a general rule, the more times an area of support or resistance is tested, the more significant it becomes. However, if these levels are broken, support can become resistance and vice versa as their significance remains but simply in the opposite role.Where these levels become significant for binary options traders is when the price approaches these levels. As the support and resistance indicators clearly identify these zones, thus removing the difficulty of this for most new traders, we can begin to anticipate that the price will react. The support and resistance indicators are highly accurate at pinpointing the most significant areas and many binary trading strategies look for a reversal of the trend in these zones.Whilst taking a blind trade in the opposite direction is likely to be profitable many times, waiting for an additional signal when the price reaches the indicated support or resistance level is highly recommended. Candlestick analysis and other price action strategies are particularly effective when the price reaches these areas in determining if the support or resistance will be maintained, or if the price will break through this level.

The Relative Strength Index

The Relative Strength Index (RSI) is one of the most popular trading indicators available for the simple reason that it is one of the most reliable ones. Traders involved in all underlying assets use this valuable indicator to help them to make the correct trading decision. Although the RSI is not a “black box” indicator, providing a one-stop shop for purchasing puts or calls, it is an excellent indicator to support the convergence of additional indicators as explained below. Developed in 1978, it may be surprising that this indicator is still highly popular in an age when traders can design their own custom tools, however, this is a glowing testament of its utility to traders of both the digital and non-digital age.The RSI is an oscillator designed to measure the two elements of magnitude and velocity to provide traders with a reading which reflects the current strength of price in a market. The reading is reflected on the indicator within a scale of 1-100, with the default levels of 30 and 70 automatically included on many versions of the RSI. The idea behind the indicator is that the oscillator will move higher and lower on this scale relative to the strength of the market price movement by using an assessment of its magnitude and velocity. The outcome is that, as the price moves higher or lower, the RSI indicator will also move higher and lower on its index. Trading signals are commonly interpreted when it moves lower than the 30 level or higher than the 70. These areas suggest that the asset is oversold (below 30) or over bought (above 70) and that traders should begin to look for a reversal trade. Just looking at any historical price chart it is clear that the RSI is incredibly good at preempting significant reversals, however, it is most effectively used alongside a reinforcing signal where a convergence will assist binary options traders to time their entry correctly into an oversold or overbought market.One of the most powerful ways to use the RSI is to look for the many times that it actually disagrees with the price that is being shown on the price chart. This is known as divergence and is an incredibly popular and effective binary trading strategy. Divergence is basically all about trying to spot a market reversal when the chart price is “lying” to traders. This occurs most effectively when the chart price reaches a recent new high or low, but the RSI indicator does not reach a similar new extreme. In the case of a new high on the price chart, it is common for the RSI to make a lower high, indicating a divergence between the market price and that the wane in underlying strength will soon result in a reversal. Similar to many other highly popular indicators, the existence of a clear divergence has a self-fulfilling element which makes the large number of traders anticipating a reversal to increase the likelihood of this actually occurring.

The TRIX indicator

When traders talk about the most popular indicators available, they can generally be categorized in to two groups. On one hand there are those known as ‘trend-following’ indicators and on the other hand ‘momentum-following’ indicators. Trend-following indicators are most popularly known as moving averages and help traders to look for opportunities which agree with the general direction of the prevailing market trend. Although these are highly effective when viewed historically, their real-time application is limited due to the fact that they lag behind the current market price. Lagging indicators, such as the moving average, do not therefore provide great entry signals on their own.On the other hand there are also the momentum indicators, such as oscillators, which not only gauge the temporary directional movement within a market but also have the power to preempt market movements. Whilst this may sound like the holy grail of trading, the major problem with trading signals generated by the overbought and oversold areas of oscillators is that they can often provide false readings if traded on their own. The decision, therefore for many traders has traditionally been to take the valuable information from each different type of indicator without simply relying completely on any single one.The TRIX indicator, however, attempts to solve the problems that each type of indicator has by combining their predictive and trend-following attributes into one indicator. Whilst predominantly a momentum indicator, the TRIX indicator was designed to filter out the smaller movements within the market and also to provide traders with signals based on a combination of trend, high/low levels and moving average crossovers. At first sight it looks very similar to the MACD, with two intercrossing lines providing the trend-following element and the highs and lows of the indicator providing the oversold and overbought levels. The TRIX indicator provides trading signals which are highly reliable and have become a standard feature of the most popular charting software packages. For binary options trading strategies it can be used effectively alongside other trading tools such as candlesticks, support and resistance and Fibonacci analysis. The combined power of the two popular types of indicator makes the TRIX indicator an important tool for beginners and experienced traders alike.

The importance of convergence for binary trading strategies using indicators

Convergence in indicators refers to the way in which they come together to agree or disagree with each other in reinforcing a trading signal. Most traders will agree that using too many indicators on any one chart can be highly detrimental because it has a tendency to result in ‘analysis paralyses’ or the inability to make a decision. Waiting for all of the stars to line up to give the green light for a trade is therefore not always the best way to trade as it rarely occurs. However, there are several ways in which traders can use the convergence of indicators and trading tools to positively guide trading and to ensure the highest probability that the majority of decisions are profitable.Using the fact that technical analysis allows for charts to be viewed in different timeframes is one of the most effective ways to positively utilise convergence. This involves moving from the higher timeframes, such as the daily or even weekly charts, to establish the trend as well as the key areas of support and resistance. By subsequently moving to lower timeframes to establish if there is a general convergence between the different charts, traders can prepare to look for a detailed trading entry on their preferred timeframe. Many traders use this method to establish where these influential areas of support and resistance may interact with the current price on their preferred trading timeframe; thus maintaining that the trend remains their friend.Convergence between indicators and additional trading tools can also be a highly profitable trading scenario. A good example of both indicators and tools converging to reinforce a trading decision is the combination of a technical indicator, such as RSI or MACD, and Japanese candlestick analysis. Whilst using the indicator alone to signal potential trading opportunities is not advisable due to the lack of precise entry signals that it provides, adding a method of pinpointing these entries will increase the probability of success. An indicator such as the RSI can be used to determine when an asset is overbought orversold and the recognition of certain candlestick patterns such as a shooting star or engulfing candle will reinforce the reversal. This convergence is particularly useful for binary options traders to ensure that the entry is made as close to the reversal as possible.


There are literally hundreds of custom binary options indicators to use alongside thousands of binary trading strategies and several of these stand out as particularly useful. The emergence of charting programmes such as MT4, and the increased willingness of brokers to provide a whole range of underlying assets on these, is particularly good news for binary options traders. The constant demand for the development of new, exciting indicators allows both novice and experienced traders to develop fresh methods and tools to look for potentially profitable setups.Whilst there has been a large movement towards designing new indicators, it is true to say that some of the oldest provide the most reliable trading signals. Classic indicators such as the MACD, RSI and Moving Averages still play a very important role in many technical trading decisions. These time-tested indicators also provide excellent examples where convergence with other analytical tools can provide excellent trading signals and high probability binary options trading setups. This convergence is further enhanced when traders look beyond their favourite timeframe in order to determine important areas of support and resistance as well as the general trend on higher timeframes. Whilst binary options are often purchased based on intra-day timeframes, having a broader overview of the bigger trading picture is incredibly useful to reinforce indicator-based trading signals.

Selected Tools to Improve Your Binary Options Trading

There is a wealth of binary options trading tools and indicators available to help new traders to improve their chances of trading profitably. Understanding how these work, and how they can improve the probabilities of profitable trading, can be well worth learning and applying to existing trading strategies. A large number of the available tools is provided directly through binary options trading platforms and include features which change the way that regular binary options are traded. These add another dimension to binary options trading beyond the straightforward higher and lower options and enable traders to gain additional control over their positions. When applied correctly, these can prove to be powerful tools and it is well worth exploring how these can enhance the experience of many traders.Additionally, there is a huge number of trading indicators which can be incredibly helpful in providing signals of future price movements. They are often applied in greater detail by third-party software programmes but are also available on some binary options trading platforms. These indicators range from the highly popular and well-known charting tools used by professional traders to custom-designed individual indicators for highly-specialised trading. The importance of all indicators for binary options traders, however, is their ability to pre-empt future price movements higher or lower. Trading with some of the most popular indicators can provide an excellent way to pinpoint profitable opportunities.

Binary options trading tools: The rollover

Beginning with some of the most popular binary options trading tools, the rollover is certainly up there as one of the most effective in a number of select situations. The rollover allows traders to effectively extend the expiry of their binary options beyond the originally pre-determined time. This is not, however, a free tool and will usually require an increased investment, representing a percentage of the original. The rollover is an excellent tool which many binary options trading platforms provide but it needs to be used selectively. Rather than risking an increase in the investment when a trade is failing, the rollover should be used whilst the position is out of the money yet requires more time to develop. This tool will favour traders with experience who are able to analyse market movements, but it also needs to be used when there is a good chance that the position will become profitable rather than a last resort for a failing trade.

Binary options trading tools: The Close Early tool

This is another excellent trading tool which can also be used whilst the binary options are still active. Unlike the rollover, it can be used in both positive and negative trading situations and, as the name suggests, it allows a trader to liquidate binary options before their expiry time. Positions can therefore be closed early in two circumstances; the first being when a trader needs to cut losses and close a losing position and the second in order to take early profits on binary options in the money. The first situation will be favourable if closing the position will free up trading funds to purchase other binary options. Although binary options technically can become profitable right up to the point of expiry, it becomes obvious that certain market moves will make the prospects for recovery very unlikely.The second scenario allows binary options to be closed early when they are in the money for a lower profit than if they were allowed to expire at the pre-agreed time. The rationale for doing this is when continuing to hold the binary options creates the risk that they will slip out of the money before expiry. The value of the binary options when closing a profitable position early will depend on both how long remains to the original expiry and also where price is in relation to the strike price. As a general rule, the further the price and the closer the options to expiry the higher the value of the binary options pay out.

Binary options tools: The Protection Rate

Although this is less of a tool relative to the Roll Over and Close Early features, the Protection Rate is a feature provided by some brokers with the aim to reduce a traders risk in the market. The way that this works is that it offers an insurance percentage of between 5-15 per cent on all binary options expiring out of the money. This means that an initial investment of 100 USD may return up to 15 USD if the trade fails. Despite this sounding like a fairly small amount, over time this can be the difference between profit and loss on a long term basis. Additionally, given that many platforms offer up to 85% returns on in the money binary options, combining this with a 15% Protection rate offers a very favourable 1:1 risk to reward ratio.

Binary options tools: Fundamental analysis

Fundamental analysis is not a tool which is directly available through a platform but it’s a technique of analysis that traders use to determine the underlying direction of markets. This analysis uses the basics of what drives a market, primarily news and data, and interprets this to determine the level and direction of influence that it has. Trading platforms, therefore, which provide live news feed assist traders with their fundamental analysis and are a powerful feature for those who can interpret the market reaction to news events. Generally, these events are segregated into two groups; those news events which are planned, such as company data releases, and those which are unplanned. Understanding the potential impact on either is in itself a tool to interpret the future direction of price and can be used very successfully by binary options traders.

Binary options tools: Technical analysis

Technical analysis focuses on chart patterns and indicators to determine trading decisions. Due to its popularity, many of these are very powerful and are used by both professional and home-based binary options traders. There are a number of chart patterns and key indicators which all traders should be aware of and which may substantially increase the probability of success. Some of the most popular and effective of these are outlined below.

Binary options indicators: The MACD

This is a very powerful indicator used by many professional traders and comes as a standard feature of any charting software package. It falls into the category of a momentum indicator which means that it can function as an indicator of the strength of the near-term market. Momentum indicators have an amazing ability to predict future price movements, as they represent the current strength of the price and are excellent tools to use for those looking for price reversals.The MACD operates most effectively as a histogram, or set of bars which rise higher or fall lower than a central ‘zero’ line. When the bars rise higher this indicates positive momentum and lower represents negative momentum which can be interpreted as price moving in a similar way. The technical way in which this histogram is created is the convergence and divergence of two moving averages and the subsequent distance between these.Interpreting the MACD in order to look for an indication of future price movements on which to base your trade can be done in a number of ways. One of the most popular strategies for binary options traders is to look for divergence between the MACD and the current price. A very probable indication using this technique is if the price chart shows a new high but the MACD disagrees with a lower high. At this point it would be likely that purchasing binary options in anticipation of a fall in price may be a profitable trade. Alternatively, simply trading the MACD movements higher and lower as it crosses the zero line is also a popular way to seek profitable trading opportunities.

Binary options indicators: Oscillators

There are a large number of oscillators which are available to binary options traders and which also fall into the category of momentum indicators. Oscillators are designed to move (or oscillate) between higher and lower levels which provide a strong indication of when a market is becoming too hot or cold. Typically, oscillators such as the Relative Strength Index or Stochastic oscillator, operate on a scale of 0-100 with an upper indicator line of 70 and a lower line of 30. As price moves higher and lower, the oscillator will represent that on this index of 1-100. When price moves above 70 it is a clear indication to traders that the market may be becoming over-bought, signalling that a reversal in price may be due. Similarly, when it moves below 30, the market may be over-sold, and a rise in price is very likely to occur.Oscillators can therefore provide binary options traders with an excellent insight into the potential future direction of a market. Purchasing binary options either above 70 or below 30 can prove to be very effective if the expiry time is estimated correctly. Given the high probability of market reversals at these levels oscillators are considered one of the most popular indicators and also come as standard on all charting software.

Binary options indicators: Fibonacci

Fibonacci’s findings operate in all walks of life as the mathematical ratio that has been proven to exist in both the natural and man-made world. It consists of a set of ratios which govern the rules of nature, from the space between the swirls on a snails shell to the renaissance art masterpieces. The basis for its existence in trading focus on the natural attraction that all living species have in common with this and it has been taken up by traders as an especially effective way to anticipate market retracements.Fibonacci levels can be used on all price charts and are most commonly applied to the most recent high and low (i.e. the price swing) in order to establish where the future price will find support and resistance within this. When applying the Fibonacci tool to the chart it will produce a series of levels based on a percentage of the price swing. As price pulls back it is surprisingly clear to see how it reacts with these ‘natural’ levels which can, importantly, be seen as reversal points for binary options traders.

Binary options indicators: Chart patterns

One very important element in technical analysis is the study of price patterns within charts. This is a huge area with many different patterns available, however, there are several key patterns which all traders should learn to identify. Price patterns are formed by the bar charts on a chart creating identifiable, and historically supported, formations which indicate the future movement of the price. Some of these patterns are so powerful that they have become a self-fulfilling prophecy. This happens as thousands of traders identify the formation of a pattern and trade simultaneously, powerfully pushing price in the anticipated direction and creating very profitable opportunities to trade.As an example, one of the most popular trading patterns for binary options traders to be able to spot are ‘double top and bottom’ trading patterns. Double tops occur, for example, when price moves to a new high before retracing. Following the retrace it will try to again to move higher in order to maintain the market momentum but will form a lower-high. The pattern it creates is known as a ‘double top’ due to the fact that the momentum is clearly waning. The price is unable to move higher than the first higher high and the bears are very likely to set in to push the price lower very soon. At this point it provides an excellent opportunity for binary options traders to recognise this pattern and purchase sell options.

Trading with candlesticks

Following chart patterns, candlesticks are one of the most powerful ways for binary options traders to pinpoint potentially profitable opportunities. All charting software will has the option to apply candlestick charts rather than the regular bar charts and they can provide a much greater insight of the general market sentiment. ‘Candlestick’ analysis has been around for centuries since being devised by Japanese rice traders during the 1500’s. The fact that they are still used by many professional traders today is a testament to their powerful predictive qualities.Candlesticks are formed by taking the opening and closure of a price bar to form a coloured body (the colour depends on whether the bar closed higher or lower than the open). They can also have a ‘wick’ pointing from both the top and bottom of the candle, which shows the daily range of the candle. The combination of the size and colour of the body and that of the wicks will determine the strength and sentiment of the market as well as indicating which way price is likely to be heading in the near future.

Candlestick analysis: Engulfing candlesticks and inside bars

Of all of the candlestick patterns, several are considered to be the most reliable and form the core of candlestick analysis. These include ‘engulfing’ candlestick and ‘inside bars’. Engulfing candles can be seen on all price charts and on any timeframe, doing exactly as their name suggests. An engulfing candle is described as one which is entirely longer than the previous candle, having a lower low and a higher high. This tells the trader that either the bulls or the bears have taken control of the price and a movement in the prevailing direction of that candle is very likely. These candles are most powerfully found at the end of a large price movement with the engulfing candle signifying a reversal in the trend. Similarly, if these are found near to a popular support and resistance level they reinforce that the support level is very much being adhered to.Inside bars, on the other hand, can be considered as both indecision bars and also reversals. They are the opposite to engulfing candles in that they will not move higher or lower than the previous candle. They represent a momentary consolidation when the market considers moving higher or lower and are most powerful when several inside bars occur together. In this instance binary options traders can wait for a breakout either higher or lower to confirm the short-term market trend and a potential trade opportunity.

Candlestick analysis: shooting stars/pin bars

Shooting stars, often also known as pin bar, candlesticks are perhaps the most popular and profitable pattern for pre-empting market reversals. They are defined by a long wick in one direction which is at least three times the length of the body of the candlestick. These are at their most powerful when they occur at key areas of support and resistance with the long wick representing the price being rejected at these levels. Shooting star candlesticks are therefore a strong indicator of a market reversal when they occur after a strong price move. For binary options traders, this provides an excellent opportunity to purchase sell or buy options in anticipation of a market reversal.When trading any candlestick pattern it is important to acknowledge that these are at their most important when they coincide with other trading indicators. Whilst a popular candlestick pattern located at an area of support or resistance is a powerful indicator in itself, the combination of additional indicators always helps to confirm a trading position. An example of this is to combine candlestick analysis with oscillator indicators to reinforce a trading decision. When the candlesticks confirm that a price reversal may be close, if this is supported by an oscillator in its over-bought of oversold area, it will confirm that the trade has a very high probability of success.


Binary options platforms offer a range of tools for traders to use which will enhance their trading experience and provide additional profitable trading opportunities. The most popular of these are the Rollover and Close functions which allow trades to be shortened or extended depending on the circumstances and prospects for the options closing inhe money. Additionally, many brokers will offer traders a Protection Rate which acts to provide a small percentage of the initial investment back to traders for binary options which close out of the money. Although this seems fairly insig ificant on a single trade basis, over time this may provide a profitable edge.Beyond these tools, fundamental and technical analysis exist to help traders to make the correct trading decisions. Whilst fundamental analysis looks at the main drivers dictating the direction of a market, technical indicators can be applied to price charts to pre-empt future price movements. Oscillators and momentum indicators are some of the most popular indicators for binary options traders and the addition of candlestick analysis as reinforcement of these signals can provide very powerful binary options trading strategies.

Why Smart Investors Love Forex Binary Options

Forex Binary options are an increasingly popular type of investment that can lead to decent profits in the short term and down the road. Compared to other market-based forms of investments, Binary Forex options keep risks low while offering decent returns.To truly comprehend how these options work, it is important to understand how the Forex (currency) market and Binary Options work individually.The Forex market revolves around the fluctuations of currency markets around the world, whereas binary options focus on predictions whether the value of an asset such as stocks, currency, and commodities will reach a certain mark.

Forex options

As explained earlier, Forex trading involves speculating on currency prices around the world. Buying when low, selling while high like any other investment. Since daily currency fluctuations around the world are typically small, Forex markets aren’t particularly volatile, minimizing risk for investors. Of course, due to the slow rate at which currency markets move, profits margins are typically small, meaning investors need to rely on large amounts of leverage to maximize the profits generated from price movements.

Binary options

The basic concept behind binary options is quite simple. Investors make a bet on whether the price of a particular asset will reach a certain point known as a “strike price.” If the guess is right, the investor receives a percentage of the value of the asset – which is determined before the trade is placed.Unlike Forex, Binary Options have only two possible outcomes, meaning the guess is either right or wrong, hence the reason why the term “binary” is used. When trading, investors can place a “Call Option,” which means a rise in value is anticipated, or a “Put Option,” which means a decrease is predicted.Another important characteristic of Binary Options that attracts investors is the fact they can be based on virtually any asset that is traded on the market, giving every investor the opportunity to focus on their areas of expertise.

How big are the profit margins for Forex investors?

As noted earlier, daily fluctuations regarding currency markets, which Forex trading is based on, are typically small, so the value of price movements tend to be low. However, with the proper amount of leverage, that value obtained from price movements can be significantly increased. Of course, the higher the leverage, the riskier the investment becomes.Developing countries which lack proper functioning governments tend to experience periods of large currency fluctuations from time to time, thus creating opportunities in the Forex market for savvy investors to make decent returns without an enormous amount of leverage. It really comes down to how knowledgeable the individual investor is about global currency markets.

How big are the profits margins for Binary Options traders?

Given the fact the basic premise behind binary options trading is an investor speculating whether the value of a certain asset will reach a particular point, margins don’t affect the returns. The return for each particular trade is fixed before the transaction begins, and investors don’t get anything extra added on, regardless of the final value of the asset.Therefore, the only thing that matters is if the value of the asset traded on meets the “strike price.” Any increased value of the strike price won’t bring higher profits.

Payouts and Losses in Forex

One of the most attractive characteristics of the Forex market, compared to Binary Options, is the fact there isn’t a cap on how much profit an investor can make on any given trade. Obviously opportunities for making profits typically come with risks, so there are also no limits on potential losses when dealing with currency markets around the world, another characteristic that differentiates Binary Options from Forex trading.Fortunately, investors do have the option of using limit or stop orders to protect their profits and limit their losses.

Payouts and Losses in Binary Options

Payouts are predetermined by brokers prior to trades, meaning investors know exactly how much they stand to gain or lose (if the prediction turns out to be wrong). Return margins vary depending on the options traded, but they can be substantially high, up to 400 percent in some cases. However, the typical return on investment is usually in the 70-80 percent range. As for losses, the investor only losses the amount paid to buy the contract. No more, no less, regardless of how far off the prediction is at the expiry time.

Closing Forex trades

Since Forex trades are based on currency markets; investors can buy and sell as they please during market hours. These makes it easier for traders to capitalize on developing trends since trades can be made in real time once the broker has been contacted.

Closing Binary options

The closing time of Binary Option trades – unlike Forex trading – is predetermined before the transaction is made. The “expiry time” on a binary option can be as short as an hour or as long as a couple of years. The expiry time automatically closes the trade, so there is no need to chase down brokers.However, depending on the particular broker, investors sometimes have the option of closing their trade earlier by forfeiting a portion of the return. Likewise, investors can also increase the expiry time of a binary option, by increasing their initial investment by a predetermined percentage. That’s another reason why Binary Options are considered to be a lot less risky than trading in the Forex market.

Orders types in Forex

When it comes to investing in currency markets, the basic type of orders are market buy and sell orders. For more knowledgeable investors, there are other types of orders including: Hedge, OTC (over the counter), SPOT (single payment option trading), Limit, and Trailing Stop orders.

Order types in Binary Options

There are about a handful of different types of binary options available to investors such as: Option Builders, High/Low, Boundary Options, Toucho-Touch Options, and 60 Seconds options. Obviously, all the different types of options can be applied to virtually any asset that is traded in the market.

Trade size in Forex

The size of a Forex trade can vary from micro lots (1000 units of a currency) to millions of units. It comes down to each individual broker to determine the maximum amount for each trade. Of course, given the fact daily price fluctuations in currency markets tend to be on the small side, a decent amount of leverage makes things a lot easier, which is why the maximum trades allowed in Forex orders are quite large.

Trade size in Binary Options

When it comes to trades involving binary options, brokers get to determine what the minimum and maximum trade amounts are. That minimum can be as low as $5, while the maximum can be as high as $10,000. Obviously, this makes binary options very attractive to novice traders, especially when compared to Forex trading since risk is easily minimized. Why you factor in the fact that some types of options can be purchased for as low as $5, while paying out as a high $100, it becomes even more obvious why Binary options – rather than Forex – are the preferred choice of beginner investors.

Trading costs in Forex

When making Forex trades, there are typically commissions, spreads and rollovers involved. Given the fact daily price movements can be relatively small when playing currency markets, all extra fees should be carefully considered prior to trades since the profit margins are already limited. Even with a large amount of leverage, these fees can easily add up, cutting into already limited profits.

Trading costs in Binary Options

Unlike Forex transactions, there are no spreads, rollovers, or commissions here. It is simply a matter of being right with your prediction and receiving the agreed percentage, or failing and losing the investment.

Binary Forex Options(BOF) vs Spot Forex trading: Why Binary Forex Options are better

To understand why the above statement is true, it is important to know what Binary Forex Options are. Well, these are a type of option where every contract bought pays out $100. The price of these contracts can vary from as low as $5 to $25, meaning a pretty decent return on the initial investment if your prediction turns out to be true.Obviously, Binary Forex Options are quite different from Spot Forex trades where investors look to make profits off the daily fluctuations of global markets.So, why are Binary Forex Options better that Spot Forex?

  1. It all comes down to the risk involved. In the case of Forex Binary Options, investors stand to gain a lot more than their initial risk, while in the case of Spot Forex, traders typically only make as much as they’re willing to risk. That makes Binary Forex Options the better alternative, since the reward to risk ratio is a lot greater.
  2. Another characteristic of Forex Binary Options that make them a better alternative to Spot Forex trading is the fact that it is a lot easier to hedge these types of trades due to the high reward to risk ratio. For example, an investor can buy opposing sides of a Binary Forex Option for $20, and still net a healthy profit of $60.
  3. There are no commissions and rollovers associated with BOF’s, and spreads are typically limited. The same can’t be said about Spot Forex trades.
  4. With the use of stop orders, there is also no need to constantly watch the market when dealing with Binary Forex transactions since the entire process can be automated. However, savvy investors often keep an eye out on market regardless since there is the option of closing out the trade early.

How to trade Forex Binary Options

The high reward to risk ratio of Forex Binary Options gives investors several viable trading strategies. Some prefer to deal with weekly expiry times; several prefer daily contracts, while others stick with hourly contracts.Binary Forex Options can also be used as alternatives for stops, allowing traders to minimize risks during market reversals.

Mastering Binary Options

If you plan on becoming a Forex Binary options trading pro, you will need to start by opening up a trading account. Then, you are ready to test the waters. Obviously, the more you know about markets and stocks, the better your chances of netting a decent profit. As with any other form of investment, learning should be a never-ending process as market are continually evolving.For those who are determined to become Binary Forex Options experts, here are a few pointers that should get you pointed in the right direction:

  1. Practice good risk management habits: Since you always know exactly how much you stand to gain or lose when dealing with Binary Options and Forex Trades, managing potential losses should be relatively easy. As with all investments, spread your risk, and learn the tiny differences between winners and losers.
  2. Stay informed: Serious investors typically spend a decent amount of time monitoring global markets in the world for things related to Binary Options/Forex trading. Those who plan to become Forex Binary Options pros would be wise to follow suit.
  3. Learn and practice various trading strategies: Some trading strategies are more efficient than others, but you typically have to try many strategies out before you find the one that’s perfect for you. An important key to understanding markets around the world, especially when it comes to Binary Options and Forex trading is having lots of experience with the many investment strategies and techniques.
  4. Stay focused: As with many other forms of investments, it’s the little things like having a positive attitude, work ethic, and perseverance that often make the difference.

These are just a few simple tips that anyone interested in exploring and profiting from Binary Forex Options would be wise to follow. So go ahead, open an account with an online brokerage firm like Bank of Trade and explore the amazing world of options.

Binary Options And Predictive Markets

Binary options markets operate as a derivative market of underlying assets, allowing traders the opportunity to buy or sell these at a specific strike price before a specific expiry date. They operate predictively, with the markets and returns adjusted to reflect the probability of the event which results in the financial returns for successful speculation. Prediction markets have been similarly used for a long time in creating a skewed market based on the probability of the outcome of an event. Commonly, these markets are used for sports, elections and any other competitive events in which the probability of something happening can be formulated as a return and exchanged within a market of participants.These markets reflect the trading communities view and anticipation of the outcome of the event by operating like any other market. When something is seen as high probability, the value increases, and when it is less likely, the value decreases. There is evidence that binary options share certain attributes of a prediction market, although there are others who point out that only some of the markets provided can be considered truly predictive. The binary options providers who create markets for sports and elections, for example, are seen as developing a predictive markets, whilst the range of financial binary options markets may be less so. The markets which offer flexible probabilities for options based on future events have been placed, at least by many US regulators, in the predictive market category.

The best times to trade binary options

Timing is absolutely essential for a trader’s success in any binary options market and for this reason it is hugely important to have a good understanding of those times which offer the best trading opportunities. Since most trading platforms offer 24-hour binary options markets to traders, this opens up the possibility of truly global trading with the prospect of chasing the sun around the globe, looking for the best trades and setups. Similarly, binary options are the only form of trading which offer markets throughout the weekend as well as day and night during weekdays.

Weekend binary options trading

Weekend trading using tools included by several of the most popular binary options brokers, including, are those which traders can make predictions on events during the forthcoming week. These are often provided as ‘range’ or ‘one touch’ options, allowing traders to predict whether price is likely to remain within a given price parameter, or if it may experience volatility and ‘touch’ a higher or lower extreme. These innovations have not only allowed larger-than-average returns on these trades (up to 500% of the initial investment) but they have also built an increased flexibility for binary options traders who are unable to trade during regular market hours.The regular hours of binary options markets are commonly known as the times when stock, currencies and commodities are at their most highly traded. This will depend on several factors, including where the trader lives, which markets they are looking to trade and the type of strategy that they will be executing.In terms of geographical location, binary options markets transcend international time zones which makes it just as easy for a trader based in London to speculate on Japanese stocks as a Trader in Tokyo to trade UK companies using binary options. The central decision that the trader will have to make is at what time they want to be awake in order to undertake this. For those looking for a truly 24 hour diary of binary options trading it is possible to trade active markets round the clock. For many traders, however, trading selective markets during just one period of the day is both preferable and healthy.

Market opening times

The key binary options markets to trade can be described as the Asian market, European market and the North American markets. These three constitute the largest and most active concentration of traders and companies as well as the most influential global currencies. The stock markets signify the regional opening and closure of these markets in this order with the Asian market opening at midnight GMT until around 9am GMT. As the sun moves around the earth, this is then followed by the European markets opening at 7 and 8am GMT depending on the precise time zone of the stock market within Europe.The world’s largest financial market then opens at 1pm GMT and trades through to 10pm GMT. Having identified the three largest markets it is important to note that there are several smaller markets which will open and close between these times. For those wanting a truly global account of the active markets, the Pacific region, which includes the Australian and New Zealand markets, opens between 10pm GMT and 7am GMT.Identifying the opening and closure of the world’s largest stock markets is a good basis for all traders to decide which binary options markets they are likely to trade. Since these are considered the official market hours, or the periods when the most market activity occurs, within these regions it will be the time when stocks, local currencies and some commodities will be at their most volatile. Since volatility is helpful, but not essential, for binary options traders, these times will be the best periods to look for high-probability trade setups.Given the 24 hour nature of global financial markets, it is important to point out that many markets remain open beyond the stock market opening and closing bell. Currencies, for example, will remain active as different pairings become popular to trade as local times move through the day. It is also important to point out the unique way in which traders can use binary options markets differently to traditional forex and currency traders. Whilst these traditional ways of trading can be used effectively whilst markets are active, their reliance on volatility in order to allow traders to make profits beyond the commissions and spreads that they have to pay make trading outside of market hours unattractive.

Advantages of binary options outside market hours

Since binary options markets do not charge commission or apply spreads to their options this makes trading these outside of market hours much more viable. Furthermore, binary options importantly does not necessarily rely on volatility, with an expiry only required to be fractionally higher of lower than the strike price in order to be considered profitable. Therefore, overnight and so-called ‘quiet’ or ‘sideways’ markets can be traded effectively with both regular binary options and also using features such as the range options offered by some platforms.Binary options markets, as derivative vehicles of the underlying markets can therefore be seen as increasing the flexibility of traders to choose precisely what time is suitable to trade. This turns the traditional image of the 9-5 trader on its head and allows those trading binary options markets to take advantage of opportunities that exist within and between traditional market trading times. This is a good reason why many trade binary options over non-predictive markets and, with the number of underlying assets available to trade growing as platforms become even more competitive it offers an excellent way to access global markets and around-the-clock trading.

Trading during the market’s opening

Trading binary options markets during regular market hours in any geographical location itself opens up several trading opportunities within that particular market. Throughout these, the opening minutes of each stock market tend to be both the most volatile and often the most popular amongst short-term binary options traders. This is the time of day that will dictate the direction of the market and is also one of the periods where the most activity occurs and out-of-market news are built in to the stock price. For this reason it is an important time for many binary options markets and a period where a large number of profitable opportunities exist.Whether a trader is purchasing sixty second or end-of-day binary options, the first few minutes can be critical in determining the success of the trade. Specialist traders use a number of strategies during the market opening to pinpoint opportunities including those looking at where the market opens relative to its previous close. For individual stocks this is important as the tendency for markets to ’gap’ up or down from the closing price allows binary options traders looking to ‘close the gap’ (the market tends to fill these gaps shortly after they have been created) a high-probability setup in the first few minutes of trading.Across both currencies and commodities, the connected nature of all markets ensures that the opening of the stock markets influences the values of both of these. Demand for commodities is created by the individual companies which make up each index and the way that these are paid for is determined by the currency markets. Additional relationships exist between binary options markets which also create trading opportunities which become available at the market opening in each particular location.

An example of market interconnection

One outstanding example of this is the connection between the US Dollar and Gold, both considered as ‘safe haven’ investments when uncertainty afflicts global markets. If trading activity opens in the US with a negative expectation (often due to a large deviation between the previous and forecast values) of either employment data or GDP levels, both the US Dollar and Gold often gain strength throughout the trading day. This also has the knock-on on effect of influencing the opening of other markets and especially the opening of Asian and European markets the following day. Binary options traders can therefore take advantage of this by observing the regional performance prior to the opening of the markets that they will trade in order have a good idea about the direction of the opening few minutes.

Trading during the market’s closure

Binary options markets also allow traders to take advantage of the frenetic trading that can occur during the stock market closure. In a similar way to the market opening, this is the period of time during which many professional and institutional traders are closing their positions and looking ahead to the next day in terms of their exposure in the market. For binary options traders who seek trading opportunities within volatile trading conditions this can often lead to some exciting opportunities. Stock market closures also have the added benefit of overlapping closely with the opening of markets within another geographical region which adds further interest to traders.

How the US affects European markets

For example, the stock market in Europe closes within a few hours of the US opening, allowing for binary options traders to benefit from opportunities from stocks within both regions. As the largest economy in the world, the US will often also have a large influence on the trading day of European markets and volatility from Wall Street will quickly be passed on to the individual European binary options markets. It is worth remembering that, if the last few minutes of the stock market also coincide with a news release either domestically or in another market, it may result in a highly volatile end of the day creating both opportunities and a reason to be cautious for those with open positions in binary options markets.

Timing for stocks

As outlined above, trading stocks through binary option markets will be most effective whilst the specific market is open. However, there is also a reasonable amount of activity immediately after market closures and even some important news releases which can also affect the next day’s opening. Since markets are also interconnected globally, it is important for binary options traders to be aware of the performance of other stock indices in order to anticipate movements in the preferred market. Many binary options traders will prefer to ‘day trade’ stock binary options due to the fact that events can occur outside of market hours which may adversely affect the opening and expiry of longer-term trades.As a derivative market, binary options allow traders to speculate on the direction of a stock market as a whole through purchasing binary options based on the entire index. This is often preferable for traders to purchasing individual stocks as it gives a more general reflection of market sentiment and thus market direction. The main index markets are available to trade with and, similar to regular binary options, they only require the index to close higher or lower by one point in order to be profitable.

Timing for currencies

Currency markets are open 24 hours per day and generally from Sunday evening to Friday evening. This incorporates the entire active trading week for retail binary options traders. However, as we all know, currency markets actually never sleep with exchange rates constantly floating higher and lower regardless of the day or time. At the same time, weekend is traditionally a time when the large industrial speculators and institutions are not operating, so the market is likely to be very quiet. During the week, binary options markets for currencies are open throughout the day and night. During the stock market trading hours of one of the currency pairs there is likely to be much more movement for binary options traders looking for volatility trades, especially between the major currency pairs.

Major and minor currency pairs

Currency pairs are generally divided in to both major and minor pairs, depending on their global importance and the degree to which they are used by international banks and reserved. Heavyweight pairs generally include the US dollar, Japanese Yen, Euro and British Pound as the most popular. These currency pairs will trade against one another most actively during the time when one of the regions is awake and actively trading during stock market hours. The most currency activity comes from the European and US trading hours and, for this reason, most non-Yen pairs will be very quiet during the Asian trading session. However, as we have already noted, binary options markets do not rely on degree or volatility to be profitable and the freedom from prohibitive spreads allows binary options to be purchased over night with the success of these trades only dependent on a one pip higher or lower move.

Timing for commodities

The binary options markets for commodities are also truly global markets. These largely rely on the supply and demand of the commodity so the most important trading times for these will where they are most heavily bought and sold as raw materials. For construction-related commodities, such as steel and copper, the Asian market is especially important as a powerful driver of demand to satisfy the demand for building and development in the region. Similarly, oil is incredibly sensitive to the performance of the wealthy Western economies and also the political situation in the Middle East.It has already been seen that gold is sensitive to global economic data and this is also very true of all commodities in general. When economic data is positive, the demand for energy and raw materials is assumed to rise which in turn increases the value of these commodities. Similarly, if a natural disaster or war threatens to interrupt supply then the value will rise. The opposite applies when the data is negative or if too much of a commodity is available on the market.The outcome of the interconnections between the economy and commodities for binary options markets mean that they can be traded throughout all market hours. Again, since many of the World’s largest financial centres are concentrated in Europe and North America, regular trading will be most active when these markets are open. However, commodities are highly sensitive to breaking news which can occur during any time irrespective of market hours, potentially causing a spike in the price of the affected commodity and opportunities for binary options traders.

Timing for index futures

Index futures are at their most volatil in the hours preceding the opening of the respective market. The very notion of futures is based on speculation and intense analysis on which way the market will be most likely to head during its opening. Index futures are often higher or lower that the actual close of the index due to this predictive element. They encapsulate the market expectations of traders and analysts and provide a good guide to those trading binary options markets as an estimated direction for the opening of the global stock markets.


Binary options markets are truly global and operate around the clock. The region where a trader lives or their preferred regional market to trade binary options will determine the available opportunities in terms of active currencies, stocks and commodities that are available. Unlike traditional stock and forex markets, binary options do not necessarily require volatility to be profitable and they can be traded effectively during flat and sideways markets as regular options or using the range trading features provided by those traders wanting to trade binary options markets during volatile periods, however, it is recommended to trade within stock market hours to capitalise on the best trading opportunities and setups. These hours follow the sun around the globe each day and typically operate between 8-5pm in most regional markets. Within this, some of the best trading occurs at the opening and closure of each trading session, with frenetic trading providing some great binary options trades especially across the currency and stock market indices which are comprehensively available through

Binary Trading for Beginners: Getting Started with Options Charts

Making any financial investment or commitment without first doing your homework is foolish at best, and downright negligent and careless in the extreme. However, many people do this habitually on a daily basis. Whether it is choosing the brand of canned food they are going to buy or the financial option they wish to trade, many reduce life to a series of gambles and punts.This is the last thing you want to do when dealing directly with financial affairs, and especially when dealing with binary options. Binary trading offers the potential for lucrative returns, so why wouldn’t you want to look at every binary chart and get all the information available before getting started?We understand that when you discover something as exciting and as potentially lucrative as binary options trading that haste can take over. Yet, it is surely best to learn about reading options charts and giving yourself the time to take in as much knowledge as possible. This way, you increase the likelihood of seeing returns from your trading activities at an earlier stage.

Getting Started with Binary Trading

The rise of online binary trading platforms and others like foreign exchange and commodities trading platforms have been fuelled by the fact they are so accessible. You cannot become an accountant or a leading stockbroker without having the necessary qualifications, but you can use online trading platforms. At the same time, there is no certificate that says you have become competent at reading option charts or can make sensible trading decisions.With this in mind, your approach to binary options needs to be realistic and honest. Ultimately, it is your own money you are putting at risk if you fail to ‘look before you leap,’ and it doesn’t take too much time to learn how to read an options chart anyway.Safe in the knowledge that anyone can get involved with binary trading, you should find a platform that provides an extensive range of options charts, like we do at Bank of Trade, although you can also download binary chart software if you would prefer to use something standalone. If you want to learn more before you get started, take the time to explore the wealth of knowledge and resources across Bank of Trade, including information about spotting trends and reading charts when you have mastered the basics.For those are 100% new to binary options trading, we have summarized what it is all about below.

How Does Binary Trading Work?

Binary options’ trading is unique among other types of online trading. The big difference is that, unlike with stocks, commodities, or foreign exchange, you are not actually buying an underlying asset. In these ‘traditional’ methods of trading, you buy the asset at a particular price, and the profit or loss you make from it depends solely on the price at which you sell, as well as how many units of each you own.When you trade binary options, all you are doing is forecasting whether you believe the price of these assets will go up or down. You are trading against the performance of them, not earning or losing based on the price itself.Another major difference is that binary options represent an “all or nothing” type of trade. Therefore, when you trade binary options, you simply say whether the price of something will increase – known as a ‘call’ trade – or decrease – known as a ‘put’ trade. If your trade ends “in the money” – the price increases or decreases as per your forecast, you receive a return normally ranging around 85%. If it doesn’t, you lose your initial investment.One of the main advantages of binary trading is that you know what the potential returns are before you make a trade, as your platform will tell you what you make if your option ends in the money. Contrast this with ‘traditional’ trading, where you simply buy and hope that the price goes up, and have no idea what your potential return is.Therefore, all you need to learn about reading a binary chart is how to tell whether something is trading upwards or downwards; you do not need to worry too much about to what extent the price will go up. One final advantage of binary trading is that it allows you to trade and make money even if markets are stagnant or generally falling in price. Again, this is made possible because you trade against the price and do not actually take ownership of an underlying asset.

Using an Option Chart to Pick Your Trades

You cannot hope to be successful with binary trading if you do not know how to read options trading charts. Yes, the returns from binary trading are potentially lucrative, but as with any type of financial trading, the losses can fast mount up if you do not know what you are looking for.

What is an Options Chart?

The easiest way to describe an options chart is as a visual demonstration of how a particular asset has performed through time. Using such a chart, you can look at whether an asset is currently trending upwards or downwards and the previous history of the price in both the short and the long term.This is essentially all an options chart is. While they might look simple and show you a pattern and trends, how you use them is all-important. For example, looking at a single binary chart on its own is worth doing, but it is even better to look at a number of them in conjunction with one another. This is because you can then identify which assets are ‘safer’ trades; some will consistently trend upward before trending downwards and following a set pattern, while others might look like a useful trading opportunity but actually not be as stable as others are.

Binary Chart Analysis

Having access to option charts is one thing; being able to interpret what they are saying is quite another. The problem many beginner traders face is that it all sounds simple when reading about it, but when confronted with your account and a selection of binary options trading charts on Bank of Trade they can be very intimidating, and give you a headache within seconds of you analysing them.What you need to do is forget about this. While ‘experienced traders’ might try and sell you a PDF that promises to share the secrets of how they read charts, the majority of these offers achieve nothing but to confuse the issue. You need to keep it simple; do not spend your time over-analysing option charts for any hidden trends, because they are not there. Remember, binary trading is “all or nothing,” and you are trading based on whether a price will increase or decrease, so you do not need to look too deeply at charts to try and spot the best “buy point” or “sell point.”

Spotting Trends with Trendlines

Using trendlines is the best way to spot trends on options charts. If your trading platform doesn’t put these onto charts for you, they are easy to spot and use yourself. All you are looking for is tops and bottoms – movement of a price upwards or downwards – to determine whether there is a trend or not. Three consecutive movements in either direction is indicative of a trend.Trendlines are excellent for short term binary options, because if you spot a trend just as it is starting you reduce the risk you take when placing a call or put trade.

Spotting Patterns

We can think of trends as a short-term, what is happening now type of thing. Looking at the bigger picture of option charts, you can then start to spot patterns. These might be related to the price range of a particular asset, so you can place trades with confidence as you grow your own knowledge, or how certain assets behave at certain times. For example, a keen trader might spot that a certain currency or commodity always seems to jump as soon as the markets open, meaning a 60-second call trade could deliver a high probability of returns from this one asset on a daily basis.Get used to spotting trends and creating trendlines first, and then move onto observing patterns and looking at the bigger picture when you gain knowledge and confidence. Remember always to look at the right option chart relative to what you are doing; if you are trading day options, a minute-by-minute breakdown will not tell you much, while the opposite is true if you are trading 60-second binary options.

Beginner Trading with Bank of Trade

Opening your binary trading account with Bank of Trade means you can instantly access free option charts and start learning everything you need to know about reading options charts as well as about binary option trading in general.Leave nothing to chance and learn as much as you can, and you will be in a great position to profit as much as possible from your binary trades. Remember to take your time when learning and do not jump straight into trading, but grow your confidence so you can start making sensible, evidence based decisions based on option charts and, in time, your own experience.

Binary Option Technical Analysis for Beginners

Getting started with any type of financial trading can be daunting, although given it will have been your choice, you will also have a positive approach to finding out everything you need to know in order to enjoy success and be as profitable as possible.While most people find it easy to pick up the use of a trading platform, the analysis, always crucial for making confident and sensible trades, tends to be the thing that people struggle with. This can often lead to people beginning to trade without having the knowledge they ideally should have. New traders can often get away with this when trading on other platforms, such as foreign currency, stocks and shares, and commodities. This is because it is often easy to manage losses through selling before a price drops too low, while there is also widespread media attention given to these markets, especially by regularly used resources such as newspapers, who will often have large sections dedicated to financial news and various markets both online and in print.Binary option trading does not get the press attention of other markets, generally because of the major differences between binary trading and other types of financial trade. An effective daily news summary of binary options would be impossible to create, because you could be trading any market. Instead, binary traders can instead read the regular finance pages and look for trend analysis in order to target specific trades.There is no question being able to analyse trends within binary trading is more critical to success here than it is when trading commodities or foreign exchange, for example. As previously alluded to, with the other markets you can often take a punt and then reactively manage a loss. In binary trading, an option will finish either in or out of the money, meaning taking a punt is an extremely foolish thing to do. Do not mistake binary options trading for gambling; it only becomes a gamble if you do not carry out the analysis you should do and start trading blind.

What is Technical Analysis?

Technical analysis refers to the study of price charts, trends, and market movement so that a trader can forecast with a degree of confidence whether a market will move up or down, and therefore make the call or put trade that is going to see their binary option end in the money.Beginners can get confused with binary option technical analysis, ironically because it is as simple as identifying whether you think something will go up or down. It is not like viewing charts for a particular commodity where a trader or an investor might look at calculating the best price to buy at, when they want to sell, and how much of a particular asset they need to buy to achieve a particular level of profit.When talking about technical analysis, it is important to recognise that many different things fall under this umbrella. Rather than talking about how you carry out your technical analysis, we need to talk about the different types of technical analysis that will serve you well as a beginner, help you to use them so they become useful when you become more experienced, and look at how they can fit into your overall binary options strategies.There are four types of technical analysis that are generally used by binary traders; the first three we look at below are the ones that should provide the most help for beginners and enable you to get started with trading at Bank of Trade.

Trend Following

This is perhaps the easiest type of technical analysis to carry out, as it involves looking at the historical data available to you as well as the “real time” movement of markets and determining when a price is likely to increase or decrease. Because you can trade binary options over minutes as well as longer periods, it is also important to look closely at how markets behave at certain times of the day.For example, you might look at a market and see that it is generally steady with a consistent price, and not much movement over the long-term. Let’s say that the last month has been virtually flat, with only a handful of points between the top and bottom prices. However, looking closer might show you that a particular market always sharply grows at the start of trading, or on a specific time on a specific day of the week, for example.You should also make this analysis of the “bigger picture.” So, if the price of a particular asset has been steady for six months, upwards movement does not always mean there is a trend happening (see mean reversion in the next section). However, if a look at yearly charts shows you that the asset has steadily grown, you can ascertain that this new movement is in fact following the longer-term trend.The biggest lesson you can learn with trend following is to look at the data most relevant to your trade. If you are buying 60-second options, then look at minute-by-minute breakdowns, likewise whether you are trading in hourly trades, daily, weekly, or longer-term binary options. The longer-term the binary option, the more idea you’ll have of how to trade based on historical trend following, but you have to balance this against not knowing what might happen in the next few weeks or months, particularly owing to external factors.

Mean Reversion

If you become adept at mean reversion analysis, you will be able not only to take advantage of breakouts but also to profit from a put trade as the price comes back down. There is nothing complicated about mean reversion, it is exactly what it says. You are looking for markets where prices might periodically fluctuate but where they ultimately return to a specific average price or range.For example, in the example we gave related to trend following above, we spoke of a price that had remained steady for six months. Let’s say that the price at the start and end of this period was similar, but there had been many peaks and troughs, some large, indicating potential breakouts, and others small. If throughout the six month period these had all return to a point at or around the original price before stabilising again, you can see that mean reversion is happening.As well as using this analysis to profit from short-term trades and to trade successfully when traders who buy and sell the actual assets will be staying away, it can prevent you making losses by taking out ill-advised longer-term trades.

Momentum Study

Studying the momentum of a market can be useful both for short-term and long-term binary trades. This goes further than merely trend following, and involves the comparison of short-term trends against long-term ones. What you should do is calculate whether the short-term increase or decrease of the asset price outstrips that of the long-term equivalent. If it does, then the asset has momentum and you should be looking to place the relevant trade. You should combine momentum studies with mean reversion if you are looking at trades that are one hour or longer, and even remember what you have learned about trends. This is because price momentum can last a matter of minutes; if you haven’t looked at everything available you might place a trade assuming momentum when in fact means reversion is happening.Does an asset gain momentum in the morning, or at the start of the week or month, for example, before reverting to the average later in the day, week, or month? Try to find a binary options broker that offers momentum analysis, or find a software program that does it for you.

Pattern Return

This very technical type of analysis can lead to high profits for traders. Pattern return analysis is something you should keep in mind to study and use later when you have gained some experience with binary trading and are confident in formulating your own binary options strategies.You will need a specific tool to carry out pattern return analysis – known as a stochastic oscillator. This tool calculates and predicts closing prices based on previous trends, price patterns and momentum, and can help you act before trends have been established. However, you should understand this is not a failsafe to guarantee successful trades, but something that you can build into your analysis should you wish to do so.

Technical Analysis Tools

While you can take advantage of a number of technical analysis tools, you should also dedicate the time to ensuring you can understand everything related to these practices yourself. Your aim should be to become competent at carrying out your own analysis so you can act confidently without using tools. Use them when you are getting started with binary trading, and as you grow your own knowledge start to carry out your own technical analysis. When your manual analysis is starting to match that of your tools, you know you are ready to move on and confidently trade yourself.

Getting Started

By opening your binary options trading account with Bank of Trade, you can get started immediately on learning everything you need to know about technical analysis, and set yourself up to make healthy profits from whatever binary trades you get involved with.