The fast speed of binary options is both a gift and a curse. On one hand, you can nearly double your investment in just 60 seconds. On the other, how are you supposed to apply technical analysis for binary options when most indicators are designed for longer timeframes?
Easy! In this article, we break down the three top indicators for binary options that can be adapted for shorter-term trading.
1. Moving Average Convergence Divergence (MACD)
MACD — short for Moving Average Convergence Divergence — is your market’s heartbeat monitor, revealing the rhythm behind price movements. It decodes trends, gauges momentum, and even spots divergence, all of which are key binary options technical analysis metrics.
Here’s how to get your MACDs ready for your binary options trades:
Step 1: Fine-Tune Your Settings for BO
Go to the Indicators section, choose MACD, and change the default settings to slice through the market noise:
- Short-term Moving Average: 9
- Long-term Moving Average: 20
- Signal Line: 3
These settings help you focus on the key signals without getting overwhelmed by fluctuations.
Step 2: Interpret the Signals
- Bullish Signal: When the blue MACD line crosses above the orange signal line, consider it a green light. Look for a candlestick confirming this upward push.
- Bearish Signal: When the blue line dips below the orange signal line, it’s a sign that the price might go down. Again, check for a candlestick that supports the downward trend.
2. Vortex Indicator
The Vortex Indicator is designed to capture both the direction and strength of a market trend. It is also all about two lines crossing, but unlike MACD, you don’t need to tweak any settings — just stick with the defaults (14 – 1.1 – 0.9).
Read the signals:
- Bullish: When the blue line crosses above the purple one
- Bearish: The blue line crosses below the purple one
Many traders consider the Vortex Indicator the most accurate indicator for binary options, as it provides clear signals that are easy to interpret.
3. Golden Cross / Death Cross
‘Normal’ use of Moving Averages might not be fast enough for binary options. But by tweaking the settings — effectively doubling the sensitivity — we unlock the Golden Cross/Death Cross strategy.
How to use it:
- Apply two SMAs with periods of 5 and 15.
- Wait for the lines to cross.
- Interpret the signals:
- Golden Cross (bullish): When the short-term MA (blue line) crosses above the long-term MA (red line), consider buying.
- Death Cross (bearish): When the short-term MA (blue line) crosses below the long-term MA (red line), you might want to enter a short position.
Conclusion
Incorporating these three indicators for binary options — MACD, Vortex, and Golden/Death Cross — into your trading strategy can dramatically improve your technical analysis for binary options. Each tool offers a unique perspective on market trends and momentum, ensuring you have a comprehensive view of potential trading opportunities.
Use these tools separately or in combinations to refine your strategy and score handsome trades!
