Binary Options Strategy | Oscillators

Oscillators

Oscillators

Oscillators are a type of market indicators which help traders deduce behavior of a price, so that a profitable investment can be made. Actually, they are one of the most important tools a trader can use because they take into account a longer period of time when compared with an asset’s price, meaning more information can be extracted from them. This article will explain the basics of using oscillators in your trades and show you how to adjust your binary options strategy to become more profitable and efficient. It is absolutely imperative that you master this important concept if you want to become a successful trader, so stick with us because we have the knowledge you need.

Oscillators | Pros and cons

Now, unlike indicators, oscillators are usually not shown directly on the chart, but in a separate window below it. As we have already said, they take into consideration a longer period of time than the price itself, so a trader should always base their investments on oscillators and not on the price’s current movement. Causes of Market Movements can sometimes affect the market instantly, leaving you with no chance to come up with a binary options strategy if you base your predictions on market prices alone. This is perhaps best visible if we take into account the oversold and overbought levels an oscillator can show you – your binary options strategy should be that you invest in put options during overbought conditions and in call options when a price reaches its oversold area. The major problem with this binary options strategy is that trends can form in these areas and if that happens this principle no longer applies because during a trend prices can stay there for quite some time.

Oscillators | Relative strength index

On the chart below you can see the RSI (relative strength index) in action. Two ranges are highlighted at the bottom of the chart (purple color): the lower one stands at 30, while the upper range is set at 70. These are the ranges which mean that the RSI is becoming oversold and overbought respectively, and that some actions need to be taken. Some theories put these limits at 20 and 80, but most traders dismiss that approach as way too conservative – you often react too slowly. In any case, the RSI is there to help you determine the moment when an asset reaches its overbought and oversold states by comparing its recent gains and losses. Use it wisely and it will be of great help to you.

Oscillators | Continuation patterns

Oscillators can also be used as a continuation pattern to help you pick the right binary options strategy. Combining the fact that they will show you overbought and oversold areas with the fact that they take into account a big portion of time allows you to find the so called neutral zone of a price. Simply take the two extremes and divide them by two to get the middle of the range. If the market is traveling upwards, breach of this neutral zone is a sign that this bullish trend will continue and your binary options strategy should be to invest in call options. On the other hand, if the market is dropping and the move is bearish when it crosses the neutral zone, put options should be traded to make some profit. Join our Binary Winners Club to learn more about trading.

Oscillators | Conclusion

So there you have it, the basics of using oscillators on the binary options market. These helpful tools can tell you a lot about a price and its behavior, so that you can make an accurate and lucrative prediction. Oscillators should really be an integral part of your binary options strategy because they also provide you with loads of useful information about the market and you can much more easily notice patterns relating to bullish and bearish trends. In any case, proper use of oscillators greatly increases your chances for profit – don’t be afraid to use them. If you want to learn more about binary options strategies, check out our other educational articles listed below.


FURTHER READING:

1. Liar’s Poker (M. Lewis, 2010)
2. The Mathematics Of Money Management: Risk Analysis Techniques For Traders (R. Vince, 1992)
3. Investing For Dummies (E. Tyson, 2011)
4. Common Stocks And Uncommon Profits (P. Fisher, 2003)
5. Market Wizards (J. D. Schwager, 1989)

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