How to use charts properly?

How To Use Charts Properly?

How To Use Charts Properly?

The binary options market has experienced a significant increase of popularity over the last few years, and that trend is more than likely to continue in the future. The main reason for that can be found in the simplicity this kind of trading offers, its fast learning curve and a huge number of brokerage companies. Trading interfaces are usually pretty well designed and easy to understand, but some traders have problems when it comes to charts usage. Every trader needs to learn how to use charts properly in order to experience success, so we will cover the basics here and give you some useful tips. Read on!

How to use charts properly? | Basic types

The first thing you need to familiarize yourself with in order to know how to use charts properly is chart types. Choosing your ideal chart type is connected to knowing How to choose the right strategy. The simplest type is the line chart, created by joining closing prices of a selected asset over a period of time. The drawback is that it doesn’t provide you with any type of history like opening prices for every individual point. However, the closing price is pretty much everything you need to predict right, so this type of chart will do the job just fine, especially if you’re a beginner. Bar charts, on the other hand, display information about high and low prices, as well as opening and closing prices for each point. They consist of vertical bars interconnected with horizontal dashes that represent opening and closing prices. Their colors depend on rising or falling of their price and this makes it easier for traders to understand the future trends. You will also come across candlestick charts, which are very similar to bar charts. However, there are some differences regarding their visual construction. Candlestick charts contain one wider bar that represents the difference between high and low price for every time point. These bars can contain one of three different colors depending on the asset’s price direction. But if you want to know how to use charts properly, you must learn more. Keep reading!

How to use charts properly? | Patterns principle

In order to know how to use charts properly, traders should understand and embrace the concept of patterns as Trend Indicators. Basically, patterns are recurring parts of your chart that are used for predicting current and future asset fluctuations. Binary options signals are based on the pattern principle as well. There are two main types of patterns – reversal, signaling that previous trend will reverse after the pattern is complete, and continuation, which signal that rising or falling will continue after the pattern is complete. There are many popular chart pattern types, such as head and shoulders, cup and handle, triangles and such that have been proven to work, and we have covered most of them here on our website, so be sure to check it out.

How to use charts properly? | Conclusion

We have reviewed the basic principles you need to learn in order to know how to use charts properly. Pretty much every trading platform contains them, so ignoring education about this aspect of trading can hurt your profit a lot. Do your best to acquire as much knowledge on this issue as possible, it will be well worth it. We wish you lots of luck in your trading!

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FURTHER READING:

1. A course in financial calculus (A Etheridge – 2002)
2. The Mathematics Of Money Management: Risk Analysis Techniques For Traders (R. Vince, 1992)
3. Cybernetic Analysis For Stocks & Futures (J. F. Ehlers, 2004)
4. Irrational Exuberance (R. Shiller, 2000)
5. Rich Dad, Poor Dad (R. Kiyosaki, 2000)

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Author: Ben Prescott
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