Using Indicators to Help Influence Your Trades Many options traders have difficulties in determining when exactly to pull the trigger and enter into a new trade. Luckily, technical indicator tools are available to help demystify the process and these tools can often be quickly interpreted and nadex binary option reviews on your trading platform.
Once we understand these factors, we can use this information to increase the probability of accurate forecasting for options trades. First, we will look at each major type of indicator to see how these tools operate. Trend Following Indicators Some traders look to take contrarian approaches to trading but the majority of investors look at the wider trends in the market and then trade in the direction of those trends. One of the most popular indicators in this category is the Moving Average, which marks the average closing price of a set number of time periods. Common settings for this indicator include 10, 21, 55, 100 and 200 time periods. MA and a longer term MA.
You can trade the crossovers at 24option. General Risk Warning: The financial services provided by this website carries a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose. In a downside crossover, a bearish trend is expected, and this creates an opportunity for PUT options. In an upside crossover, a bullish trend is expected and this creates an opportunity for CALL options. In the chart below, we can see a downside MA crossover following an uptrend.
The MACD indicator can be used in conjunction with other indicators as well. For example, if we can see a buy signal in the MACD at the same time a bullish MA crossover is seen, an excellent opportunity for CALL options would be developing. Agreeing indicator signals will generally lead to higher probability trading opportunities. Overbought and Oversold Indicators Another technical indicator strategy can be seen with the overbought and oversold indicator tools. Basic economics tells us that when asset prices become too expensive, people are less likely to buy that item and more likely to sell it. This situation represents an overbought condition and PUT options become preferable.
Using the RSI, indicator readings below 30 suggest oversold conditions while readings above 70 suggest an asset is overbought. Conclusion: Use Indicators to Spot New Options Trading Opportunities For those who find it difficult to decide on potential price direction for an asset, indicator readings can prove to be highly valuable in helping you to find new opportunities. Your capital may be at risk. This material is not investment advice. Is the Golden Mean a Useful Technical Indicator? What is CFD Trading All About?