Many strategies for trading various products, including binary options, are based on market technology. Traders identify patterns in the course of the price and thus derive the probability of future price movements. There are several patterns, such as trends and consolidation phases, which are easy to recognize.
Trends are clear upward or downward movements in the prices. Consolidation phases can run sideways, but also slightly upwards or downwards. They are then called either bullish or bearish flags.
Bullish and Bearish flags
Bullish if they occur within an upward trend and bearish in the downward trend. The flags tend to tilt slightly against the prevailing trend.
But not only price patterns are part of the market technique, but also the presentation of the prices. There are usually three ways to do this:
- Line chart
- Candle chart
- Bar chart
The line chart is the simplest of the three Types and connects the opening or closing prices based on a time unit. However, it does not depict highs and lows.
The candle chart or candle chart is based on a Japanese method of analysis and represents the high, the low as well as the opening and closing prices as one candle. The bar chart is an old method and very similar to the candle chart.
The most popular representation of the charts is the candle method, because it is more clearly structured and, in contrast to the line chart, also shows lows and highs.
What do candle patterns say?
Displaying the courses as candles enables a more in-depth analysis of the courses. Therefore, some well-known patterns have become established over time. This includes, for example, the hammer. The hammer often points to a reversal or a strong shift in the demand-supply ratio. The course collapses extremely quickly, so to speak. The hammer appears both downwards and upwards.
Many analysts try to include candlestick patterns in their analyzes. For example, they are on the lookout for hammer formation, wait for confirmation that will come when the closing price of the next candle has overcome the low of the hammer, and position themselves in the direction indicated by the hammer.
Top 5 Candelstick patterns for trading in Binary options or Nadex.EXPOSED
Strategy for binary options
A popular candle stick strategy is based on using dynamic movements. As is well known, very dynamic movements take place after a consolidation phase. Candles can indicate such consolidation phases very well by forming several candles one after the other, the bodies and wicks of which are getting smaller and smaller. You can also use the Bollinger Bands as a technical indicator to confirm that the candles are contracting more quickly.
But even if the candles shrink, the dealer still doesn't know in which direction the dynamic movement will take place, The trader doesn't have to buy options before moving. He can also simply wait, have the dynamic movement confirmed as shown above and only then buy an option.
Candle stick patterns can increase the probability of a win, if you include them in addition to the trend analysis. There are several patterns for candles, all of which indicate a special situation in demand.
However, just like any analysis, the analysis of candlesticks requires a strong level of observation and discipline. Candles can also act as confirmation of a developing trend and thus make it easier to decide on the right entry.
Nevertheless, it should not be forgotten that candle stick patterns are not miracle cures, but only a component of technical analysis, The more modules the analyst or trader masters, the more successful he can be.
Analyzing candle stick patterns requires analysis software that can display prices in candle form. The binary.com broker has such software as a service in the program. In order to use other technical indicators as filters, however, the trader would have to use one of the free software offers from financial information portals.