Binary Options Indicators

Binary options indicators can enhance your trading strategy and potentially increase profits. The best indicators and signals are available to download for free via popular platforms such as MT4 and MT5. This guide explains how to use some of the top trend and sentiment binary options indicators, to help you become a potential winner.

What Are Binary Options Indicators?

A chart indicator analyses market movements to find potential opportunities. Investors can find trends and patterns in underlying markets to inform trading decisions.

Essentially, technical indicators are mathematical formulas that are applied to the price fluctuations of assets, including forex, stocks and crypto. An indicator aims to assist traders in using objective data that indicates a likely win. Put another way, an indicator takes data from complex graphs and simplifies it into an easily digestible format for traders.

The best binary options indicators can be downloaded for free from MetaTrader 4 (MT4), MetaTrader 5 (MT5) and other popular platforms. Indicators can be used in a wide range of strategies, such as scalping, 60-second options and 5-minute options.

The indicator makes a live prediction based on various factors and then sends alerts based on the data. There are also sentiment indicators that look at what people collectively feel the market will do.

Why Indicators Are Important

The overwhelming amount of data available when trading can be confusing. One simple solution would be to ignore the data. However, trading binary options requires a good grasp of the markets so that you don’t end up trading blind.

Technical indicators are key to ensuring that binary options trading is based on skill, rather than luck.

Moreover, popular brokers such as Deriv (Binary.com), have built-in technical indicators and analysis tools.

This means you do not have to form your own equations and algorithms.

Binary options indicators are also fast and reliable. They can help you to make sense of vast chart data that would otherwise be unmanageable. Not only can they help confirm a hunch, but they can also uncover new leads that may have otherwise gone unnoticed.

Types Of Indicators

There are many different types of indicators available for binary options, each with specialist qualities. Typically, indicators fall into two types:

• Leading indicators – those that try to investigate the future
• Lagging indicators – those that try to draw from the past to make predictions

In addition, technical indicators then fall into one of four categories based on what they are trying to discern:

• Trend – These indicators show the market direction. They are also referred to as oscillators.
• Momentum – These are designed to show the strength of a trend and then signal where a reversal is likely to happen.
• Volatility – Volatility indicators show periods of high or low volatility in a market. They show the extent of market movements and how much prices are changing.
• Volume – Volume indicators show the number of units of an asset being bought and sold. While trading volume should not alone influence the value of your options, it can paint a helpful picture of market activity.

Repaint Or Non-Repaint

Binary options indicators can be repainting or non-repainting. A repaint indicator keeps changing its values. They always use future data to determine values and entry signals. In doing this, they ensure historical entry and exit signals look accurate.

A non-repaint (or no repaint) indicator does not change its values after the price bar or arrow has closed. They use price bars to the left (not in the future) when calculating values. Both repaint and non-repaint indicators can be used on MT4, MT5 and other platforms.

Picking which to use is up to you. Repaint options tend to look nicer, particularly when viewed historically. However, they can be unappealing for real-time trading because signals can disappear after they are shown. Moreover, you could end up placing a trade based on a buy signal that has disappeared.

Scammers have also sought to utilise this opportunity. Unfortunately, there are many unreliable binary options indicators of both kinds online. Before you use any, check forums or reviews to see whether they can be trusted.

The Best Binary Options Indicators

Here, we detail how to use five of the most popular binary options indicators:

Average True Range (ATR)

Average True Range is a volatility indicator that measures how much a price is changing, or how stable it is. It only requires historic data to calculate and generate trade signals and it can be applied to any timeframe.

The range is calculated by subtracting the low from the high and is represented by the largest of:

• The most recent high minus the most recent low;
• The absolute value of the most recent high minus the previous close;
• Or the absolute value of the most recent low minus the previous close.

ATR can be used in two ways: to determine when to enter or exit a trade, and to determine the size of the trade. A high ATR represents increased volatility and a low ATR means the price is relatively stable.

The drawback is that it does not predict the direction of price movement, it only predicts how likely it is to happen. As a result, ATR is one of the binary options indicators that is best used when combined with other indicators.

Relative Strength Index (RSI)

The Relative Strength Index is a momentum indicator. It aims to signal whether a market has been overbought or oversold. This helps traders decide whether to buy or sell a binary options contract, as well as determine the right expiry time.

RSI places an asset on a scale of 0 to 100. If the figure is above 70 it is considered overbought, whilst under 30 is considered oversold. The number is calculated by dividing the average gain and average loss.

When it is over 70, you should enter a short position and when it is under 30 you should enter a long position.

The downsides of RSI binary options indicators are that they are poor at spotting reversals and can lag changes in long-standing trends. It is at its best when prices are oscillating between bearish and bullish.

Stochastic Oscillator

A stochastic oscillator is another type of momentum indicator. It compares the closing price to a range of prices of an asset over a given period.

Like RSI, it is represented on a scale of 0 to 100.

However, unlike RSI, there are two lines displayed by a stochastic oscillator. The first, known as the fast stochastic, is a moving average. The second, the slow stochastic, is calculated as %K through the formula:

%K= ((Closing price – lowest price in chosen period) / (Highest price in chosen period – lowest price in chosen period)) x 100

The stochastic indicator also shows whether an asset is overbought or oversold. In this case, a figure of 80 or above means it is overbought. This means you should enter a short position with your binary options contract.

A figure under 20 means it is oversold and you should go long.

The main weakness is that this indicator can produce false positives, especially during periods of high volatility. Like most binary options indicators, it is best used in conjunction with signals.

Moving Average Convergence/Divergence (MACD)

The MACD binary options indicator is a popular option, with many advertised online (some of which state they have an 83% win rate). It is a trend indicator that is most accurate during times of high volatility.

MACD compares two moving averages (which are themselves indicators) for two periods. The main tool and point of comparison is the difference between the long-period average and the shorter period average.

Using and reading the MACD indicator is straightforward. If the shorter average is higher than the longer, the trend is rising. If the longer one is higher the trend is dropping off. MACD also highlights the strength of the trend and can signal a reversal when the lines switch direction and converge.

However, this tool can give false indications that a reversal is about to occur. It should therefore not be used to accurately identify reversals. Just like all the binary options indicators we have covered, it is most successful when combined with other tools and signals.

Ease Of Movement (EOM)

EOM is a volume indicator, but it can also determine trend strength. The indicator subtracts yesterday’s average with today’s and divides it by the volume. This creates an oscillator that can give negative values.

If the value is large and positive, the price of an asset is increasing at a low volume.

Similarly, a small positive value indicates the price is increasing on high volume. On the other hand, a large negative value indicates price drops on low volume, whilst a small negative value shows a dropping price on high volume.

The EOM indicator shows how easy a trend is and hence how likely it is to continue. The higher the number, the stronger the trend. Positive results represent price hikes or bullish behaviour, whilst negative results show price drops or bearish behaviour.

The EOM indicator does not give any trading signals by itself – it works well with the ATR indicator, in particular.

Free Binary Options Indicators

There is a vast library of free binary options indicators available at most online brokers, including Pocket Option, Quotex and IQ Option.

In addition, TradingView and MetaTrader provide all the indicators mentioned above for free.

There are also plenty of bespoke indicators available via free download, many of which are said to be 95% accurate. The Genius binary options indicator, Xtreme (or Extreme) indicator, Comodo indicator, Boss indicator v4.0 and Win-Win indicator, are just a few examples found on various websites and forums.

Final Thoughts

Binary options indicators help to manage an otherwise overwhelming amount of data. They simplify charts into an easy-to-understand format which can indicate the right trading move. There are many indicators to choose from and most work best when combined with tools and signals. Use this guide to start trading binary options with technical indicators today.

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