The basics of technical analysis

Binary trading is simple to learn and available to anyone. You do not have to be a trading expert or a genius to start trading and become successful in it. What’s more, you can use trading robots like the one provided by Fintech LTD and let them do the trading on your behalf.

Still, if you want to make trading decisions yourself and be successful in it, you need to learn and stay informed about the situation in the market. Technical analysis is one of the techniques that help traders make correct predictions and make right trading decisions. If you know how to perform it, your trading is likely to be successful and lucrative.

How does technical analysis work?

The basic principle on which technical analysis relies is that all situations in the market repeat themselves in cycles. Technical analysts observe the changes in the market and spot the patterns that repeat over certain periods of time. This helps them make correct trading predictions and decide when is the time to call or put the options. Also, this way they are more likely to determine the expiry periods they should set for the binary options they trade.

technical-analysis-optionThe use of charts

Technical analysts use charts to predict the movements in the market. They observe the charts and the price movements which occur on them. This way they can determine potentially profitable positions of each option and count them in the pattern. These patterns serve to predict the future movements of prices, so the traders know the right times for trading.

Double tops and double bottoms

Double top and double bottom are the easiest patterns to spot, and they are among the most important ones. When you spot these market trends, it means that the trend is reversing and you have a chance for profitable trade. This pattern is formed when the price moves to a new high or low and only then it corrects to form a lower high or higher low on the pullback, and then it repeats the cycle.

Head and shoulders

using-technical-analysisThis pattern has a high-probability reversal. It is called head and shoulders because it resembles the head and shoulders when you look at the chart. When the price moves to a high and then to an ever higher high, then it corrects and returns to the previous correction before moving to a high again – this is when this pattern is formed.

Indicators

When you want to perform technical analysis, you can use various indicators that will help you define the movements and create patterns. The indicators are divided into momentum and trend indicators. Momentum indicators serve to show how much energy the market has at certain prices. Trend indicators are the average price of an asset over a specific period of time. They form a line on the chart where the traders can see the average price of the asset. Both these indicators can help the traders determine the patterns and predict the future movements of the assets, which will help them trade more successfully.