Binary Options and MACD Indicator
The Moving Average Convergence and Divergence, or MACD for short, sounds like a daunting prospect to anyone who is new to binary options trading. However, it is useful to understand how it works and how it can help you to improve the success level of your trades. It is considered to be one of the best ways to decide when you should buy your binary options and can even help with deciding how!
The MACD chart shows two lines which fluctuate up and down; these lines often cross and they can show the best time to buy or sell an asset option based on what it is about to do. It is a very commonly used indicator, assisting many traders to achieve high success rates. In effect it will help you to identify when an assets price changes direction, how long and even how low the price is likely to go as well as how long it will stay on a current upward trend.
To calculate the MACD you will need to take the difference in closing price exponential moving averages based on a twelve day period and a twenty six day period. Once you have these figures you can enter them onto your chart and create a solid, wiggling line. The other line is created by using the simple moving average for your asset over a nine day period. The two lines together should criss-cross multiple times and provide you with an excellent idea of when the lows and highs are likely to be. You can then place your trades accordingly.
This type of analysis is known as sub zero simply because the price movements are showing below a static line which indicates the zero line; where the asset will have a price of zero. This is not because the price of the asset has shrunk this low but because the way this technique works is by tracking small adjustment sin price which generally result in a chart below zero. If the chart rises above the zero line you should consider using a call option as the market is bullish.
Although it is a difficult tool to fully understand, once you have managed to come to terms with how it works and what information the resulting chart can give you, the you will find it is of immense assistance when deciding which trades to place. It can also be used in conjunction with a variety of other tools to improve your understanding of the market and a specific asset. You will then be able to benefit from this additional analysis by using the information to choose the right assets to buy and sell options in; providing yourself with a much better return on your investment than was previously possible. In fact, this technique should assist you to obtain a regular income from binary options trading.
