The Art and Science of Binary Options Technical Analysis

Some might say that there’s no art involved in technical analysis, that it’s all cold and calculated or at least that’s how it should be. I agree. But on the other hand I agree with the guys who say trading is an art as well. I don’t have a definitive answer, but I think that knowing what technical analysis is and how to use it will help you find the answer for yourselves.

 

What is Binary Options Technical Analysis?

Technical Analysis For Binary Options. Technical analysis is a science, an imperfect, imprecise social science, that studies financial markets and the price of assets. It is used to predict future price movement, trading signals, based on past and present data. Tools involved include price patterns, technical indicators and trend.

 

The Art And Science Of Technical Analysis

 

Technical Analysis; Signals For Binary Options Trading

There’s a clear trend in this industry: almost all brokers want to convince clients that trading binary options is easy. All over the place you see stuff like: “just pick Up or Down and trade” but nobody tells you HOW to pick Up or Down. The “How” is given by Technical Analysis combined with Fundamental Analysis. Many traders pick one method or another, meaning they apply either technical or fundamental analysis, but the best way is to become a “hybrid”, to use technical analysis in line with the bigger fundamental scene.

Because of the nature of the subjects studied, namely people, social science is very imprecise and highly subjective and the same is true for technical analysis. The good news for us traders is that the  market is dumb. Individual market participants are smart but the market as a whole is a mob. Mob mentality is primal, animal even, and does not readily learn from its mistakes. It is subject to follow the leader, it is highly reactive to news and over time, will repeat itself over and over again. Savvy traders noticed from the earliest days of charting that certain patterns tend to repeat themselves and this meant they could profit when those patterns formed in the future.

More good news for us technical traders is that we do not need to know everything in the market if we can read the charts correctly. The first tenet of technical analysis is that the market knows everything and if it doesn’t know it, it soon will, and that knowledge is or will be represented in the Binary Options Trading Charts. A popular method of viewing charts is with Japanese Candlesticks, a very useful technical analysis tool.

 

The Art And Science Of Technical Analysis

 

Basic Concepts Of Technical Analysis

Basic concepts of technical analysis include trend, support & resistance and volume. In order to make a scientific study we use tools, gauges and indicators to measure things like price action, momentum,  and volatility  in relation to trend, support & resistance and volume. The tools measure these metrics and compare them to past price action then display them on the charts in order for us to make predictions about the future. Some of the things that technical analysis can tell us is when the market is getting ready make a big move, the direction of an impending move, the extent of an expected move and where prices are likely to stop moving. The following article will help introduce you to some of these concepts. – Chart Patterns Tool, Follow The Money

 

The Art And Science Of Technical Analysis

 

Here’s a simple example: say that in the past the price of an asset bounced three times at resistance and the fourth time it finally broke that resistance level and kept on going higher after the breakout. If the same pattern/behavior occurs again, the trader can assume that after the breakout price will continue to move higher, just how it did in the past.

 

 

The Art Of Technical Analysis

Art today usually refers to beautiful or interesting objects that draw our attention, in the past an art form was any undertaking in which mastery could be achieved. In a sense everyday tasks transcend the mundane and are elevated to an art form. Think of how top athletes play, someone like Wayne Gretsky,  how they are able anticipate what is going to happen before it happens, how they are able to be in the right time at the right place. Gretsky knew the rules and the fundamentals of hockey so well they were a living part of him, he loved hockey and hockey loved him.

When you love trading and technical analysis so much that you know it better than you know your own self, that’s when rules can be bent and art created. When the first motorcycle backflip was performed during an official freestyle event the crowd and the judges went quiet for a few seconds. A backflip was technically impossible! Or so they thought at the time. But still, the guy just did it. The thing to remember is that this guy didn’t just get on his bike and do a back flip. He rode for years, learned all the basic tricks until one day he rode up on his booter and could see the back flip in his mind and knew he could do it because of confidence in his skills.

This is very comparable to high level traders. They are knowledgeable enough, experienced enough, quick enough, insightful enough,  savvy enough, to anticipate the market and seemingly know what is going to happen before it does.  It takes time to reach this kind of level with trading but it is possible. Think about this, if  a newbie walks up to a bike and says, “hey, I can do a back flip” he might just break his neck. For newbie trader this may mean losing a big part of your stake, or getting washed out of the market.

The trick is to trading the market like this is to learn it, study it, practice it until it becomes a part of your very being.  This is why you should be studying the historical charts; to identify past patters, see what happens when the patterns break and learn to apply that knowledge to future events. Over time you will learn to read the indicators like a book, you will be able to anticipate the market and see trade set ups as they form, instead of after the fact, and be able to profit from them. Basically, you will have connected the dots to becoming a true binary options trader.

 

 

The Bottom Line

Simply choosing Up or Down is gambling, no better or no worse than pulling the handle on a one armed bandit or spinning the roulette wheel. It takes more than blind luck to be a successful trader, it takes an edge. If you have been trading without success this is the answer you have been looking for.The bottom line is that technical analysis is very important to your trading success. It is how trend is determined, it is how price patterns are recognized, it is how binary options trading signals are derived.

 

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