Basics of binary options: flat indicators
- VFX Blog
- For beginners
The maximum profit is given by trading on the trend, no one will argue with this. But if you look at the history of how signals work for binary options, you can see that 70% of the time market in sideways range. Flat indicators will help you accurately identify periods of low volatility, enter at the very beginning of directional movement.
All trading assets have periods when the price is almost unchanged, which means a lack of liquidity or a temporary "truce" between buyers and sellers. Moreover, the flat can be wide with sharp speculative movements of 50-100 points, which are not confirmed by trading volumes. Sideways movement begins when the trend has ended, before or after strong fundamental events.
The flat indicator makes it possible to prepare in advance for opening a trade after a range breakout, when the trend begins to lose its strength or close the current position. When analyzing price dynamics, you should remember:
- If there is sideways movement on middle and higher timeframes, look at shorter time periods. There may be areas of the trend where it is quite possible to open an intraday trade.
- Exact binary option strategy should detect the presence a sideways movement with the same accuracy regardless of the timeframe and currency pair;
- Good when the flat indicator has settings for the average volatility. For example, pairs that include GBP, the norm is the width of the corridor of 50-70 points, and for the low volatility NZD, such movements are already a strong trend.
Standard flat detection tools
Our task is to determine the absence of pronounced movement. It is logical to assume that first this will be shown by the flat indicator following the market direction – moving averages (Moving Average) and their combinations. One of the simplest options present in all binary trading platforms is Bill Williams «Alligator».
The lines are intertwined or arranged in parallel- flat; begin to divergence at the beginning of new a trend.
The next flat indicator is Bollinger Bands, where, in addition to the direction, current volatility is assessed. The narrower the channel, the stronger the next trend will be, and with 50-60 points of width, use swing binary options strategy, especially on higher timeframes.