Charts play an integral part in any good binary options trading strategy, as they allow investors to see when assets are approaching optimal Put or Call points. Both graphs and charts are used to quickly determine crucial information about an asset’s historical performance, helping to guide a decision about how the asset is going to perform in the future. While charts give that information visually, showing every data point along the way, charts generally reduce the information on a graph to just a few key data points: change over specific interval, high, low, previous close, medians, and perhaps forecast data.
For example, a binary option chart for a currency pair like EUR/USD in forex might show an average daily change of 0.51%, a one-week change of 1.07%, a one-month change of -1.70%, a three-month change of -9.08%, a six-month change of -4.02%, and a one-year change of 8.81%. These few data points tell us quite a bit about the performance of the EUR/USD pair: the biggest down swing came in the last three months, prior to six months earlier there was a massive upswing, and in the last week the currency pair has swung from a downward trend to a slight upward movement. The thing that should be most apparent through this chart is that the currency pair has quite a bit of historical volatility, and the current upswing is only a small part of a recovery of the three-month loss.
Based solely on this chart data, with no further graph analysis or any sort of fundamental analysis, a binary option trader might choose to purchase a Call binary option contract on EUR/USD. After all, in the absence of fundamental data to the contrary, one can reasonably expect recovery after the massive losses shown by the chart.
Of course, relying exclusively on the binary option chart data would be a mistake, since fundamental data might be a factor. In this case it would be a good idea to look at why the Euro had weakened so much, and why it was strengthening again. If the fundamental data (in this case the Greek bailout) remained positive, the Call binary option would be even more attractive. If the fundamental data was weakening, it might be worth foregoing a binary options contract, or even taking out a Put binary option contract. If there was no real fundamental data impacting things, we might still encourage a Call binary option contract, since a gradual recovery would still be more likely than a further slide – although such a contract might be taken more cautiously without fundamental data to bolster it.
As part of your main strategy, binary option charts can also be very useful as a quick way to see what the daily lows or highs for an asset were. These lows and highs can be used to determine the best places to purchase a Call or Put contract – purchasing Calls at the daily low and Puts at the daily highs. Again, however, fundamental data must also be taken into consideration to ensure one is not led astray by chart data when the market is reacting strongly to fundamental shifts.