Beginning down the road to trading binary options can be quite confusing, and at times can feel like randomly selecting either a Call or Put option. Of course, this is far from the best way to be trading, and by taking a few simple steps to learn the basics of analyzing graphs one can be much better prepared to make stronger trades.
It should be noted that even the best graph analysis is far from robust without an accompanying fundamental analysis. Trends that appear to be forming in the graph may be the result of huge global events taking place, and without an understanding of those events the exact wrong move may be taken based on the graph alone. As a result, it’s a good idea to always be keeping at least a superficial eye on what is happening in the world while looking at graphs.
Most binary options trading platforms offer their own graphs for each asset on which contracts are traded. Although these graphs may not be as accurate as real-time graphs through a financial service, it is this data that dictates whether a contract expires in-the-money or out-of-the-money, so it is best to rely on these graphs whenever possible, as the main part of our strategy.
Learning to understand the graph you’re looking at is the first step to being able to analyze it. The graphs included with most binary options trading platforms are quite straight-forward. The graph shows the movement of the asset over the current life of the contract. Many platforms allow you to scroll back as well, to see what the asset did further in the past. Once a contract is purchased the strike price is marked on the graph, so that investors can see whether they are currently in-the-money or out-of-the-money.
The most straight-forward way to use graphs to analyze binary options is to simply look at the past few hours of an asset, to see where its high point was and where its low point was. Some assets will rise up to their high point or down to their low point relatively frequently over the course of an hour, and these are the easiest to purchase contracts successfully on. The simple strategy is to just wait until the asset hits its three- or four-hour high, and then to purchase a Put contract, or to wait until it hits its low, and then to purchase a Call contract. This technique has the advantage of requiring no formal technical analysis, as the investor is essentially deducing technical data from how the charts look.
More formally, investors may wish to look elsewhere for a current technical analysis of the asset in question. This analysis will include a listing of key supports and resistances. The graph on the trading platform can then be used to see which of those supports and resistances are currently in play in the asset. Call contracts would then be purchased when the asset arrived at a technical support, and Put contracts would be purchased when it arrived at a technical resistance.