Historical price data is an integral part of the binary options analysis process and should play a key role in each and every trade decision. Although some do question the level of importance that price action has in relation to current movement, no trade would be complete without at least some consideration of how the price has moved in the past. All technical charts include historical price information, and with good reason.
There are several things to look for when analyzing historical price data, with the most important being highs, lows, and mid-range prices. Highs and lows pinpoint times when market sentiment was quite strong, with plenty of buying or selling taking place. Since extreme price swings do not take place very often, it helps to know if a strong price push has recently take place, or if a specific underlying asset is more prone to large movements than other assets.
The mid-range, or average price is often considered the be the price level of an asset when it is balanced. Balance is achieved when the number of buyers and sellers are similar. The average price level can shift over time, but often it will remain near the same level for quite some time. Gold is an excellent example of this, as it has remained near the $1,200 per ounce level for many months now. It’s quite clear at this point that some major shift in the market will be required in order for the price of gold to rise or fall significantly.
Do be looking for price trends. These should be easy to spot, as they are always represented in the form of either an ascending or descending line (or candles when viewing a candlestick chart). Not only are these easy to recognize, they represent some of the best trading opportunities of all. Lasting trends can provide multiple profit opportunities. Short-lived trends are still valuable in that they can provide fast and easy earnings.
A common question among binary options traders is, just how far into the past should I be looking? There is no easy answer to this question, but many link the expiry time to the amount of analysis that needs to be completed. For example, there would be no need to study price action for the past year in order to execute a successful 60 second trade. Price movement from a year ago would have little, if any bearing on such a trade. With that being said, it would make sense to view price movement for the past 12-24 hours, as in doing so any significant trends can be noted.
The standard price chart that is provided by most brokers is typically quite basic. In most cases, these charts do not include any technical indicators and do not allow you to view price action that is older than a few weeks. These charts are an excellent starting point for beginner level traders. However, a shift to more detailed charts should be made as soon as possible. It can take some time to master the use of these charts, but the effort will pay off in the form of a larger number of profitable binary options trades.
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