Oscillators in Binary Options

Oscillators in Binary Options

Oscillators are a type of indicator very helpful for any trader with a trend-following approach. They help a trader define short periods of market extremes and indicate trends losing momentum. Oscillators are preferred by traders as they offer a visible perspective to trading in the sense that divergences can be used when compared with the trend indicators category where divergences are useless.

Oscillators Present a Clear Strategy

Trading forex with oscillator has the advantage that the trader knows exactly when to enter the trade, not like trading with trend indicators as in that case one needs to look at things from a relative point of view. With oscillators, for example, I want to buy a call option/place BUY contract on any dip of the relative strength index (RSI) into the 40 level after it reaches the 50. It is a clear strategy and this is possible only when using oscillators. On the Metatrader platform one needs to go on the upper tabs list, choose Insert, then Indicators, and from that list, there is a category called Oscillators.

On the JForex trading platform on the other hand, the oscillators are being called momentum indicators as basically there is a momentum that is building before the oscillators are breaking. If you want, the difference between trend indicators and oscillators is the same like the difference between technical and fundamental analysis. One cannot trade without both categories to be considered. Trading can be done solely on the back of oscillators or indicators, but chances that the option will expire in the money are clearly smaller than taking into account both categories. The same is valid for technical and fundamental analysis: while technical analysis is showing the target, basically where the price should go, fundamental analysis is giving the reason for why the price is moving in that direction.

Reliability of Oscillators

This doesn’t mean that trading is not possible only by using technical or fundamental analysis when making a trading decision, but it shows merely that a combination of the two leads to more success in trading than otherwise. Oscillators are considered to be more reliable than price because they take into account more candles before plotting the level on a chart. For example, the RSI (14) is plotting a value on a chart that takes into account 14 candles prior to the current candle that is opened. This is valuable information sometimes not even the trend indicators are offering.

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