In binary options trading, one of the best tools an option trader can have is a graph. A graph is the most essential tool in a trader’s toolbox, and can help put your asset price before your eyes so you have it at a glance for efficient and effective binary options trading. Learning to trade like a pro first means learning to use tools like one.
This binary options guide will help you learn option trading by understanding options graphs – how they work and how they can help your trading strategy from here on.
An Overview of Binary Options Graphs
An option graph essentially works the same as other graphs for other asset types. It basically tells you two essential pieces of information. The first is the timeline for the trading period; the second is the past and current price for the asset.
An option trader uses various types of graphs in order to get the information he or she needs for effective binary options trading. This means using the data that is coming in to predict what a particular asset will or will not do over the timeframe.
Most of the graphs you will run across during your binary options trading experience are line graphs that plot the price of the asset over a certain period of time. Also on the chart are specific lines based on what type of trading method you have.
For example, if you are using standard binary options – in which you predict if an asset will be higher or lower at expiry than a particular price – there will be a line on the graph that shows you the strike price you need to be above or below.
If you are using Touch options, or Range options, you will have additional lines that mark the high mark or low mark you need to touch at least once. For Range options, you will see lines that tell you the set range you will need to hit at expiry in order to be in the money.
A Binary Options Guide to Incorporating Graphs into Your Trading Style
It helps to learn option trading by paying close attention to graphs and using them to help you. But, you want to make sure you are applying them correctly.
An option trader uses graphs first and foremost as a binary options guide of sorts. Be careful about predicting the future using only the info on the graph, but do look for patterns and trends to assist you.
Also, couple this information you receive from graphs with other information –such as incoming stock data, or forex events, or other data that gives you an indication of what is going on with a particular asset. Remember, trading does not happen in a vacuum.
Another way to learn option trading with graphs is to incorporate short-term graphs with long-term ones. Most default graphs only display a relatively short time period. Use one from a longer period of time to see how the asset has performed within the last week, month, three months, six months, and year so you can better gauge trends and patterns.