How to Read And Understand Charts
Binary options charts are used by traders to track the progress and movement of various assets. There are multiple types of charts used for numerous types of trading, but there are some common ones that you will see more often. From simple one screen line formats to multiple screens displaying various assets and data, it is essential to make sure you have the data you need to be able to trade effectively.
Each one follows a similar format. First, you have the y-axis which has numbers written up and down the side of the chart referring to price; then there is the x-axis along the bottom which represents the time or date. It is necessary, when it comes to online trading, to ensure that all data is shown in real time to be able to trade effectively.
The type of chart that you will use will depend on the source of the data and the options that you are trading in. From simple charts to more complicated options that offer a more detailed analysis, there are a whole host of solutions available to traders no matter what level and experience you have.
In this guide, you will learn:
- What binary charts are and how they work
- Why Identify the different chart types
- How to use different charts advantageously
What Are Trading Charts
Charts are used to display data in various formats. When it comes to binary options, they are used to demonstrate the movement of an asset in a specific time frame and the historical data of that asset. This information can then be used to study the various assets, identify trends and help you to understand the movement of the different trade types offered; commodities, stocks, indices and currencies.
It is much easier to trade when you have the historical and current real-time data available to you as you are more likely to be able to identify patterns and use them to make successful trades.
Those traders who are just starting can use the basic formats to understand the price of an asset and the trends over time. Beginning at a basic level is probably better, to start with as it allows you to become familiar with the various assets one by one. As you get more experienced with charts, you can begin to examine them in greater detail and look for more in-depth data.
The type of chart that you will use will depend on the options that you are trading in.
The Different Types of Charts
Tick, line and candlestick charts each of the different types serves a different purpose, and some of them are more complicated than others.
For simple trade types such as short term, High/Low options involving one asset type you would use a simple tick or line chart. For more complicated trades, when you need more information, you might use a candlestick chart (candlestick because it looks like a candle with a wick coming out of the top).
Many brokers offer a simple line chart which is OK for necessary trades and beginners, but for those who need more data and in-depth analysis, an alternative could be better. It can also depend on the types of assets you're trading, some assets are faster moving and need more chart options and data.
There are many services online that offer more detailed analysis but before you choose it is essential to ensure that you understand what you are looking at and how to use the data presented.
Choosing Your Chart
The chart that you use will depend on the type and number of assets that you are trading in. It will also depend on your level of experience and your ability to read and analyse data.
Brokers have their form of charts on their trading platform that is displayed when you click on to their trading platform. These vary significantly between brokers and while some are fundamental others can be much more advanced. If you prefer to have a lot more data to analyse, then you will need to choose your source of data very carefully.
Sometimes they can be very basic so for those that prefer more information you can use chart sites with more advanced formulas. Avoid the temptation to rush in and get caught up in the buzz of your first trade. Take some time, analyse the various information that is available to you, have a look at the various data of the assets that you think you might choose and start to become familiar with the trends of each.
How to Use Charts And Data
First of all, you choose your asset; usually in a search box above the chart. Next, you pick your time frame; this is generally in the form of a drop-down menu next to the asset search box. If you want to compare the performance of two different assets, then you can choose to use the comparison tool.
To alter the term, you can usually zoom in and out to check the performance over a day, week, month, year etc. Now while this type of search functionality is offered by some brokers, for others, it is a case of scrolling through and choosing your asset and then clicking to reveal a simple data display.
There are various sources of information that will answer questions about the different charts and how to read them, but if you are unsure and nervous, you can always use a demo platform to get familiar with using the information before you start trading with actual funds.
Many brokers offer a demo platform with virtual money, often they are free, sometimes though you need to have chosen your broker and deposited a minimum amount before you can use it. Finding a free demo platform is an excellent place to start.
Jacob has been an author for us since our launch in 2012. He has over forty years’ experience in the financial sector and has held a variety of positions within financial services corporations and venture capitalist organisations.