Market analysis with IQ Option – How to do it

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Market Analysis

Binary options analysis is the practice of analysing a binary options trade prior to execution. Before taking on a trade in any market, it is necessary to carry out technical and fundamental analysis of the asset you intend to trade in order to increase the chances of success. The binary options market is no different. Without binary options analysis, trade would be more of guesswork and nothing would distinguish it from the roulettes and other stuff that belong to the casinos of Las Vegas. In binary options, there is no place for gambling or guesswork in trades; leave that to the guys in Vegas.

Sometimes, binary options trades are referred to as bets. I really do not like this terminology, because trading is not something you pick up from the street. If one has decided to trade binary options, it has to be taken seriously and learning to perform binary options analysis is an integral part of the learning process.

Binary options’ trading is all about predicting the directions and behaviour of assets. Since the same assets that are traded in their respective markets are the same ones we will encounter in binary options, it is necessary to know how to analyse these assets technically and fundamentally. When the trader has mastered this, he will be able to carry out solid binary options analysis.

Let us take an actual trade example. This trade was a Touch/No Touch trade for the EURUSD taken on October 25, 2020, with a 24-hour expiry. We placed a No Touch binary option trade for the EURUSD, predicting that the EURUSD would not touch the price barrier of 1.4031 before expiry.

The trade was successful, as the EURUSD did not reach the price barrier before the expiration date. A total of $55.65 was staked in the trade, with a profit of $44.35, giving us a total payout of $100.

Now was this a product of guesswork or a trading hunch? No. This was a product of technical and fundamental analysis carried out on this pair prior to the execution of this trade.

The Binary Option Analysis for this Trade

The first step in performing a binary options analysis for this trade was to locate a chart for the EURUSD to analyse. Since most binary options brokers do not offer charting tools, we had to locate a forex broker whose trading platform had charts or us to use. We located one and started the analysis.

Fundamental Analysis

In the financial markets, the fundamentals of an asset always supersede the technicals. This is why we did a fundamental analysis first. At the time of analysis, there was a meeting of the Eurozone financial ministers to determine how to put together a rescue package for Greece, which was groaning under a sovereign debt crisis. At the same time, Italy was also on the radar as its debt reached a staggering 600billion Euros. These were indeed bad times for the Euro and the markets had responded accordingly. The meeting was due to end later that week with the issuing of a communiqué to announce measures to help these countries out. We knew that the markets would be range-bound as traders looked to the outcome of that meeting for direction. Thus, we did not see the Euro climbing past the 1.4000 psychological barrier before the end of the meeting.

Technical Analysis

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We headed over to the charts to see what the price action was saying, and we got the confirmation we needed. A strong resistance had capped the EURUSD at 1.39605 for three days straight. Thus, we were able to set an appropriate price barrier that we felt that the EURUSD would not achieve in 24 hours.

The trade was then setup on the binary options platform, with a price barrier of 1.4031 and a 24-hour expiry. As at the expiration of the trade on October 26, 2020, the resistance cap was yet to be breached, putting us in the money.

Binary options analysis is not about guesswork, or trading on a hunch. You must be able to perform the appropriate analysis of the fundamentals of the asset you want to trade, look for confirmation on the charts and then execute the trade accordingly.

IQ Option Technical Analysis: The Ultimate Tool

One of the most important features IQ Option provides to traders is the ability to stick markers and symbols to an online diagram. To put it simply — the ability to use technical analysis. Web-based binary option platforms are rarely equipped with drawing tools and — even more rarely — with built-in indicators. The availability of technical analysis tools makes IQ Option extremely functional. Still and all, what’s the real benefit of such graphics and what’s the point of using the drawing board and indicators in the daily routine?

The Importance of Drawing

The drawing board is an essential technical analysis tool. Above all, this is due to the fact that many trading systems and a significant number of strategies are designed to think that traders rely on some elements of the diagram—for example, the support and resistance lines. Every trader chooses the lines and shapes he needs, as well as the timeframe for them, by himself. For this reason, it is extremely useful to plot markers on a diagram.

There are many ways to use such markers. Of course, the most common is to make them display trends. Trend is the most important thing in options trading, and it is of great importance to track trends. The use of the drawing board as a tool for creating graphical analysis markers and finding chart patterns— Diamond, Triangle, Three Peaks, Head & Shoulders, etc.— can be equally effective.

For example, the diagram shows that a Three Peaks pattern is generating, but to identify the entry point, i.e. the support line breakthrough point, is not an easy thing to do by sight. You can keep track of the correctness of the figure generating process and get a clear and understandable entry point only by using graphics.

The tools can be used not only to work with graphic strategies and simple patterns that are generated on the diagram. They can also be used together with indicators that are present on the platform.

Technical Analysis Indicators

It should be noted that the platform is equipped with four widely spread indicators — Bollinger bands, moving averages, RSI (Relative Strength Index), and Alligator. All of them can be used both individually and jointly. Indicators help traders forecast the direction of price movement correctly.

Bollinger Bands

Bollinger bands is one of the most popular indicators. Based on data from the moving average and standard deviations, it creates a corridor within which the price moves. Focusing on the corridor borders, we get signals for the entry. If the price breaks the lower limit, we should buy CALL options, if it breaks the top limit—PUT options are the right choice.

Bollinger Bands Signals

Moving Averages

Moving averages show the average asset price based on a predetermined time interval—for example, 14 days. If the diagram crosses the moving average, it is a signal to buy options in the direction of the breakthrough. The longer the time interval is, the more accurate are the signals. However, their number will also decrease.

Relative Strength Index (also known as RSI) is only available when working with candlestick charts. This indicator is also very popular and is one of the most widely used globally. It reflects both the strength and the magnitude of price changes. Unlike other indicators, RSI is not displayed on the chart in any form but is built in a separate window just below the chart. A lot of different strategies are based on this indicator. RSI shows asset overbought or oversold levels based on historical data. If the asset is overbought, we should buy PUT options, if it is oversold—CALL options are more preferable.

Alligator

Alligator is highly competitive with the previous indicators in terms of popularity. It is presented as three moving averages of three different periods. When the lines cross, it means that the trend is about to begin. Once all three lines start pointing in one direction, the trend begins. After that, we should follow the trend. A number of profitable and simple strategies that have been successfully used by traders worldwide are based on Alligator.

Using technical analysis indicators helps not only get completely understandable analysis data, but also unsophisticated and clear entry and exit points. Moreover, thanks to Alligator the trader can fully track all opportunities, as the proper analysis of the price movement requires not only the information that an indicator itself can provide. Quite often, for example when using Bollinger Bands, traders use support and resistance lines to get a correct and clear signal to enter. They minimize the risks faced by traders. It should be noted that it is almost impossible to run such lines without a drawing board.

The use of both indicators and a variety of graphics on the IQ Option platform is not limited. You can put all necessary markers and indicators on the same diagram to make your technical analysis even more efficient.

Also you can read about Parabolic SAR, MACD and Stochastic.

The IQ Option UK can provide significant assistance to traders as it contains all the tools required for the proper technical analysis. It allows users to identify entry and exit points much more effectively, as well to analyze the diagram and to significantly reduce the risks. You can make more money by combining indicators and diagrams to filter the received signals with different tools. It is important to note that drawing tools can not only support us when working with certain indicator-based strategies, but also serve as a basis for profitable strategies. Also, they are extremely useful for hedging and working with patterns — all this makes the IQ Option drawing panel useful and important for traders. Trading with the use of indicators and graphics can ensure a regular income.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.

GENERAL RISK WARNING

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
87% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

What Should You Do When the Market Is Flat?

In any given moment the market can move in one of the three directions; up, down or sideways. As you probably already know, the flat market (synonymous with the sideways movement) is considered by many to be not the best time to trade. The thing is, when the market is flat, it is hard to make sound predictions. Low volatility means that potential upside is lower than during the periods of strong movements. However, when the market is flat and the trading activity is low, there are lots of things a trader can do.

As a trend trader, you want to stay in the market when momentum is strong. And it doesn’t matter whether the trend is positive or negative, as both can offer trading opportunities. During the flat market, however, most professional traders abstain from opening new deals.

Here is the list of three things you could do while waiting for the market to gain momentum.

Performance review

It may not sound engaging, but this step is of utmost importance. Remember how important it is for a trader to keep a trading journal? A trading journal is a collection of all your trades and information related to them. What kind of information should it be? Everything you find relevant, from your emotional state to market observations. Put down market conditions the moment you open and close the deal, what went well and what could be improved, your mistakes and observations. When the market consolidates (becomes flat) it is time to review your trading journal, estimate the effectiveness of your trading system and make necessary adjustments. You can read more on the topic of trading journals in this article. Applied correctly, a trading journal can improve your overall trading performance.

Fundamental research

It is no secret that almost all exchange-traded assets are heavily affected by fundamental factors — economic, social, political etc. When the market stands still, there could be a fundamental explanation, that you could find and use for future reference. For example, when a company stock is traded in a narrow corridor, it probably means that the market is expecting a major announcement or an earnings report. During the flat market it is wise to carry out seasonal or sector analysis with the purpose of identifying new trading opportunities. Those of you interested in stock trading can also dedicate some time to reading economic and company reports.

Technical research

The flat market is also the time when you can conduct technical analysis with the help of available tools and indicators. Technical analysis can complement your trading system and deepen the understanding of the bigger picture. It is during this step that you can take a look at various assets on different timeframes and explore the market for abnormalities.

You can also evaluate your trading strategy and adjust it in accordance with constantly changing market conditions. When one indicator stops working it may be wise to try something else. Or to reshape your trading system completely.

Conclusion

The flat market is definitely not the most engaging part of the trading process, yet it is absolutely necessary to use the time when the price moves sideways intelligently. Take a break, evaluate your performance and try to spot new trading opportunities.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.

GENERAL RISK WARNING

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
87% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Trading Education, Free Demo Account!
    Get Your Sing-Up Bonus Now!

  • Binomo
    Binomo

    Good Broker. Only For Experienced Traders!

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