The Wild Tales of Indicator Jones
Indicator Jones is out to swing his whip from one to another. Trading on his own did not work for him in the wild jungle of Smart Options – so he started to search for a solution in his financial adventures. Soon he came across YouTube videos and forums, where he scratched his funky leather hat – “Indicators seem to be the solution to my mess!
This is the NEW HOLY GRAIL I have to find – a new mission! It will give me back all my lost ducats and water my drained treasure box. They will guide me the way through this Smart Options jungle. The giant rolling stone ball behind me will soon make me flat like a pancake if I don't find a solution to generate tons of winning trades!”
Indy Jones slaps his whip and grabbed the most promising indys he could find – all with excellent comments and reviews, for some he had to leave his tiny rest of gold coins on the table. Once he installed all the promising indys to his MT4 he felt reminded to his wild days in the jungle:
Maybe you found yourself a bit in the wild story of Indicator Jones – and yes, this is a totally normal process in every traders lifecycle: The search for the holy grail, also known as working indicator. It is normal in a phase of learning – you might feel disoriented, you look at the chart and are just like “WTF – I don't know what is happening here and what to trade.” Indys seem to be a quick fix to that issue.
An arrow appears and we are ready to go and put a trade in, right? Nah, unfortunately not. This would be just too easy and we all would rake in cash already. The Binary Nerd also uses indicators (on a very small scale) in trading Smart Options – however, the trades does not come from them, they come from his brainz. Traders trade – indicators indicate, simple as that. This is valid for trading Smart Options as well as for Forex. The job of an indicator is to point you to some price action behavior and the traders job is to estimate if the indicator shows up a valid signal and trading setup or if it is a false one.
Please be aware: Many people want to exploit the insecurity of traders in learning mode. They try to market their (often shitty) indicators as an easy solution. But trading isn't easy, it is a tough game. In the right market conditions they can work out pretty well for the first, but also, once the markets are changing, you can hear the sounds of blowing accounts. As hard as it is: There is no holy grail – it just does not exist.
Smart money management, patience, your learning process and the study of price action exists. Don't put any hope in indicators, especially not in overpriced hyped ones or ones that require a deposit with a certain broker. Often indicators are marketed with videos, where you see the coder/marketer trade very successfully with their indicators. Well, videos can be cut and seeing should not always be believing. It is hard, but we have to accept there is not a single indicator in the world that can replace the humans brain, when it comes to estimate a legit trade setup. Never forget that, otherwise it will cost you monies.
Here is a small overview of indicators that are common to use and have a meaning for Smart Options trading and could give you a clue of what is going on. We don't use them all, but it is good to know what they do and what they mean.
BOLLINGER BANDS AND THE MEAN AVERAGE
The price, represented by the candlesticks (in the most cases), grows and falls inbetween an upper band and lower bollinger band, which are showing us the highs and lows of the price for a configured period of time. This channel is divided by the Mean Average (often called the Mean or MA).
This Mean Average represents the mean price of your currency, commodity or stock and has three directions: Upwards, which means the price is in an uptrend, downwards – which means a downtrend and sidewards, which shows us a certain indecision of the markets or ranging markets. Please note: The more thin the channel is, the less volume there is. This shows us a bad price action and to stay out, as trading several techniques become dangerous in this conditions.
Where to find in your MT4?
INSERT-> INDICATORS->TREND->BOLLINGER BANDS
The Standard settings are set with a period of 20 (the bands and MA are calculated by the period of the last 20 candles) and a deviation of 2. If you want to play the safe card (less signals, increased reliability) you set this to 24 and 3.
THE STOCHASTIC OSCILLATOR
With your MT4 installation comes a Stochastic Oscillator. Often referred as STOCH Indicator. This indicator has two lines: The fast and the slow stochastics. Many traders use this indicator to filter their signals by another one to get more reliability. In conjunction with the RSI they can have valuabe informations for us traders. If you see a setup and see the RSI above 70 plus crossing STOCHS above 70 with a downward slope it can be a nice put (see example screenshot below). It is always about the confluence, about connecting the dots.
Where to find in your MT4?
INSERT-> INDICATORS->OSCILLATORS->STOCHASTIC OSCILLATOR
RSI – THE RELATIVE STRENGTH INDEX
RSI, or in full the Relative Strength Index, is often used in trading binary options. The RSI is represents the momentum of a currency pair by measuring the strength of the price movement. The formula simplified is speed of the price movement in conjunction with the overall change of the price.
The RSI Indicators shows us if a price is overbought or oversold (OB / OS). It represents the value in a scale between 1 and 100, and you can configure the RSI Indicator when it shall trigger an alarm. By default it triggers once the asset hits the mark of 70 as overbought or once it dips below 30 as oversold. Please note a simple OB/OS alert should not lead into a trade automatically.
Where to find in your MT4?
INSERT-> INDICATORS->OSCILLATORS->RELATIVE STRENGTH INDEX
So this was a brief overview of the most common indicators on Smart Options – we hope it helped you a bit, and even more we hope that you could avoid the indicator jungle that Indicator Jones has gone through. The most important lesson in this article is
Indicators -> indicate – Traders -> trade
We know learning to trade is hard, but there is no quick fix to riches at least we don't know any, trading wise. However, the three presented indicators might be a help in your binary options trading venture. Study them, work with them – but never rely on them alone.
The Bollinger bands should be a daily companion, RSI and STOCHs are to be checked out as quite a few good traders like to work with them. Maybe they will fit your style. But don't focus to hard on them – focus on the price, learn how the price behaves as this will be your base later on: PRICE ACTION.
Don't lose your patience, it will come by time – as the best best binary options indicator on earth is your brain!