All who trade binary options need one or more chart to use for the purpose of completing market analysis. The two main types of analysis are known as fundamental and technical. Most market experts tend to prefer one of these over the other. However, both involve the use of charts. Despite the fact that charts tend to be somewhat less vital to the process of fundamental analysis, they should still be used as a means effectively forecasting the upcoming price direction of assets.
Charts supply a graphic rendering of asset price movement for specific periods of time. There exists three different charting options that are popular with modern traders. Each carries out various functions and each can be utilized in a different way, but their main purpose continues to be that of assessing exactly how an asset price has moved, is currently moving, and the role that support and resistance is impacting the movement.
Line charts are extremely basic, a fact which makes them ideal for beginner level traders. These charts display price movement in the form of a single line that moves up and down as the price does. Line charts are not going to provide you any specific information regarding opening or closing prices for specific time-frames. However, they can tell you the highest and lowest realized prices for various time periods. Line charts are available in most binary options platforms, but do not expect to find more complex charting options to be made available.
The creation of candlestick charts is credited to Munehisa Homma. The foundation of this method of market analysis dates back to the 18th century. The candle itself will reveal the opening and closing price of any selected asset, and will also reveal the full range of movement that the price has covered throughout any specified period of time. Candlesticks therefore provide essential information that is linked to future market behaviors by showing you what has occurred in the past.
Bar charts deliver the same information as basic candlestick charts, but visually they are quite different. Some market experts reference these as Open High/Low Close charts. The decision to use either bar charts or candlestick charts is one of personal preference because both are going to provide you with the same types of information. Which should you choose? The one that you find easiest to read. Candles, with their wicks of various lengths can cause some confusion at first, while bar charts tend to be more simplistic.
As a general rule, no trade should ever be executed without first completing the process of market analysis. Basic line charts are perfectly fine for novice traders, but over time more detailed charts should be given a closer look. Most experienced traders use a free version of MetaTrader 4 as their charting package of preference. Although MT4 was originally designed for the Forex marketplace, the charting options that is provides can easily be applied to binary options trades.