What are Binary Options Signals?

Binary options signals are indications, based on formal analysis, of the direction an asset will tend to take in either the short or the long term. The signals allow the trader to assess risk.

Anyone who trades in binary options needs to frequently analyze the assets or markets she/he trades in. Some traders spend hours analyzing their potential trades. For the trader, the end result of analysis is a signal, or signals that tell the trader that the time is right to trade an asset and how to trade the asset.

The signal that tells the trader how to trade is extremely important. The underlying asset may be poised to go up in value or to go down in value. Every day we see screaming headlines that some investment vehicle will now start to go up and other equally screaming headlines that the same investment vehicle will now start to go down!

Binary options traders can profit handsomely no matter how the asset moves! This is where the signals that analysis generates come in.

Most traders don’t have hours to analyze every potential trade. Some do minimal analysis, follow the news, and ultimately rely on their own sense of how an asset is likely to perform as a basis for a trade. Many traders subscribe to companies that do the analysis for them.

Types of Analysis

There are two basic types of analysis: technical and fundamental. They are quite different from each other. The signals they send out are a reflection only of the types of analysis themselves.

Technical Analysis

Technical analysis relies heavily on three types of charts: candlesticks, line charts, and bar charts. These charts use the same data but give different perspectives. Some traders prefer one chart over the others. Bar charts and candlesticks are similar in that they send strong one-day signals.

Candlesticks are considered better at measuring investor sentiment. The candlestick pattern has been recognized for over one hundred years. It emerges when the opening and closing prices are placed on a graph with the “body” of the candlestick connecting them. At the top of the candlestick is a line that indicates the high for the given time period. At the bottom of the candlestick is a line indicating the low for the time period. Technical analysts see significance in every pattern of candlesticks. Some patterns give a strong buy signal, some give a strong sell signal, some are non-committal as to the direction the asset may take, and, finally, some candlestick patterns can be used as either a buy or a sell signal.

Clearly, it requires some expertise to properly read a candlestick pattern.

Many traders prefer the bar chart because they find it easier to read. Bar charts also give strong buy or sell signals.

Line charts show support and resistance levels. Support is the level that investors use as a buy signal. Resistance is the level that investors use as a sell signal. Most assets trade within these two points. When an asset breaks out of either point it is a very strong signal. Breaking out of resistance is a powerful buy signal. Breaking out of support is a powerful sell signal.

Once you develop skill in reading the charts, you can make learned decisions and trade accordingly. The strong buy and sell signals are obvious. The indeterminate signal will tell you to wait before trading that asset. The combination signal is the hardest to read. Many traders who do their own technical analysis simply wait for a strong signal before trading.

Fundamental Analysis

Fundamental analysis is based exclusively on the strength of the company, the asset, the asset class, and the overall economy. It is not directly concerned with investor sentiment. That is an aspect of technical analysis. Fundamental analysis uses real business-related facts to gauge and predict investor sentiment and confidence.

To understand a company or asset through fundamental analysis, you have to be able to read business reports, to understand the implications of breaking events, to anticipate changes or innovations in the asset class, to assess the skill of a company’s managers, to gauge the strength of the company’s competitors among many other elements.

Types of Assets Traded

There are four basic types of assets traded: currencies, which are traded as currency pairs; stocks; commodities; and indices. Within each asset class are numerous assets available for binary options trading. Each asset class and each asset can be analyzed using both the technical and the fundamental methods.

Term Length

The formal analysis of an asset may differ depending on whether the analysis is for the short term or the long term. In both technical and fundamental analysis, the greater the time period being analyzed, the more reliable the analysis will be and the stronger the signals will be.

Sites that Sell Binary Options Signals

Most traders lack the time or skill to make complete analyses of an asset. For them, there is now a proliferation of companies that sell signals. The cost of receiving these signals can be thousands of dollars. We advise traders to be very careful before investing in a signals provider.

The Bottom Line

There are always signals that indicate how an asset may trend in both the near future and long term. It is an invaluable skill for the trader to understanding these signals properly. Learning how to make both technical and fundamental analyses is a never-ending challenge.

Both technical and fundamental analysis have a place in helping you decide your next course of action. No system is infallible and both give important insights as to the direction of markets, asset classes, and assets.