Trend indicators for options trading

Ted Capwell Updated:

Automatic services that can clearly and quickly determine the main price trends of the market, or simply trend indicators are the most popular resources for conducting professional technical analysis of the market. At the same time, we are not only talking about such a direction of exchange trade as binary options – trend indicators are used by investors in all markets without exception. The reason for this lies in the winged expression “Trend is your friend”! Of course, with a clear direction of the market it is much easier to create a trade forecast for any type of contract – for this the market itself creates the most optimal conditions. Conversely, outset or flat does not allow efficient trading, as the price is not predictable and demonstrates a chaotic mode of formation. Against this background, we suggest that you consider a list of trend indicators that are most popular and effective for binary trading.
Our article is recommended to newcomers, as it reveals the basic principles of the work of effective forecasting services, which expands the instrumental and technical potential of private traders in the issue of professional analysis. Having studied a set of indicators and their logical algorithm of work, you can create multi indicator trading systems for your trading parameters, and also effectively use the market as a means of stable earnings.
So, given the popularity of this type of services, today the World Wide Web offers several hundred names of trend indicators. All of them have various forms of work, their own calculation algorithms and ways of generating signals. And of course every tool has its advantages and disadvantages. In general, it is possible to divide the indicators into these types:

• Linear
• Duct tools
• Histograms

In this issue, there are a number of derivatives or custom indicators that are developed by the authors on the basis of standard services for specific market conditions or basic assets. We will look at a number of classic resources for determining the trend trends of the market.

Moving Average

Indicator MA or, as it is called by professionals, the moving average is perhaps the most classic service for determining the trend. His work is based on the algorithm for calculating the average indicators of the value of an asset in a certain market range, which is set during configuration. Here the basis of the analysis is a classical technical pattern – the market, despite the chaotic movement and the construction of a chart with frequent kickbacks and explosive impulses of volatility, always strives to balance at the level of its average indicators. This is what makes the indicator MA a high-precision resource for forecasting.
Moving Average on the working chart of the underlying asset is a simple line that displays the smoothed indicators of the price movement. This format of indicators allows traders to accurately determine the current trend trend, which is formed on the market and allows using the service as a signaling tool for betting.
As the main set of signals that the indicator offers, it is worth highlighting such classical indicators:

• Crossing the indicator’s level in one direction with quotations of the asset – this signal allows you to work with binary contracts at the time of the emergence of new trends.
• Direction of the indicator line – since AI forms smoothed market indicators, its focus clearly indicates the main trend trend that will last for a certain time, which the investor can effectively use for trading.

Trend indicators for options trading: Moving Average


Bollinger Waves

Bollinger Bands – a classic indicator of the channel price movements of the market. In fact, this is a specialized format for using a combination of three MA indicators. Here, trend indicators are used with a certain period of the formation of movings and a shift in the construction. As a result, we get a price channel, limited by moving average lines – the data of the movings show the price extremes in a clearly established technical range, as well as the standard MA line that determines the current market trend. Such a set of combined services opens a wide range of opportunities for market analysis and obtaining consistently high trading indicators:

• Levels of possible technical spreads of quotations
• Global changes in trend movement
• Level of price volatility

Such indicators of the indicator make it possible to obtain a number of highly effective trading signals capable of maximizing the effectiveness in the binary trading mode:

• Reversal of quotes from the boundaries of the channel
• Breakdown of the indicator’s median in a certain direction

Trend indicators for trading options Bollinger waves


MACD indicator

The MACD convergence / divergence level service is a standard oscillator. As in the previous case, this resource of technical analysis is built on the work of classical MA in different modes and periods of construction. In this case, we use 3 sliding – 2 in a linear build format with different periods for the formation of removals and a clearly set signal shift and an additional Moving Average service in the histogram mode. Despite the intricate and relatively complex algorithm for calculating the indicator, it is able to generate simple and understandable technical signals for trading.
Its work allows traders to react quickly to reversals and the emergence of new market trends, to determine the strength of the momentum of the price movement, to form forecasts based on the oscillator’s own trends. The variety of signals and the range of market indicators make the oscillator an indispensable tool in technical analysis. Often MACD is used not only as the main forecasting service, but also as a resource for filtering signals. This is facilitated not only by the absence of a redrawing of indicators in the performance of the indicator, but also by its clear and timely reaction to minimal changes in the trend of quotations, even in the minimal time periods for valuing quotations.
As signals the oscillator offers such a set of indicators:

• Crossing and divergence of lines of moving averages among themselves
• Growth or fall of the histogram of the indicator relative to the axial level of the scale
• Oscillator’s own trends
• Divergence – the divergence of service indicators with the direction of market fluctuations

Trend indicators for options trading MACD indicator


Alligator indicator

This professional service is well known to market professionals and is a classic service developed by the well-known investor Bill Williams. The basic algorithm of the indicator is based on the principle of market valuation using three different periodic moving averages with a technical signal shift. This technical service is one of the most informative for binary trading. In particular, the tool is able to determine the areas of the market and the consolidation of the market, the direction of price trends, the point of origin of new trends in quotations, the strength of the momentum of the current trend movement. In fact, a variety of service indicators allows it to be used in technical analysis as an independent and highly effective strategy, which makes the indicator an attractive technical resource for valuing quotations.
The list of technical signals of the indicator includes such a set of indicators:

• Chaotic crossing of the Alligator lines in a narrow price range – thus, zones of market consolidation are defined in which it is better to refuse trading operations
• Crossing lines among themselves in a certain direction – this indicator signals the emergence of a new trend and is the most advantageous moment for the execution of a binary contract
• The degree of divergence of the Alligator lines among themselves – in this way the investor receives information about the strength of the price pulse

Trend indicators for options trading Indicator Alligator


CCI Indicator

Commodity Channel Index is a classic reversal indicator, which was created as the environment for determining the extremes of quotes, in which the price generates cyclical changes in the direction of the trend. The idea of ​​the algorithm of the instrument is built on a simple regularity: the market moves mainly from the maximum level of indicators, for a certain period to a minimum, while conducting well-forecasted turns in certain zones. The CCI tool is a line that estimates the trend in a certain number of periods and two technical levels that limit overbought and oversold zones. These services allow you to clearly identify on the asset chart possible areas of price reversal, as well as generate information on the current trend trend of the market.
The main signals of the instrument are classical indicators:

• Turnover of the moving branch to form a new local trend in the oversold / overbought zone
• Own trends of the indicator line
• Divergence

Trend Indicators for Options Trading CCI Indicator


Parabolic SAR

This algorithm for automatic evaluation of trading quotations is the simplest and most affordable means for forecasters to generate forecasts. His work is based on the definition of points in which the momentum of the market trend is reduced to a minimum and a new technical trend of the market begins to form. As a matter of fact it is a parabola with a cyclic indicator of a turn of waves which precisely specifies in zones for favorable registration of rates in the binary market. In the classic format, the indicator on the chart looks like a line of dots or crosses, located above or below the liquidity chart. It is the place of formation of the indicator relative to the price of the asset that is the main informative signal for trading. So, if the dotted line is under the price chart, then this is a signal for trading the option UP, and vice versa, the formation of an indicator above the price of the asset allows you to open the contract option DOWN. The simplicity and informative nature of the indicator make it possible to determine as easily as possible the most efficient market levels for trading binary options:

Trend indicators for options trading Parabolic SAR


We presented you a set of the most effective and easy-to-use trend indicators. These technical services have long been known in the market and are considered the most productive for trading services. Of course, the list of trend indicators is very large, and you can independently study their work, but the tools proposed in our material, while mastering their algorithms and methods of using in analysis, already allow you to create high-quality and professional trading strategies with a high level of efficiency.

In conclusion, it should be said that the work with binary contracts certainly requires great efforts and deep knowledge in technical analysis and the principles of using specialized services in forecasting market trends. However, there are a number of resources in this issue, and we presented them to you today, which can significantly facilitate the task of the trader and maximize the level of effectiveness of their trade.


“General Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.”