Learn to set up your chart
If you want to trade forex binary options you will definitely need to use candlestick charts.
As a first step you need to choose a chart platform, and then you will have to select a broker which provides binary options trading.
In order to explain the charts platform I am using Freestockcharts.com which in my opinion is one of the best web-based chart providers. Especially when it comes to Forex, they offer a huge list of currency pairs and full library of indicators.
It is a good idea to start the set up using timeframes according to your trading strategy. Binary traders usually prefer short terms so I would recommend using 1 minute, 5, 10, Hourly and Daily charts. Of course it is always an advantage to zoom out and get an idea about the bigger picture of the market.
For example if I am trading standard 15 minutes expiries I will use 1 or 5 minute timeframes so that I follow the price performance for a longer period in candles before the option expiry time.
You can easily zoom in or out by simply scrolling with the mouse when you are on the chart. The available types of charts are: line, bar, candlestick, area and heiken-ashi. I prefer candlestick with color based on Open vs Close, down bars filled in red.
This chart provider offers very useful tools that can be implemented in your trading strategy such as Fibonacci retracement, Error Channel, Regression Channel and many more.
I would recommend the usage of the Fibonacci tool when the Forex pair is trending. For an uptrend you need to locate a Swing Low on the chart and drag with the mouse to the most recent Swing high. Do the opposite for a downtrend.
The idea is that you can expect the currency pair to retrace from the recent high/low and to find support/resistance at one of the Fibonacci levels: 23.6%, 38.2%, 50.0%, 61.8% or 100%. Levels can be customized on your desire.
Use the Pitchfork to define continuous points of support and resistance levels. You need to find a recent low (A) on the chart where the median line will start, and then locate the next highest point (B). The lowest retracement from (B) is (C). It is recommended to set up this tool when the Forex market is trending so that you can trade channels.
The average directional index (ADX)
This indicator could be your best friend in identifying a trend. ADX is not one-directional as it can confirm both up and down trends. When ADX rises in value that means the trend is strong and you can continue buying call options for an uptrend and put options for a downtrend.
0-25 = weak or no trend
25-25 = strong
50-75 = very strong
75-100 = extremely strong
Moving average convergence divergence (MACD)
MACD will help you to indicate a new trend whether it is up or downwards. I am using a histogram for this indicator as it plots the difference between the fast and slow moving average. A big histogram indicates strong trend.
12 previous bars – fast moving average
26 previous bars – slow moving average
9 previous bars – difference between the two moving averages
Most of the binary brokers do not offer candlestick charts so you will need to find a chart platform that best fits your trading strategies. Understanding the charts will definitely increase your profits when you trade FX binary options.