Using MACD for Binary Options Trading-JB88

Using MACD for Binary Options Trading



Overview of MACD

MACD is one indicator that can show the direction of the trend and also market momentum. Often included in the oscillator category, traders often use this indicator to confirm direction and know the strength of a trend. MACD consists of 2 components, namely the signal line and MACD area. MACD is generated from the difference in Exponential Moving Average (EMA) 12 with EMA 26, while the signal line is a Simple Moving Average (SMA) 9 of the MACD value itself.

This indicator signal is taken from the MACD area position to line 0. If the MACD area is above the 0 line (in the positive zone), it can be used as an uptrend confirmation. Conversely, a downtrend can be confirmed if the MACD is in the negative zone (below the 0 line). The MACD area width can be used as a marker of trend strength. The wider the MACD area, or the further the MACD bars from line 0, the stronger the trend is going on.

In addition, traders can also take overbought and oversold signals from MACD. This indication can be analyzed from the intersection of signal lines with the MACD area. Oversold conditions occur when MACD crosses the signal line from below, while overbought positions are confirmed when MACD crosses the signal line from the upward direction.

Binary Options Trading with MACD

In binary options, traders need to know the strength of the trend in order to be able to place "call" or "put" options more convincingly. In addition, analysis of trend strength is also needed so that traders can estimate the exact expiry time. Even though the trader has opened an option in accordance with the trend direction, the position can still end out-of-the-money if the option is closed when the price trend changes.

To prevent this from happening, confirmation of direction and trend strength with MACD needs to be done. Simply put, traders can pay attention to the momentum of MACD crosses with signal lines to open options in the direction of the trend.


In the graph above, it appears that if the "put" option is opened based on an indication of MACD which cuts the signal line from above in numbers (1), (3), and (5), the position will end in-the-money. The chance of the "call" option also appears in the number (2) and (4) indications, where the MACD is seen cutting the signal line from the bottom.

Some binary options trading strategies that apply the use of MACD also involve several types of trend indicators such as 2 types of MA, namely SMA and EMA.

Trading Trend with MACD
In accordance with its function, MACD acts as a confirmation of the trends that have been identified on the chart by other indicators. In this case, traders can use SMA, EMA, or Parabolic SAR as the main trend indicators.

EMA combination with MACD

In the use of EMA, the option signal is taken from an EMA cross that is confirmed by the MACD transfer from the positive area to negative or vice versa.


The example image above shows the use of EMA 7 and EMA 26, an indication of the "call" option appears when EMA 7 cuts EMA 26 from bottom to top. At the same time, MACD moves to leave the negative zone and then moves above level 0.

Even with different periods of EMA usage, the same method of analysis can still be applied:


This time, the EMA used is EMA 4 and EMA 10. Downtrend prices are confirmed when EMA 4 cuts EMA 10 from above and the MACD area moves to the negative zone (1). However, when the MACD cuts the signal line from below (2), the "call" signal that appears is not very convincing because the price does not show a change in trend and is still below the EMA. The new option signal appears again (put) when EMA 4 cuts EMA 10 from the top again, and MACD again shifts to the negative zone (3).

Traders who want another setup can add an RSI or other type of oscillator to complete the option entry signal confirmation. In addition, traders can also customize the use of MACD with the trading system that has been implemented.

Conclusion

The use of MACD is not only popular with forex traders, but also for binary options traders. Although it is only a confirmation tool, MACD has an important role in trading analysis in binary options. This indicator can confirm trends, determine trend strength, find the right entry position, and help identify trading opportunities from sideways conditions. To get the best trend analysis, the indicator that is most often paired with MACD is the Moving Average types. However, traders can also combine MACD with oscillators and other trend indicators such as Parabolic SAR.


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