How to Develop a Signal System
So your are on the look for free signals. Let's see what systems are available to traders and try to assess their usefulness. First, some brokers will offer free signals. Well, I wouldn't put too much weight on these for the obvious reason that I don't think that it's in the brokers' best interests to supply their customers with useful tips, thus I don't think this kind of signal systems are worth much.
Now, although we are considering free signals here I want to touch for a moment on the paid services out there. There are several binaries option trading signals offered online for a fee. These services claim to improve your winning chances, however none of them worked for me, this is not to say that they are worthless, I am just making a personal observation here. It may work for you, my advice is to try them, if you find any of them useful, fine, if not just drop them.
So, broker services don't work and paid services don't work either. what's left? You'll have to go the do-it-yourself rout and develop your own system. Don't worry, it's simpler than you think. I said simple I didn't said easy.
The first strategy you can sevelop yourself is a system based on the news. We know that news events drive market prices, good news will cause an uptrend and bad news will cause a down trend, these may be very short living but is just enough to help us win a trade. What you need to do is locate a news source that publicize the news as early as possible, you want to catch the news early enough so that you will be able to ride the trend at its very start, the earlier you catch the trend, the better your chances for a successful trade.
I'll now list several additional strategies that you can develop by yourself, these are all based on technical analyses. i will not elaborate on how each of this indicators work as this involve a level of technical analysis knowledge that is beyond the scoop of this article, however you can obtain this knowledge easily online, simply use the terms I mention below as your base for searching.
Binaries Trade indicators Based on Moving Averages
Moving averages offers you a hint regarding the way of the market, this is useful in discovering a trend. A trend is an effective entry signal. A drawback of moving averages is that they often leg the market therefore you may use short period moving averages, such as a 5- or 6-day moving average, to reveal the current price action.
Moving averages are the simplest and most used technical indicator. They are utilized for smoothing the price movement. Moving averages are used as a trend line which adapts to price modifications, not only as a standard trend line.
The Moving Averages strategy gives you the following signals:
If the closing price dips below the moving average - this a sell signal.
Binary Signals Based on the Crossover of Moving Averages
Crossover of Moving Averages is another strategy that can help you identify a trend. This comprises of two moving averages: a “fast” moving average (e.g. 10 bars) and a “slow” moving average (e.g. 15 bars). The slow-moving average needs to use a larger amount of days than the fast one.
A crossover is regarded as a basic form of signal and is preferred amongst numerous investors since it eliminates all emotion. The standard kind of crossover is when the price of an asset moves from one side of a moving average and closes on the other.
Price crossovers are employed by investors to spot changes in momentum and can be used as a simple entry strategy. A close above a moving average from below may suggest the beginning of a new uptrend.
The Crossover of Moving Averages Strategy gives you the following signals:
When the fast-moving average crosses the slow moving average from below - that's a buy signal.
When the fast moving average crosses the slow moving average from above - that's a sell signal.
Option Trade Signals Based on the Moving Average Convergence Divergence Strategy (MACD)
The MACD strategy is another indicator that is useful in identifying trends. This indicator take advantage of the relationship between two moving averages of prices.
Most traders use the difference between a 26-bar exponential moving average (EMA) and the 12-bar. This difference is then plotted on the chart and oscillates above and below zero. A 9-bar EMA of the MACD, called the "signal line," is then plotted on top of the MACD, functioning as a trigger for buy and sell signals.
The MACD strategy can be used in various ways, however the most popular is to use the signal line for entry signals as follows:
When the signal line crosses the MACD from below - that's a buy signal.
When the signal line crosses the MACD from above - That's a sell signal.
Developing Indicators Based on the Williams Percent Range Indicator (Williams %R)
The Williams %R strategy developed in 1966 by Larry Williams. Its purpose is to help identify overbought and oversold positions in the market.
This indicator is categorized as an “oscillator” because the values vary between zero and “-100”. The indicator chart usually has lines drawn at both the “-20” and “-80” values as alert signals. Values between “-80” and “-100” are interpreted as a strong oversold condition, or “selling” signal, and between “-20” and “0.0”, as a strong overbought condition, or “buying” signal.
The Williams %R strategy gives you the following signals:
When the indicator has a value above 80 - that's a sell signal.
When the indicator has a value below 20 - that's a sell signal.
Indicators Based on the Relative Strength Index Strategy (RSI)
The Relative Strength Index strategy is yet another overbought/oversold signal. it was created by Welles Wilder.
The Relative Strength Index Strategy gives you the following signals:
When the RSI crosses the 70-line, overbought-zone, from above - that's a sell signal.
When the RSI crosses the 30-line, oversold zone, from below- that's a buy signal.Trading RSI signals Video
A Strategy Based on the Bollinger Bands and Channels Strategy
"Bollinger Bands" incorporate a moving average and two standard deviations, one above the moving average and one below. The main thing to understand about Bollinger Bands is that they consist of up to 95% of the closing prices, according to the settings.
Trading Bollinger Bands can assist you to fully grasp a number of characteristics of an asset such as the high or low of the day, whether a stock is trending, as well as whether it is volatile or stable. Sometimes while trading Bollinger bands, you will notice the bands coiling really tightly which indicates the stock is trading in a narrow range. This is actually the trigger to look at for a price breakout or breakdown. Often large rallies start from low volatility ranges. When this occurs, it is termed as "building cause", this is actually the calm before the storm.
The Bollinger Bands Strategy gives you the following signals:
When prices move above the upper Bollinger Band - that's a sell signal.
When prices move below the lower Bollinger Band from below - that's a buy signal.
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