Free Binary Options Charts
Different Types of Charts for Binary Options Trading
When you start trading binary options, there are several types of charts you will see most often. Each type of binary options chart has advantages and disadvantages, and once you understand the differences you’ll likely find that one type appeals to you and your trading methods. Before starting there a few points about charts which are universal to all forms of charts discussed below. The Y-axis, or numbers written up and down along the side of the chart, is the price. The x-axis, numbers along the bottom of the chart, depict the time of day or date. Therefore, all these charts show price movement over time.
The tick chart is a line that shows every movement the price has made. Typically these charts only show a few minutes of data since the price is constantly moving. The price point at the far right is where the price is at now, while the data to left is where the price was at times prior.
The advantage of this type of chart is that it shows all the price movements over the last several minutes. The downside is that you can’t see any price data further back than that. Being able to see more data allows you to see if there is a trend (a sustained price move in an overall up or down direction), or any chart patterns developing.
On a binary options broker site you will see this type of chart if you click an asset and choose an expiry time that is fairly close, such as 5, 10 or 15 minutes away for example.
Figure 1 shows an example of a tick chart.
Figure 1. GBP/USD Tick Chart
The chart shows roughly 30 minutes of data, and the black horizontal line represents the current price. The red vertical line indicates when the option expires.
Over this timeframe we can see that the overall price trajectory is down, as each move higher is lower than the last, and each move lower reaches a lower price.
A line chart looks very similar to the one shown above; you’ll see a continuous line moving from left to right across the chart.
The tick chart is also a line chart, except that the tick chart shows you all the price movements since it only shows a short of amount of time. A line chart does not; this will be explained in a moment.
If you want to see more data –such as the price movement over hours or days–then you can use a line chart. Lines charts “summarize” the data, so you can see longer periods of time.
Typically you will see this type of chart when you click on an asset and choose an expiry time or date that is further out, like several hours or the end of the week.
By selecting an expiry that is further out, you’ll notice that the values along the x-axis shift from times to dates. Figure 2 shows an example of this. The expiry is not shown since it is a couple weeks into the future.
This chart looks very similar to figure 1 (the tick chart), but the x-axis has changed so that you can how the price has moved over a longer period.
Something else is very important though. Unlike the tick chart, with a line chart you don’t see every movement. The line chart only reflects the closing price for each interval the chart uses (unknown in this case since the brokers typically do not allow you to configure your own charts). The closing price is the last price at the end of defined period, such as 5 or 15 minutes for example. For every 15 minutes (or other internal) only the close is recorded on the chart, and then each close is linked to each other creating a continuous line.
This “summary” data makes it easier to see trends and doesn’t bombard you with too much information. The drawback is that you may not be trading with all the information you need. To explain, we’ll look at one more type of chart…
Figure 3 shows a different style of chart, which shows more data, called a Candlestick chart. The candlestick chart below only shows the data from 15/08, the last couple days shown on the line chart (figure 2).
Figure 3. EUR/USD 15 Minute Chart
Each bar on this chart represents 15 minutes. If the bar is green it means the last price in that 15 minute period was higher than the price at the start of the 15 minutes. If the bar is red, it means the last price is lower than the first. The “fat” part of the candle represents the open and close. If the bar is red, then as indicated before the close is lower than the open. If the bar is green then the close is higher than the open. The small “wicks” coming out of the tops and bottoms of some of these candles represent the high and low points reached during that 15 minute time period.
As you can see, this chart shows more information, and in a more visual way. I have noted one important distinction on the chart. After the price surged near the middle of the chart, a decline followed it (sizable red bar), which was then followed by another green bar. On the line chart in Figure 2 you can’t see this. The line chart makes everything look clean, while in reality this chart shows that the market is typically more jerky. And each of those jerky movements could be the difference between losing and winning.
For short-term trading, such as expiries of about 5 minutes or less, use a tick chart. Ideally though also check out a longer-term expiry so that you can see what the asset has been doing over the last several hours or days as well. The best trades are typically when you can get multiple chart time-frames to line up. For example, you see that the trend over the last several days is up, and the price is also moving up on your tick chart. Sometimes simple is best, but if you want to get more advanced with your analysis you may want to check out candlestick charts. Since most brokers don’t offer these you’ll need to source them from somewhere else on the web.