A common tool that Future traders use is the high/low moving indicator. The tools incorporates two moving averages that is based on a period’s highs and lows in order to make a price channel moving average envelope. Nonetheless, is this indicator useful for traders of binary options?
KNOWING MORE ABOUT THE HIGH/LOW MOVING AVERAGE INDICATOR
This tool is commonly used by futures traders. It is just like price channels and moving average indicators but are quite simpler. It makes use of two moving averages. One moving average is based on higher prices and the other is based on lower prices. This is quite unique from the usually moving average which is solely based in typical or closing prices. The average makes price channels that you can use in different ways for signal generation and trend confirmation as well as resistance and support.
USING THE HIGH/LOW MOVING AVERAGE INDICATOR
The first thing you need to do is to calculate moving averages. This is based on easy moving averages and two varied time periods. You will know if it’s a high moving average when there is a simple ten bar moving average. Low moving average only comes with 8 bars. You can download the high/low MA indicator tool if your chart package does not have it.
The tool is not used as a tool for crossover but you can also use it this way. What can be measured as a great signal that follows trend is a hard break below or above the upper moving average. You can use this strategy together with a trend or trends so that you can get rid of fake signals.
There will be a contrarian signal if there is a break just outside of the envelope which is counter to the existing trend. An example would be prices being sold in a robust downward trend, you can go for support and then bounce higher. You can enter Put if prices can break high moving average contrarian.
Moreover, you can use this tool when you want to find and confirm support. There is also a similar behavior of the moving average to prices. This may break or bounce through areas with support and resistance. When prices test and break through temporarily through an area with support and resistance while the high and low envelope verifies that either resistance or support, it is signifying an additional contrarian entry signal. This strategy is also a great trend following indicatory. It confirms trends in a similar way as resistance and support confirmation. Once the indicator moves, bounces and trends from trend line then it signals trend following entry.
As a plus, you can also use this indicator for volatility measurement. Once the envelope becomes wider, there is increase in volatility and the moment it narrows it shows that there is a decline in volatility. Binary traders may not find this very useful but it can be used together with other tools in order to get prospective entry points. Another way to trend on such signal is to enter positions that follow trend when there is a very narrow envelope and when the envelope is wide then there is a contrarian position.
WHY IS THIS INDICATOR GOOD?
For starters, this strategy is great. One reason why it does not suck is that it mixes many kinds of analysis to a single indicator. This is really beneficial for binary traders because you can actually add this and get rid of two other indicators. Channels and moving averages are very well recognized and trustworthy indicators for trading, giving numerous signals. The indicator mixes those features thus allowing to offer at least five varied kinds of signals. Another thing why it is good is that newbies can find it quite appealing and easy to use.
WHY IS THIS INDICATOR BAD?
This indicator is not so good because it is just a single indicator. If you are a fan of using more than one indicator and time frames for getting great signals, then you might not enjoy this. On its own, this may offer a lot of false signals and whipsaws for it to be really efficient for binary signals. Nonetheless, mix it with other tools such as Fibonacci, trend lines, and other tools then you can surely appreciate its true beauty.