5 Reasons To Trade The Daily Charts in Binary Options
Most traders don’t know this but trading the daily charts is superior to trading shorter time frames. Most successful Forex traders will surely testify to this.
Trading binary options using the Daily charts is beneficial to a trader in a number of ways. In this article we will present a few reasons why trading the Daily charts is so advantageous in binary options.
Your broker wants you to trade short time frames
Think back about your binary broker advertising. Do they focus on the weekly or monthly results? The fact is that most brokers advertise quick wins in 60 seconds or 15 minutes to an hour.
If you look at any binary platform it is usually set at default to trade very, very short term. The reason is simple, the platforms are designed to give your broker an edge.
Trading short time frames will make you trade more often and the more you trade the more you might potentially lose. That is how your broker makes money, off your losses.
Trading daily charts will slow you down. Finally
There are many binary options websites and specialist traders that recommend trading systems built on 5 min or 15 min charts. The charts on these short time frames change quite often but usually not by a whole lot.
On a 5 minute chart each five minutes is represented by a single candle, if you’re looking at candle charts.
In order to trade them well one needs to be looking at the charts consistently not to miss good trading opportunities. That is why most day trades who trade very short time frames throughout the course of the day are a bit strung out and often consume a good amount of coffee to get going. They can get quite hyper during the experience too, which in most cases goes against them.
Changing your habit and looking at the daily chart will slow you down enough to have time to question your decision and follow your trading plan.
So if you don’t want to look at the charts for a few hours per day, switching to the daily charts will liberate you to a much greater extent than you think. Do yourself a favor and slow down. Despite what others may suggest, successful trading is not about speed. (Unless you’re a hedge fund with a high frequency trading platform and AI.)
Trade less frequently. Less is good
Overtrading is one of the major causes of failure, both in Forex and in Binary Options trading. The more you trade the more you expose yourself to the risks within the market.
Sure, there are some successful traders who trade the 15 minute charts but that requires concentration, market participation and a lot of self-control which usually take years to master.
For most binary options beginner traders the easiest and the best way to approach the markets is to swing trade by looking at the daily charts.
When you start trading the daily charts your trade frequency will lower immediately because you will need to wait longer for good trading setup.
As each candle represents a days trading session by the time you spot an opportunity in an asset, it may take a couple of days or weeks.
Fortunately, given access to so many assets available on binary options platforms you really don’t need to worry about the lack of trading opportunities on the daily charts. They will be there as long as the markets are operational.
It’s unfortunate that many traders fall into addiction to trading. They are so focused on beating the markets and winning that each time they win they get a rush (based on natural dopamine levels) and then feel the need to win again. This psychological experience will cause traders to take more risks in their approach. They begin to trade emotionally and as soon as they do, they begin to lose. More on this here
Trading less often and using longer expiry times of couple of days will also tone down your trading and help you to keep it under control.
Have plenty of time to anticipate and prepare
Short time frames don’t give you much time to prepare. As mentioned above, the charts change so often and so quickly that all your technical analysis drawn on the chart will usually need to be replaced the following day.
With daily charts your technical analysis can stay drawn for about a month and it will still be applicable to what is happening in the markets.
All your trend lines and support and resistance and Fibonacci levels should be drawn on a Daily chart. A daily signal will trump a signal from a 4-Hour chart, and a 4-Hour signal will usually trump 1-Hour.
Drawing Support and Resistance levels on 15 minute charts would be useless as the duration is to short to be of any major significance as a whole.
Trading is a constant battle between bulls (buyers) and bears (sellers) and daily charts represent best who wins the battle for each trading day. That is why most price support and resistance levels are drawn on the Daily charts.
Many beginner traders who get stuck in 5 or 15 min charts over-analyze them. They add too many indicators to their charts making their trading experience more complicated than it needs to be. Most of the popular trading indicators work on all time frames but they were originally designed for the Daily or Weekly charts.
Determine the real market trends
For immediate better results in binary options, stay away from the market noise which is considered to be quite substantial on any time frame between 1 min to 15 min. It’s impossible on short time frames to detect any viable trend that is happening.
To present this within context, when you’re looking at a 15 minute chart, everything that you see on your screen will most likely be a single candle on a Daily chart.
Here is an image that shows EURUSD M15 chart. Notice the distance between the highest support and resistance levels, marked in red.
And here is the same pair, EURUSD with the same marked levels, but shown on a Daily chart. Notice how much smaller is that distance between these two levels drawn on the 15 minute chart.
Daily charts show overall trends much better than shorter time frames can and that is why most institutional funds also look at Daily charts to plan their big positions.
It’s easier to trade with the trend and follow the market movers.
Few final words about using the daily charts
Not having a stop loss to worry about in binary options is actually more beneficial when you trade the daily charts. When you set your trade expiry to 3 or 5 days and the trade goes against you there will be a longer time for the price action to reverse and go into positive allowing you to close the trade earlier if you wish to do so.
Price fluctuations are common in the markets and a lot can happen in three days. Your trade might go in and out during its duration. This would mostly be caused by influential news announcement or economic release, lately even Trump’s tweet.
Most binary brokers today offer the option of early close with a lower win percentage, but which is still a win and it should be considered. It’s much better to win 5 or 10% than lose a 100% and as long as you don’t lose in binary options, you’re winning.Published in Education