Binary Options are a type of option in which the payoff is structured to be either a fixed amount of compensation if the option expires in the money, or nothing at all if the option expires out of the money. These types of options are different from plain vanilla options and are also sometimes referred to as “all-or-nothing options” or “digital options”.
Binary Options have become very popular and attract a lot of novice traders, who find easier to trade binary options than doing actual trading, because position management is out of the equation. Most of them feel they have an edge because they can read technical charts, but ignore that short-time price movements are completely random and have nothing to do with technical analysis.
Binary Options have an expiration time, and therefore cap your profits in two dimensions: price and time. The odds of the future price being above the current price in a fixed period of time is always a 50% chance, and thus trading binary options is actually gambling.
Of course, not all usage of Binary Options should be considered gambling. Binary Options can be used as insurance to hedge actual positions in other assets, like gold, silver or stocks, for example. But make no mistake, trading binary options without an underlying trading strategy is gambling.
The indicator displays past values on the chart and implements a relative strength oscillator that measures the overall tendency using two moving averages: if the main line is above the signal line, bars tend to close above the open price and vice-versa.
Aditionally, strong breakouts or false breakouts are directional factors to have in count, and are portrayed on the chart by a trailing “+” to the candlestick data.