This indicator shows the difference between the oscillator and the smoothing line. Usually, the MACD indicator is used as a basic. As for a smoothing, it can be provided by the signal line.
Description of Moving average of oscillator binary options’ indicator
This indicator was developed in order to determine the difference between the MACD indicator and the signal line. It is represented in the form of a histogram on a chart. If the main indicator shows higher values than the line, then the value of the binary options’ indicator is positive. Therefore, if the situation is opposite, the values of the binary options’ indicator will be negative.
When the difference between the MACD and the line grows, the MACD grows too. But if the difference shortens, the MACD becomes narrower. Generally, this Moving average of oscillator indicator is visually very similar to the MACD, but it is very important to remember that these two indicators are different.
One of the major disadvantages of this indicator consists in the fact that it sends many false signals, and it can cause losses for a trader. However, in order to reduce losses, you can use the settings of period.
Technically, this indicator reflects the correlation between buyers and sellers in the market and shows the current balance between them. Thanks to this indicator you can see who dominates in the market currently. If a trader has this information, he can more easily determine the further direction of a trend.
Signals of Moving average of oscillator binary options’ indicator
One of the main signals of this binary options’ indicator is the change of an inclination of the indicator’s diagram. If a price on a chart continues to update its maximums, but, at the same time, the indicator’s inclination changes and the indicator starts to decline, it can show that the market will reverse soon. Therefore, it it is recommended to be prepared to buy the Put option.
If the descending trend is observed in the market and, at the same time, the indicator’s showings grow, we can conclude that the descending movement will change soon, therefore, you should buy the Call option.
Additional importance of indicator
The importance of this indicator is also the fact that if its values reach the extreme points, they will be also indicative of a reverse in the market. And it is important to understand that this indicator sends the leading signals. In other words, a reversal of the trend does not necessarily occur when the indicator reaches the maximum value. For example, if the maximums are achieved, then the maximums on the price chart can continue to update. For this reason, in order to buy the Put option, it is necessary to wait until the appropriate situation occurs.
The same is applicable to the Put option. If the indicator shows its minimum values, then the minimums on a chart can continue to update. For this reason, before a trader buys the Call option, it is necessary to wait until the appropriate situation occurs.
Finally, in order to work with this indicator, you can use the divergences, which may occasionally appear between the indicator’s line and the price chart. If the bearish divergence appears, a trader has to buy the Put option. And if the bullish divergence appears between the indicator’s chart and a price, it is needed to buy the Call option.
As mentioned above, it is important to monitor the indicator’s signals closely because it may send many false signals if it has more sensitive settings.