Technical analysis with Bots

What is technical analysis?

Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume.

The key concept in trading analysis is a trend identification. It’s done by analyzing charts and finding patterns in the past price changes.

Ticks and candles

Since technical analysis focuses on analyzing charts and price changes over time, it’s worth mentioning ticks and candles as those are key concepts in charting.

Tick is a price of underlying asset at a specific moment of time. Prices change every 1-2 seconds on Binary and Deriv platforms (on MT5 and Deriv X prices can change more frequently for Forex pairs).

Candle is a representation of a time period such as 1 minute, 2 minutes, 5 minutes, etc.

Both ticks and candles can displayed on charts.

Ticks charts are mostly useful for short-term strategies whereas candle charts fit better for longer term analysis.

Tick chart shows every single price change whereas candle chart summarized price changes for a specific time interval and displays it as candles. The horizontal axis is the timeline and the vertical axis displays prices of the underlying asset.

Tcik chart

Candle chart

Each bar on the candle chart is called a candle and it represents a time interval, for example 1 minute, or 15 minutes, or 1 hour, etc.

Each bar has 4 important properties: open price and close price are the first and the last price of the candle time interval.

High and low prices are the highest and the lowest prices of the underlying asset during the candle time interval.

Trading platforms can color candles differently. Deriv.com and Binary.com platforms show Red candles when open price is greater than the close price, and Green candles indicate that open price is less than the close price.


Blocks to work with ticks and candles

Indicators

What are indicators and how to use them?

  • Technical indicators are heuristic or mathematical calculations based on the price, volume, or open interest of a security or contract used by traders who follow technical analysis.
  • Technical analysts or chartists look for technical indicators in historical asset price data to judge entry and exit points for trades.

Source: Investopedia

In Binary Bot and DBot technical indicators are blocks that require a list of prices as an input parameter and return signals that can be interpreted by a trader to make a decision to enter or exit the market.

Simple Moving Average (SMA)

SMA is a frequently used indicator in technical analysis. It calculates the average market price over a specified period, and is usually used to identify market trend direction: up or down. For example, if the SMA is moving upwards, it means the market trend is up. Simple Moving Average (SMA) Definition

image image

Exponential Moving Average (EMA)

EMA is a type of moving average that places more significance on the most recent data points. It’s also known as the exponentially weighted moving average. EMA is different from SMA in that it reacts more significantly to recent price changes. Exponential Moving Average (EMA) Definition

image image

Bollinger bands (BB)

BB is a technical analysis indicator that’s commonly used by traders. The idea behind BB is that the market price stays within the upper and lower bands for 95% of the time. The bands are the standard deviations of the simple moving average. If the price reaches either the upper or lower band, there’s a possibility of a trend reversal. Bollinger Band® Definition

image image

Relative strength index (RSI)

RSI is a technical analysis tool that helps you identify the market trend. It will give you a value from 0 to 100. An RSI value of 70 and above means that the asset is overbought and the current trend may reverse, while a value of 30 and below means that the asset is oversold. Overbought or Oversold? Use the Relative Strength Index to Find Out

image image

Moving average convergence divergence (MACD)

Moving average convergence divergence (MACD) is calculated by subtracting the long-term Exponential Moving Average or EMA (26 periods) from the short-term EMA (12 periods). If the short-term EMA is greater or lower than the long-term EMA then there’s a possibility of a trend reversal. Moving Average Convergence Divergence (MACD) Definition

image image

Deriv (Investments) Europe Ltd (W Business Centre, Level 3, Triq Dun Karm, Birkirkara BKR 9033, Malta) is licensed in Malta and regulated by the Malta Financial Services Authority under the Investment Services Act to provide investment services in the European Union (licence no. IS/70156). It is also authorised and subject to limited regulation by the Financial Conduct Authority in the UK. Details about the extent of our authorisation and regulation by the Financial Conduct Authority are available from us on request.

Deriv (MX) Ltd, Millennium House, Level 1, Victoria Road, Douglas IM2 4RW, Isle of Man, is licensed and regulated in Great Britain by the Gambling Commission under account no. 39172 and by the Gambling Supervision Commission in the Isle of Man.

Deriv (Europe) Limited, W Business Centre, Level 3, Triq Dun Karm, Birkirkara BKR 9033, Malta, is licensed and regulated for synthetic indices by the Malta Gaming Authority (licence no. MGA/B2C/102/2000), by the Gambling Commission for clients in Great Britain (account no. 39495), and by the Revenue Commissioners for clients in Ireland (licence no. 1010285).

Deriv Investments (Europe) Ltd is authorised to deal on its own account and is both the manufacturer and distributor of its products.

This information is intended for Retail & Professional clients.

CFDs offered by Deriv Investments (Europe) Ltd are considered complex derivatives and may not be suitable for retail clients.They may be affected by changes in currency exchange rates; If you invest in this product you may lose some or all of the money you invest; The value of your investment may go down as well as up.
CFDs offered by Deriv Investments (Europe) ltd also come with a high risk of losing money rapidly due to leverage. 63% of retail investor accounts lose money when trading CFDs with Deriv Investments (Europe) ltd. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

+18 Icon Please trade responsibly. For more information about responsible trading please click here.