There are a lot of different analysis techniques that you can refer to when trading binary options. When you first start out trading binary options it is wise for you to experiment a little with different analysis tools to see which systems are the easiest for you to interpret and which systems work best for you when you trade based on them. One analysis tool that investors find to be the most useful and most profitable, is the Cloud/Kumo, which is also referred to as the Ichimoku Kinko Hyo.
What makes this system easy to use is that it uses 5 indicators when it is charted so it includes a lot of information in the analysis. The unique aspect of using Cloud/Kumo analysis is that although it uses 5 indicators, it is still very easy to read and the information key areas tend to jump out at you. As you can probably guess by the name it was an analysis technique that was first developed based on the Japanese stock market.
Here is how it works as a trend indicator. The 5 indicators plotted on its chart are Kijun Sen,Chikou Span, Tenkan Sen, Senkou Span A and the Senkou Span B. The difference between the Senkou Span A and the Senkou Span B lines forms the cloud on the chart. So when looking at the chart you can easily see with a quick glance the support and resistance levels, equilibrium, strength of the trend, current trend information and the potential points for trend reversal.
The easy to spot cloud is the key indicator when looking at the chart. If the market price is above the cloud it usually signals a downtrend is about to happen and when the market price is below the cloud it usually signals that an uptrend is about to happen.
The amount of information contained within it and the accuracy of its use have made the Cloud/Kumo system one of the most widely used trend indicators for trading binary options.
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