There has been a lot of hype in the last year or so regarding Value Charts
. It has taken the Binary Options
world by storm. Are you wondering why? Well, stay tuned and let me give you the lowdown on why most traders are using them. Value Charts were created to display the valuation of a market at any given time. It does this by making use of instruments' prices. As you may or may not know; price and value are two totally different terms. Yet as traders we only look at price charts to trade with. Price, on the one hand, is the sum of money that is given for the sale of something. Value, on the other hand, deals with the issue of what price is fair to pay. What is the meaning of "fair" when it comes to the pricing of an object, you might ask. This is the price at which both buyers and sellers deem as reasonable. It is also refered to as the equilibrium of supply and demand. See the drawing below to better understand this statement.
What Exactly Are Value Charts
Value Charts is an indicator that shows us when a particular pair is trading at a fair value, is trading below fair value(undervalued), or is trading above fair value(overvalued). Overvalued and undervalued are more commonly referred to as overbought and oversold conditions. Traders make use of Value Charts to analyze and predict future market movement by looking at these oversold and overbought conditions.
How Value Charts Are Calculated
The Value Chart Indicator utilizes a mathematical procedure. This procedure isolates the calculation period into different cycles and uses the value extremes found there. The values that are obtained are then smoothed out and displayed independently in a candlestick for each time period. The calculations are highly complex and cannot be described in a few sentences. Are you confused yet? I bet you are sitting there wondering what on earth did I just read. Let us rather move on to the more useful stuff.
How Can I Apply This To My Trading
A decent Value Chart indicator is rare to find. As the saying goes: "good things are hard to come by". It is however important to take note that these indicators are known to slow down your Metatrader platform quite a bit. You should only use them on your favourite trading pairs to avoid this problem. The last thing you want to happen to you is missing out on a perfect trade you have been waiting for because your charts were lagging.
Metatrader indicator for Value Charts
As always, MetaBinaryOptions is offering you a free Metatrader
indicator for helping you apply this strategy.
Click here to download the indicator 100% free
This indicator will automatically plot Value Charts on your chart to show you when the asset is undervalued or overvalued.
Figure 1 – Value Charts indicator
The whole idea when using Value Charts is to take trades when the instrument you are trading is in the oversold and overbought regions. As usual, I would urge you to trade these overvalued and undervalued levels with the help of other indicators or price action. Look for confluence levels to increase your odds. So lets take a look at a trading example:
Figure 2 – Value Chart trading example
Let us examine the chart in Figure 2. This particular pair and timeframe gave us two very obvious trades that had an extremely high chance of going in our favour. The name of the game is quality not quantity. One or two quality trades per day is more than enough. Ok, so we saw a strong support being formed at the 1.11250 level marked with the red line. We get our first buy signal at the first arrow. The Value Chart dipped under the -8 level almost touching -10. This indicated that the pair was undervalued(oversold). We also see the price touching the support level for extra confirmation. This was more than enough information to take a call trade. This one worked out perfectly.
Most traders know that when a support line gets broken it becomes a resistance level. If you don't know this yet, do yourself a favour and check out our support and resistance strategy. We saw price rallying up into our 1.11250 support/resistance level that we have drawn on our chart. This was also a 50% Fibonacci Retracement level which added to our odds. When it reached this point the Value Chart was touching the +8 overvalued(overbought) level. This is where we get our second clear signal to go short. Another successful trade executed. After a while you will get the hang of using Value Charts. Taking high probability trades will become like second nature to you. You can use this indicator on any market that you wish. Remember that the deeper the price goes into the oversold and overbought levels the stronger the signal will be. An exception to this is during important news releases. Rather stay out of the market at times like these.
Value Charts Summary
There you have it fellow traders. Now you know all you need to know about Value Charts and how to use it to your advantage. Use it, don't use it - as long as you are confident in your trading plan and putting in all the time needed, you will succeed sooner or later. Hard work pays off. I'll leave you with this quote.
"Focused, hard work is the real key to success. Keep your eyes on the goal, and just keep taking the next step towards completing it. If you aren't sure which way to do something, do it both ways and see which works better". - John Carmack