Here are some methods and strategies for binary options trading that we provided our traders, We assure our traders that their investments go through a secure platform and they will have better chances of earning profits after reading this article. we made sure to provide ample tools and features in order to try out various tactics for earning profit.
The Need for Binary Options Strategies
Trading in binary options is fast becoming one of the most popular types of activities in the financial market. Many old-school traders who had considerable experience in financial markets and investments are adding binary options trading to their portfolio. Novice traders are also opting for this type of trading. This could actually be done without a lot of experience in financial trading, and any trader from any skill level will be able to grasp the basics and eventually learn binary trading strategies.
One reason why binary options trading is gaining wider appeal is because it is an ideal way to trade on which way an asset is headed. Although trading in binary options is relatively simple, certain types of strategies are needed in order to be successful at it. Because of its up-front and direct rewards, it also has great risks. Because of the main characteristic of binary options trading of great rewards and great risks, all traders will definitely benefit from knowing some binary options trading strategy or two.
Having a binary options strategy ensures traders that their investment will have a better chance of earning profit. Admittedly, many people are saying that trading in binary options is relatively simple. However, trading in binary options is more than selecting an asset to trade, predicting the price movement (selecting Call or Put) and deciding on the amount to invest and expiry time. It also requires a certain degree of financial market knowledge and being able to analyze and interpret relevant information.
Benefits of Having an Options Trading Strategy
Many traders actually don’t have a binary options strategy. The truth is many investors are saying that when it comes to trading, you don’t really need a strategy and you can just go with your gut and let your instincts guide you. But having no binary strategy, especially if you don’t know much about trading and investment can be a risky thing. You run the risk of losing a lot of money instead of earning profit.
Merely relying on your gut feel or even luck while doing binary options trading is much like gambling. Eventually, this will certainly not work and the trader might end up losing an investment.
Therefore it is much better to have a certain binary options trading strategy in order to have better results and greater profit.
Having a strategy while doing this type of trading also gives traders an assurance that any of their trading decisions come from logical reasoning. This also gives them a trading pattern that tells them either to continue or discontinue certain strategies. This trading pattern can also be analyzed and adjusted accordingly.
For instance, traders are able to analyze several consecutive strategies to see whether they have made enough money. Traders can either decide to shift or retain certain strategies. Having a binary options strategy will also help traders decide on what to use for future trades based on how past trades fared. In this way, better trading decisions can be made in the future.
Any which way you look at it, it is very impractical to start binary options trading without some sort of a plan of action. This will lead to a lot of inconsistencies which run counter to the goals of a trader.
Although there are different approaches to be used in binary options trading, a binary options trading strategy usually has several common goals. The first goal is creating a binary option signal and knowing how to trade this particular signal. The second goal is determining how much should be traded, and the third goal is improving a trader’s strategy.
The List of the Best Options Trading Strategies
Employing a binary strategy is one of the most effective approaches to avoid risks in binary trading. A general way to avoid risks in binary trading, especially for beginners, is to concentrate on one asset only. This is because consistently trading one asset for a considerable amount of time will aid traders in being very familiar with it. When a trader feels very comfortable with one asset, then it is time to focus on another asset to learn.
Aside from this general strategy, there are other important strategies that are worth learning for binary options traders. The binary options strategy categories are divided into three parts: (1) main types of speculative training strategies; (2) action strategies, and (3) risk appetite strategies.
Main types of speculative training strategies:
1. Trading with technical analysis
Also called chart analysis, technical analysis is when traders thoroughly study the charts of different assets to be able to predict the future movement of the asset. Another definition of technical analysis is the process of forecasting future price movements based on past historical data. Investors can either look at the long-term view or short-term view of graphs and candlestick patterns.
Technical analysis or chart analysis is based on the Dow Theory, and they do not result in very accurate predictions. The Dow Theory basically states that whatever happened in the past happens again in the present and the future. In short, history repeats itself. The Dow Theory has three theorems that are most applicable to technical analysis: (1) what is important, but why is a better question to ask; (2) price discounts everything; and (3) the movements of price are not completely random.
Technical analysis uses charts and looks at technical indicators to predict future happenings on the market. It uses information so that investors can interpret what the market is saying and what they can do in the future. Doing technical analysis will be able to assist investors predict what is likely to happen to prices on the market over time.
What are the main steps of technical analysis? The first step is broad market analysis using major indices such as NASDAQ, S&P 500, and others. After taking a big sweep of the market, do a sector analysis in order to single out the strongest and weakest sub-groups within the broad market. Lastly, do an individual stock analysis in order to determine the strongest and weakest stocks within a sub-group.
There are several things to look out for when doing technical analysis. First, look at the overall trend through peak/trough analysis, moving averages, and trend lines. Next, look at support levels, which are areas of congestion below the current price. Another thing to look for is resistance levels, which are areas of congestion above the current price.
2. Trading with fundamental analysis
Another type of analysis that could be used as a binary strategy is fundamental analysis. The strategy of fundamental analysis looks at the underlying forces that affect the health of the economy. It focuses on economic statistics and the climate in order to look at future market orientations, particularly of the exchange rate. Similar to technical analysis, it is used to get a forecast with the aim of profiting from price movements of the market.
On a daily basis, many economic indicators are published (e.g. unemployment rate, consumer price index, and gross domestic product). Economic figures such as these are usually available online, which investors can monitor in real-time. The purpose of monitoring these indicators is to help traders make decisions about the principal instruments traded in binary options.
There are general steps of fundamental analysis. Although there is no final step-by-step approach, there are general steps that traders can follow. First, traders can make an economic forecast and make an evaluation of the economy in general. There is usually a correlation between stock prices and interest rates. Next, it is time to assess an industry group. Traders should consider their overall growth rate and their importance to the economy. When the industry group is narrowed down, an investor can also specify the list of companies by doing a detailed analysis of a company’s rank on market share and product position.
1. Trend Strategy
Looking at market trends is a fundamental strategy that both beginners and seasoned traders use. When trading on an asset, one of the most essential factors to consider is looking at trends. Since a trend is the foremost direction of an asset’s price, it can be set over several time periods. Traders can look at short-term trends on a daily basis. It could also run over weeks, months, and years. Traders make their decisions based on the direction of a trend. It could either be an uptrend or a downtrend. If the price of an asset is going to rise, the trader chooses CALL. If the trends show a decline in the price, the trader chooses PUT. Option500 makes it easy for traders to either choose the CALL/PUT option. Traders usually see clear directional movement before making a decision to either CALL or PUT. The reason behind this is because you can only yield profits when this is clearly seen.
The easiest way of identifying trends is to use a technical indicator, the moving average, which computes the average rate of price change over a time period. For binary options, it is suggested that traders use hourly trend strategies, although assets can also be set to a 30 minute time-frame. Traders have great opportunities to succeed using the trend trading strategy if they have the ability to look for the busiest market times when trading volume is high.
2. Pinocchio Strategy
When used properly, the Pinocchio strategy has the ability to be very accurate, and if used the right way, can yield high results. This particular strategy is very helpful when the asset price is forecasted to either fall or rise drastically in the opposite direction.
The type of candle that is used in the Pinocchio strategy is the pin bar, also called the “Pinocchio bar”. The wick of the candle gets longer when the price goes in one direction. The longer the wick is, the higher the probability that the price of the asset will go in the opposite direction, hence the reference to “Pinocchio’s nose.”
For beginners, this type of strategy can be best practiced. Traders will choose PUT if the wick is up and choose CALL if the wick is down.
3. Straddle Strategy
Straddle strategy is an action strategy used when there is volatility in the market or striking just before the break of a news update that will affect a specific stock. This highly regarded strategy involves choosing CALL and PUT with the same price and expiration date. In binary options, the straddle strategy is beneficial because the trader gets the best of both worlds – they get to cover the two options and ultimately gain from the large movement that the breaking news update or report will create.
However, adapting the straddle strategy in binary options can get quite complicated. To successfully use straddle as a binary options strategy, traders can use the touch option, which is available in Option500.
Another easy way to use the straddle strategy in trading binary options is to purchase a boundary option, which dictates a lower and upper price level. One of the best brokers, Option500 offers the boundary option for its account holders. Traders can actually predict the price of an asset using these boundary borders.
4. Risk Reversal Strategy
Advanced binary options traders prefer to use the risk reversal strategy because it aids in minimizing potential loss by a huge amount. The risk reversal strategy works like this: the trader has to simultaneously make a CALL and PUT on the same asset. Another benefit of this particular strategy is that it increases the chances of a potential gain.
There are three general steps to follow in making a risk reversal strategy. The first step is to identify the asset, the next step is to set the maximum and minimum payment ratios, and the third and final step is to execute the trade.
5. Hedging Strategy
The hedging strategy is done when two off-setting positions are combined into one single trade. When a trader hedges, they attempt to either lock in profits or limit losses by utilizing two off-setting positions. Another word for the hedging strategy is pairing, and the simple action in binary options trading is placing both CALL and PUT on the same asset at the same time. The hedging strategy is ideal for investors to protect their trades.
Risk Appetite Strategies
The last category of binary options strategies are the risk appetite strategies. There are three risk appetite strategies that are ideal for beginners. The first is the conservative long-term strategy, the next one is the semi-conservative strategy, and the last one is the aggressive strategy.
1. The Long-Term Strategy
The aim of the conservative long-term strategy is to be able to minimize risks and build up the assets steadily and gradually. The tools that are used for this type of strategy are the Fibonacci retracement and the zigzag indicator. The investment amount of a long term should not be more than 5% of capital, and the target trade should only be from 1-2 each day.
2. The Semi-Conservative Strategy
The recommended number of trades per day when using a semi-conservative strategy is about 4-6 a day. The same principles apply as with the conservative long-term strategy, but there are more calculated risks, and therefore expect bigger rewards. Traders can yield up to more than $5,000 with this strategy.
3. The Aggressive Strategy
True to its name, the aggressive strategy is a bit more complicated and works with about 100 setups for each currency pair on a daily basis. If used correctly, this strategy can produce great results and high profits.
Looking at all these strategies that were discussed in this article, you may ask, what is the best binary options strategy? The answer is it all depends on your needs and goals. Traders can actually mix and match until they achieve the most effective strategy that works for them.
Choose a Platform with the Best Binary Options Strategies
There are numerous trading platforms claiming superiority and more chances of gaining profit for its account holders, but Option500 is definitely a cut above the rest. It has a comprehensive list of options trading strategies that actually work and garner profitable results.
There are several strategies that one could use. One essential part of developing successful trading strategies is the knowledge of each element of the strategy inside and out. Because of the popularity of trading strategies and the number of platforms navigating the market today, it could be quite daunting to choose which strategy is best.
By signing up for Option500, traders get to maximize the use of these binary options strategies to gain more profit. Signing up for an account is free, and Option500 requires a very minimal deposit in order to make a trade.