Binary options strategies
- Published: Wednesday, 01 February 2017 11:18
- Written by James Henderson
Many people think of binary options trading as a complex and risky way of making money, but in reality this kind of investment is accessible to all. Even if you’ve never heard of binary options trading before, you can quickly gain an understanding of the techniques and skills required to become a successful investor. In essence, binary trading involves choosing whether the value of an asset will increase or decrease. A growth in price is known as a call and a drop is known as a fall. Here are some easy to implement methods for making your money grow on the binary options market.
Reduce the risks of binary options trading
The market gives off certain signals that the trained eye can quickly identify, these can help traders make the right moves and profit from the outcomes. However, even experienced traders can lose money on binary options, but they also know how to lower their risk of this happening. Primarily, traders should never invest their entire capital in one transaction, secondly, before making a trade always check the form of the asset in question, and thirdly, remember that 5-10% of your equity is the best investment per trade.
Strategies for success
Although there are many assets available to binary options traders, concentrating on just one will give you a valuable insight in to its performance. Pick one that feels familiar, like a particular pair of currencies, and then trade on it regularly. In time you’ll get a feel for it and be in a better position to predict how its value will change.
Watch the trends
Beginners and experienced traders alike use this rudimentary strategy to work the markets. Known as the bull bear strategy, the idea is to carefully watch the performance of a particular asset over time, noting when it rises and falls. Brokers provide trend lines to help traders in this process. If the trend line is flat and an asset is expected to rise, choose the No Touch option. When the asset is about to rise, select Call, and if it’s declining select Put.
Another very popular and commonly used technique is the Pinocchio strategy. It is employed when the value of an asset is anticipated to go up or down drastically in the opposite direction to which it’s currently moving. If the price will go up, then choose Call, and when it’s going to fall, select Put. Newer traders can try out this method on one of the free demo accounts offered by a number of online brokers.
When the markets are in a state of flux, for example when some important news is about to break, the saddle strategy is great way of managing the situation. Used by traders across the world, it enables them to avoid single Call and Put placements in favour of placing both on one asset. The objective is to use Put, when an asset has grown in value, but is predicted to drop soon. When the fall is in motion, select Call on the same asset and wait for it to increase again. This concept can also be applied in reverse, traders simply select Call on low priced asset, then Put as it begins to bounce back. When the market has been volatile, the saddle strategy enables traders to boost their chances of doing well in one option at least.
Risk Reversal Strategy
If traders are familiar with the basics of Put and Call options, then the risk reversal strategy can offer large pay-offs for very little investment. This method focuses on reducing the risks of trading and boosting the chances of making a profit. It is carried out by choosing an underlying asset, then buying Call and Put options at the same time - the practice works best when the value is shifting regularly. By selecting two binary options, traders expect two outcomes and by using one asset for both, they are assured of a beneficial result from one.
Also known as pairing and frequently used on the stock exchange, as well as the binary options market, a well implemented hedging strategy can lower the risks associated with trading and provide a means of protection against losses. To make it work, the investor has to select Put and Call on a single asset simultaneously. In doing so they ensure that whether an asset rises or falls, they will obtain a beneficial outcome. It’s a shrewd way of safeguarding your investments and guaranteeing you’re ready, whatever happens on the market.
Considered by many industry insiders as the basis for all robust investing, fundamental analysis is used by traders to gain a deeper understanding of one particular asset. Once they have observed the way it behaves over a period of time, traders can begin to trust their instincts when it comes to predicating future movements. However, it is by far the most time consuming method of all the binary options trading strategies. Investors begin by reviewing the financial affairs of a company; its market share, earnings statements and monetary reports. They then take this information and scrutinize the past activity of the company, considering how it coped during times of economic uncertainty and change. When a similar scenario occurs, traders can make accurate predictions about the company’s behaviour and tailor their trading strategy accordingly.
easy strategy is best for beginners
As a rule, an easy strategy is best for beginners. One of these strategies for binary options is the successful trend-following strategy, where the investor works with the trend: A market price generates the buying behaviour of a big majority. If the market price of a financial product rises, this means that the significance of the product (for example, of a commodity) is highly classified. One should therefore, follow this trend since a market price is rather continued than broken.
Investors should thus, look out for a stable market price which is located on a rising trend. The cognition of such a market price can become a profitable thing if the entry timing is well placed. As a rule, the trading with binary options by means of the trend-following strategy, has good prospects due to its stability. Call and put could be grossed accordingly. This strategy is also grossed with commodities. Normally, commodities in contrast to shares and foreign exchanges are above all, much more stable (especially gold).