Overview to basic binary options trading strategies

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect Choice For Beginners!
    Free Demo Account!
    Free Trading Education!
    Get Your Sing-Up Bonus Now!

  • Binomo
    Binomo

    Only For Experienced Traders!

Contents

Binary Options Strategies

Why To Use Strategies While Trading Binary Options

There’s no doubt that financial instruments can appear intimidating. When news about the financial markets appears on TV, you’ll often see financial traders sweating over complicated-looking graphs on multiple computer monitors or barking at each other across crowded trading floors. The commentary will describe exotic investment vehicles that can seemingly only be understood by people with PhDs in rocket science. To be clear, there are financial instruments that are very hard for the layperson to understand, but that’s not true of all of them.

Binary options are more popular than some investment vehicles because they are less complicated. There’s a clue in the name, ‘binary,’ because as an investor you’re only having to choose between two options: will the value of an asset go up over time or down? Traders will place a bet on whether the price will increase, which is called a call, or decrease which is called a put. So, in terms of probability, you could look at binary options trading as a bit like gambling on a coin toss.

Minimising Risk

Now, having said that, binary options trading carries a high level of risk and can cause you to lose all of your funds, and it’s because of this risk that binary options strategies are so important. You can trade safely if you do your research and put effective binary options strategies in place. We’re going to help you spot the market signals that will help you to do just that.

For a start, here are your golden rules:

  • don’t invest all your capital at once
  • be aware of how your asset is moving before you invest
  • never invest more than 10% of your total equity in a placement

Reasons to Use Binary Options Strategies

Although we think binary options strategies are worthwhile, you could just as easily go with gut instinct, flip a coin or consult a horoscope to help you decide what to do. You might even be successful here and there, but long-term this is a surefire way to lose all of your capital. Probability won’t let you win with random behaviour, any more than it will let you win 50 consecutive coin tosses. To win consecutively as a trader you will need binary options strategies, and we are using the plural because you will need more than one.

Binary Options Strategies – Description and benefits

The main reason to use any trading strategy is that it will stop you from making emotional decisions. As a trader, all of your decisions need to be grounded in logic and rationality. There is very little room for hunches or luck. The other benefit of using binary options strategies is that they allow you to do active ‘field research’, meaning that if you take a defined approach to each investment and document it, and may be it fails, then you can tweak and refine it, and if it succeeds you can use it again and maybe try to improve. The markets are your laboratory where you go about testing your trading strategies, over a set number of trades and a set period of time. When you hit your time limit then you can look back and ask yourself whether your strategy is working, is it making you enough money, could it be improved etc.

Any other approach is going to leave you guessing. If you base your trades on guesswork, then you won’t know why they succeeded or why they failed. Using binary trading strategies will give you something more concrete to base your future adjustments on.

It’s important to know not just why you succeeded or failed, but why you succeeded or failed. Conducting a series of stand-alone trades with nothing to link them is as reckless as hoping for those 50 consecutive heads to come up in a coin toss marathon. When you trade, you shouldn’t just be crossing your fingers each time and being surprised by every outcome. And long term, the law of averages says that the best thing you can hope for is to break even, which is no way to make a living. It may not even be a feasible ambition because to break even you have to win more than you lose, and that seems highly unlikely without binary options strategies.

Money Management Strategies – What They Are and Why You Need One

A lot of people fall into the trap of developing a trading strategy but not a money management strategy. It’s all very well choosing what kind of asset you want to trade and how much risk you want to be exposed to, but you also need to give some thought to money management, because it will help you to build the kind of account balance that will see you through bad periods and help you sustain winning streaks.

Let’s consider the effects of having no money management strategy on someone who gambles a tenth of their balance on a single trade. If the trade doesn’t win, they now have to increase their account balance by 20% just to break even. If three trades in a row go south, then they will need a 30% jump in their account balance to get back to the breakeven point. This is a common scenario that can dig you in deep quite quickly.

Lots of losing streaks are longer than three trades, so you can see how money management strategies play an important role within binary options strategies. Without a good money management strategy, you will undermine your efforts even if you have a good trading strategy in place. Losing streaks will inevitably happen, so you must have a plan to deal with them.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect Choice For Beginners!
    Free Demo Account!
    Free Trading Education!
    Get Your Sing-Up Bonus Now!

  • Binomo
    Binomo

    Only For Experienced Traders!

Analysis and Improvement Strategies

There is no Rosetta Stone of binary trading strategies. The only constant with the markets is change, so the best traders need to adapt all the time. You could say they constantly evolve, even when they’ve become highly successful. It’s not like there’s a magic point that they get to where they know everything, and every trade they make is a winner. That day never comes. But they do get to the point where they analyse every trade deeply and thoroughly. If there’s any magic then it lies there.

By analyzing and improving your trading and money management strategies you’ll remove the parts that aren’t working, refine the parts that are and become more profitable over the long term. Even if you’re already making money, but you aren’t trying to constantly improve, who’s to say that you aren’t actually leaving profits on the table?

Types of Binary Options Strategies

There are three common elements to binary options strategies.

  • Using signals to guide you
  • Deciding how much of your funds to trade
  • Constant refinement

To create a successful strategy, you need to understand as much as you can about every aspect of it. Here’s how to do that.

Step 1 Using signals to guide you

A signal is something that tells you that the price of an asset is about to move one way or another. Asset prices move all the time of course, but what if there was something that could let you know which way it was going to move before it happened? There is, and we call this thing a signal.

Signals can be created using news events and/or technical analysis. Getting signals from news events is probably the more common one among new or inexperienced traders. Things like company announcements, industry announcements, governments releasing inflation figures, these sorts of things can all be viewed as signals that can affect prices.

If you want to develop a working strategy, then you need to think about what news events to expect and when. Most binary options trading platforms will feature economic calendars, so you’ll be informed that in a couple of days’ time a firm’s earnings reports are due. This kind of pre-warning will help to inform your analysis.

The best binary option trading platforms will also let you know what’s expected in that earnings report. This will help you to make decisions about which way the market is going to move before the report comes out.

A news-based approach to trading has the benefit of being fairly easy to learn and understand. It’s not like you need to gain secret knowledge. You’re just taking common knowledge and thinking about its implications for the asset that you’re interested in.

The disadvantage of news-based signals is that they don’t stop markets being unpredictable. For instance, if an earnings report shows that a company has boosted its profits, you might think that that’s a positive result. But that same report might suggest that profits were expected to be higher, or that the company expects to face stiff competition. There are all sorts of unknown quantities that can spook the markets and pull the rug out from under that good news.

Technical analysis gives traders a narrower view than that offered by the news. It focuses on how an asset price moved in the past, with the aim of finding patterns that may offer clues about how the price will move in future. This is an area that can become a rabbit hole of complexity—make no mistake—but the underlying principle is fairly straightforward. You try to work out future behaviour of an asset price based on its past behaviour.

So, the question is, which one of these binary trading strategies should you be using; a news approach or a technical analysis approach? Well, everyone is different, with different strengths and weaknesses, so the best advice we can give to you is to try them both and see which one works best for you. Either of them can bring you success if they gel with you.

Now, you may be wondering how much that little experiment is going to cost you. What if you’re terrible at using the analytical approach and it ends up costing you a fortune? Well, there’s no need for concern. Most decent brokers will be able to offer you a demo account to practice on. You’ll have full access to the trading platform, you won’t be using real money. You’ll get the chance to trade in binary options with zero risks. Sure, you won’t make any money with your demo account, but you won’t lose any either. Instead, you will have an ideal testbed on which to see how your strategies play out.

The last thing to say about signals and strategies is to concentrate on the short-term. Some investment strategies try to predict asset price shifts over long periods of time, even up to a decade. In binary options trading, you’re not really interested in this kind of information. You’re more concerned with what the price will do in the next two minutes, or hour or day.

Step 2 – Deciding how much of your funds to trade with

Money management strategies vary in their complexity. A simple one will have you investing the same amount for every trade, but it’s risky and doesn’t take your overall level of profitability into account or how much capital you have at your disposal. So, we only mention this because you might hear it mentioned and we want you to avoid it.

Another one that you may hear about is the Martingale money management strategy. The idea behind this approach is to recover from your losses as quickly as possible by increasing the size of your trades after each loss. For instance, you could set an amount of money that you will trade with, and if you experience a loss then you double it. If it’s successful then you aren’t just back to where you started, you’re ahead.

It shouldn’t be too hard to see that there is a problem with this strategy. Namely, if you experience a losing streak that won’t quit then the Martingale strategy would have you increasing your investment on every following trade. So, if you had a run of 11 straight losses, number 12 would be a gamble that was 2,048 times bigger than that first trade. Unless you’re a billionaire, it’s going to be hard to keep that kind of optimistic speculation going.

It all comes down to how good you are at making predictions and how good you are at ending losing streaks. You need to keep in mind that there are no certainties in binary options trading. Even surefire trades that you would stake your life on can end up losing, and losses can easily turn into streaks, even if you’re the best trader in the world because at the end of the day nobody has a crystal ball. That’s why the Martingale money management system is not for everyone. It does have its place, but it needs to be employed with caution, so it may not suit beginners.

A percentage-based system doesn’t come with as much risk, so it’s the one that the majority of traders usually prefer, especially binary options trading newbies. It’s a fairly simple concept. The amount of money you put into a trade is based on the amount of money you have in your trading account. It’s kind of the opposite of the doubling down approach that the Martingale strategy uses because after each losing trade your subsequent trades will be for lower amounts. But if you win, your following wagers will be for greater amounts, because your account balance will have gone up.

This conservative approach is designed to preserve as much of your capital as possible so that you can trade for as long as possible, and it gives you the best possible chance of clawing your way back from successive defeats and capitalizing on your successes.

The only variable for you to consider is what percentage of your balance to use. Typically, a trader who is not risk-averse will probably go for around 5%, while everyone else will probably prefer something nearer to 2%.

As an example, let’s assume you feel comfortable with 5% of your balance being invested in a trade. A $500 account balance gives you a $25 trade. If your balance dropped to $300, your trades would now be only $15. If your balance rose to $800, each trade would be $40.

With this strategy, you will only be gambling with what you can sustain. It’s a measured approach that adapts to your current situation and prevents you from throwing good money after bad when you eventually stumble into a rut of successive losing trades, and it won’t let you become overconfident if you win a few either. For these reasons, it’s one of the binary options strategies that’s hard to fault.

Step 3 – Constant refinement

Diaries aren’t just for moody teenagers. They are also essential for developing you into a better trader. It doesn’t matter whether you have a little black book or an Excel spreadsheet. Whatever works for you. The important thing is to record every trade that you make so you can build up a body of ‘evidence’. In time you’ll have a detailed history of what works and what doesn’t, and that will help to ensure that the trades you make in future are successful more often.

A diary is like a silent partner for beginning traders. It allows you to look back at trades and give yourself good advice. Try placing trades based on both technical analysis and news events signals but record them separately in your diary so you can see which one works the best for you. When you’re involved in the day-to-day business of trading, you may not realize exactly how you’re approaching it, but your diary will always tell you the truth. So, for instance, you might think that technical analysis suits you best because you’re getting twice the profits that you’re making with signals. But your diary will tell you that you’re actually spending twice as much time studying technical analysis, so it’s an unfair comparison. Maybe you’re getting greater returns per hour of invested time looking for news events signals. Only your diary can tell you.

A trading diary also delivers the kind of granular detail that is essential to fine-tuning any of your binary options strategies. This is important when you get to a decent level of competence and are only looking to improve by small amounts—icing the cake so to speak. But you can only do this if you understand the details of what you’re doing well enough to tweak them.

Don’t forget to use your trading diary to check every aspect of your trading strategy, including money management, your choice of assets, and the size of each trade.

When you get in to the detail, consider noting which days of the week are best and which times of day are best for the best results. Do you perform better with some brokers and some trading platforms? Make a note of it; it’s all-important.

Having said all that, try not to succumb to information overload. Although you’re recording everything you don’t have to change everything at the same time when you’re trying to refine your approach. If you do that it’s hard to know which aspect of the change worked. If you change broker and then asset class and then trade amount all at the same time and you have a run of successful trades, how will you know which one of those three things that you changed contributed to those successes? It is far better to change one thing at a time, then you will know that it was responsible for the change.

Binary Options Trading Strategy Examples

Let’s take a more detailed look at some binary options strategies. The ones listed below are some of the most frequently used, but there are plenty of others available as well. As you learn more, you’ll no doubt come across traders who split, combine and adapt their binary options trading strategies to suit their own goals. You’ll probably be tempted to try this kind of thing yourself, but it’s important when you start out to learn the basics and save the customized approach for later. Whichever one you choose, don’t forget to combine them with a money management strategy too.

Asset prices usually move in line with a trend. You’ll often see a zigzag of ups and downs that are actually all part of a larger upward or downward trend. When you understand the shape of the trend you begin to see that the zigzag movements can be predictable in certain situations, and when you can predict those movements you have an opportunity to execute profitable binary options trades.

To put it simply you have a couple of main options: you can gamble on the overall trend or on each of those zigzags. Trading the overall trend means looking at the big picture. You’re not interested in trying to capitalise on the minor ups and downs of an asset price. Instead, you are looking at a shift in price over the longer term.

Trading on swings in price requires that you place more trades, which is inherently riskier but potentially more rewarding.

Upward trend – New highs and new lows will usually be higher than past highs and lows in an upward trend.

Downward trend – New highs and new lows will usually be lower than past highs and lows in a downward trend.

Of course, you shouldn’t lose sight of the fact that you are free to use both approaches to trading. It’s a free country!

One of the most frequently used ways of trading trends is with High / Low options. Every binary options trading platform will offer this kind of trade. With a high option, you’re betting that the price will go up and with a low option you’re betting that the price will go down. The only variable is the period of time during which you think this will happen.

A riskier, but potentially more profitable variation of this is called a one-touch option. Instead of just betting on whether the price will go higher or lower, you’re predicting whether it will hit a specified number called the target price.

Example 2 – Trading on News Events

This is a fairly popular type of trading strategy. You will use the news as your source of intelligence. When a company reports greater profits or a new and exciting product then the theory states that generally, this will cause more people to want to own shares in that company and this demand will push up their price. The opposite is true if the company announces bad news of some sort. In both cases, binary options traders are in a position to make money if they can anticipate the direction of the next shift in the share price.

The downside of this type of approach is that it is not clear cut. When you trade on the basis of news events you place your fortune in the hands of fate.

So, it’s a good thing that there are other strategies that you can take to increase your chances of successfully trading binary options. Here are three of them.

Boundary options – when you’re certain that an asset price will change but you can’t be quite sure which way it’s going to go then a boundary option can be really useful. With it, you set two target prices, one of which is below the current price and one of which is above. The difference between them is called the price channel. If the asset price passes either of them then you win. If it only moves inside the channel then you lose.

Trading the breakout – The breakout represents a window of opportunity. It’s the time, anywhere from 30 seconds to several minutes after a piece of news about an asset goes public. It’s the perfect opportunity to use a high/low option because it’s here that traders will try to limit their losses or alter their positions for profit, and so it’s here that you’re likely to see significant fluctuations. You’ll sometimes hear breakout trading being called the 60-second option because the timeframe is literally that short.

Intelligent High / Low trades – it seems counterintuitive, but sometimes good news may result in falling prices in the markets. That’s because even though the news may appear to be good on the surface, such as a rise in manufacturing productivity, if the markets were expecting a greater rise then the news comes as a disappointment which they will then adjust for. If you can predict when such things will happen then high/low trades can help you to profit from them.

Example 3 – Using Candlestick Formations

As a new trader, you might find this strategy the most difficult to understand, but the good news is that once you do it is going to be the simplest one to put into practice and profit from.

When you look at a typical graph of an asset price then you’ll be looking at an oversimplification that features a before and after. If you want to know more (and you do) then look to candlesticks to fill in the details.

Candlesticks appear on an asset’s chart over time. The bottom of the Candlestick indicates the lowest price it reached during a particular time period and the top indicates the highest price it hit. In the middle you will also see the opening and closing price, so a candlestick gives you an easy to digest view of the price range fluctuations for that asset in that particular time period.

Now the way to use candlesticks in trading is to recognize different formations of them. Once you can do this you can better understand which way the price will go next.

For instance, if you see a candlestick with a gap then that means the asset price jumped significantly higher or lower. Gaps are unusual because prices usually move in a much more gradual fashion, hitting the majority of price points on the way. When one appears during a period of low trading volume then it’s telling you that there is likely to be a quick correction.

This can happen just before a market closes for the day when there aren’t many traders left placing trades. The gap can be produced in this situation by large trades, but that doesn’t mean that the asset is strong. Maybe the gap wouldn’t have appeared if more trading had been going on, so knowing this you can estimate the gap in the price of this asset and use that information to plan your trades.

If gaps appear when trading activity is high, but the price is not moving much then this can indicate that there may be a new breakout, or surge in that direction. Again, use this information to your advantage when you trade.

If a gap appears when trading volume is normal and there’s a trend in one direction, it might suggest that the trend is accelerating. Good intelligence to have for your next trade.

Developing a Binary Options Strategy Without Risking Money

If you’ve taken all of the advice in this article on board then you’ll no doubt be wanting to test your new binary options strategies, but you still might be reluctant to get your feet wet when you are aware of how easy it is to lose money. You don’t want to blow all the money in your trading account on testing out your theories, do you?

That’s where a binary options demo account comes in useful. Every half-decent broker will let you use their trading platform demo fashion, gambling nothing more than numbers on a screen instead of money from your account. It’s probably the best way there is to start testing (and recording in your diary, naturally) your binary options strategies, without losing your shirt.

The Strategies

One of the beauties of binary options trading is that there is virtually no limit to the kinds of assets that can trade in. Trade on those assets that are most familiar to you such as euro-dollar exchange rates. Consistently trading a single asset will help you to gain that all-important familiarity with it to help you predict changes more easily. There are two types of strategies explained below that can be of great benefit in binary options trading.

1. Trend Strategy

This is a popular strategy, and it is also called the bull-bear strategy. To implement it you’ll need to keep an eye on the rising, declining and the flat trend line of the traded asset. If you see a flat trend line and think that the asset price is about to climb, use the No Touch Option.

If the trend line shows that the asset is going to go up, choose CALL.

If the trend line shows a decline in the asset price, choose PUT.

This method works just like the CALL/PUT option but in this instance, you decide on a price that the asset mustn’t hit during the time period you specify. So, save Facebook’s share price is $490 and the trading platform says the No Touch price is $495. If it doesn’t hit $495 during the time of the trade, then you win.

2. Pinocchio strategy

Use this strategy when you expect the asset price to fall or rise dramatically. Choose ‘call’ if you think it’s going to go up or ‘put’ if you think it’s going to go down. This one is best tested on a demo account before you go live.

3. Straddle Strategy

This approach is best used when the market is volatile and when you’re expecting significant news about a particular asset to break. This is a strategy that’s much respected throughout the world of trading. It lets you avoid choosing between CALL and PUT; you put them both on the selected asset instead.

The overall plan is to use PUT when the asset’s value has gone up, but there is a suspicion that it will go down again soon. As soon as the decline starts, put the CALL option on it, because you expect it to rebound soon. You can also use this strategy in the other direction, by placing CALL on a low-priced asset and PUT on a rising asset value. This boosts your chances of success by covering you in both directions. The straddle strategy is a favourite of traders when the market or asset is tending to fluctuate.

4. Risk Reversal Strategy

This is one of the most popular binary options strategies because it’s designed to reduce the amount of risk involved with trading and boost the likelihood of securing a profitable trade. With this approach, you place CALL and PUT options on an asset at the same time. This can really help when assets are volatile.

5. Hedging Strategy

This is another one of those binary options strategies where you place both call and put positions, with strike prices that overlap. The thinking is that at least one of them will pay out. You can make more than if you just select one option, and if you lose then it will still be a lot less than the straight loss you would suffer from just one option. It’s a useful tool to add to your trading bag of tricks.

6. Fundamental Analysis

Binary options strategies almost always require that you have knowledge of the underlying assets that you are effectively gambling on. The theory with fundamental analysis is that you really go to town on understanding the business whose share movements you are interested in understanding. To do this you need to get to grips with things like their earnings reports and financial statements.

As a trader, this review helps you to understand how the company has been performing and how its stock reacts to particular market news. If you know well enough what kind of shape the company is in and what kind of events have caused its share price to fluctuate, then you’ll be much better placed to predict and therefore profit from future changes.

We hope that this guide has been useful in preparing you to take your first steps with creating your own binary options strategies.

Binary Trading Strategies 2020 – Best Binary Options Strategy

Developing binary options strategies can be a very difficult task if you don’t know what you are doing. This is why you should be practicing your method for quite some time before the live account gets going. There are several things you can do when it comes to a strategy. Learning everything you can about the markets you want to trade is the first and foremost part of the process. Without common knowledge of the asset you want to trade the likelihood of it working diminishes greatly.

What does it take to create a winning strategy? First of all, it takes a lot of dedication. Developing simple binary options trading strategies is a key to success. You may put in hours upon hours of time into making a working method. The key is not to get discourage if you aren’t successful at first. During the development you will learn the markets so well, that a hidden gem may pop up and save you. Keep pushing to find one that works. Also, don’t try and find or build the holy grail of binaries. The odds of this are zero. There are no sure bets in trading or safe harbours. All you need is a better winning percentage than losing. We’ll break down some of the things to help you get started on you strategy development process in our binary options trading school.

Binary Options Trading Strategy

If you are a better than average trader and can understand the markets this is where you want to start. You feel like you’ve watched the markets for some time, and you are ready. You must think about what might work and might not work. Rule out all the garbage so you don’t waste your time. Take a look at what you’ve done so far.

Are you a short-term or long-term trader? Are you looking to take 60 second binary trades or daily? Bring all the information to the table and then go from there. Once you have this you can start picking the assets you want to trade. Look for patterns on the charts (trading with candlesticks) or use indicators to help you decide. Price action is your friend so make sure you include that as well. You have a lot to consider. After a while things should come together for you to start testing. If you find something that has potential, you must backward and forward test. You’ll be happy you did before real money is at stake.

You need to pick a broker where you will apply your strategies from our binary options brokers list. Be sure you do not find a random broker or an offer you mysteriously received in your inbox. You can check out the IQ option platform, which is the best trading software in our opinion. If you reside in USA you should read our Nadex review.

Copy Someone Else’s Strategy with a Binary Options Robot

Don’t feel bad copying another traders work with binary options robot. Take a strategy you found in Binary Options University or in a book and do your own testing. Be sure it works the way the developed says it does. Again, test and test some more. This will help you over the long run. If you find some success after a while you can then bring it to the IQ Option trading platform. Over time you will see if it is successful or not. Again, don’t get down if it doesn’t work. This is a long process.

Free Binary Options Trading Strategies

If you are feeling really good about your fundamentals of binary trading skills, you can take someone else’s strategy and make it your own. The strategies we suggest to apply are all free binary options trading strategies. We do not charge you to use our website and large portfolio of websites. You can apply a moving average or some kind of trading indicator to help rule out the noise. There is so much you can do to an existing strategy to make it that much better. Don’t try and reinvent the wheel if it is working. A lot of times people tweak methods and make them worse. This leads you to believe the original strategy isn’t good. You can always change what you have, but remember you won’t know for some time if it is good or not.

Test the Binary Options Trading Strategy

As mentioned above, this is probably the most important part of developing a strategy. Testing it can save you tons of money. We would say time, but the fact is it takes time to practice and make it right. Some have tried to trade with binary options robot where others have been chasing higher binary options payouts via touch no touch binary options.

How do you test a strategy? Easily, all you have to do is open a 24option free demo account or alternatively use the binary.com app and you are well on your way. You of course need the charting software to manage the price action. Bring the two together and you are well on your way. No matter if you are using indicators or just plain price, you have to put it to work and see if you get a decent winning percentage.

4 Simple Binary Options Trading Strategies

One of the biggest differences between binary options trading and simple gambling comes from the fact that gambling requires little or no strategy and is based more on probability and “luck.” Options traders rely on more complicated approaches, however, but formulating a strategy can seem incredibly difficult in the early stages. Here, we will look at some of the factors to consider when you are developing your strategies in order to ensure that they meet your investment needs and allow you to use your strengths to maximize gains.

1: Selecting Your Time Frames

One of the first factors to consider is the trading time frame, and it can be argued that this is even more important for binary options than it is for other types of trading. This comes from the fact that your trading time period must be outlined before the actual trade is even open.

Selecting your time frame will depend on a variety of factors. What type of trader are you? How much time (on a daily basis) do you have to devote to managing your trades (and in looking for opportunities)? Do you prefer a fast-paced approach (such as those seen in 60 Seconds options)? Or a more conservative, long term approach (using weekly or monthly options expiries)? Are there any economic events (such as an interest rate decision or corporate earnings release) which will affect the performance of the trade?

All of these factors must be addressed when defining the parameters of your trade, and the results here will vary from person to person.

2: Selecting Your Binary Trading Assets

The next element in formulating your strategy is to decide on your trading assets. Do you have a strong knowledge base for a particular asset type? If, for example, you have a firm understanding of the stock market (and are able to interpret earnings statements) it will make sense to focus your attention on those markets. Alternatively, if you have a strong understanding of macroeconomics (constructing trades with economic data), you might prefer to focus on commodities or currencies.

There are factors that have a special influence on each these asset types, so it will be important for you to be able to actively trade during those events. For commodities, this might include events like the weekly inventories report in oil, whereas in currency markets it will be important to monitor the markets when major central banks are conducting their meetings.

3: Technical Analysis or Fundamental Analysis?

After you have decided on your trading assets and time frames, you will need to determine your forecasts for price direction. To do this, traders will either work from technical (chart) analysis, fundamental analysis (a study of economic reports), or some combination of the two. If you tend to be more skilled in areas of math and probability, you will likely be better suited for chart analysis. For the more “right brained” trader, this time might be better spent assessing recent economic data that is likely to influence the prices of your asset.

Most traders will use a combination of these two strategies, waiting for a major economic event to generate an overall bias (for prices to move either up or down), and then use technical chart analysis (using price charts) in order to decide on exact price levels to establish the trade. This can be helpful in increasing the probability for a successful trade, as it ensures your trade is supported by economic data and asset valuation.

4: Use Strengths When Formulating a Binary Options Trading Strategy

Formulating your binary options trading strategy can seem like a daunting task. To be sure, forecasting the future prices of an asset is complicated. But when we break down the process into its component parts, the process does start to look attainable. Most of these elements will be based on your investment needs.

Do you want to be an aggressive trader (higher risks and rewards), or do you want to take a more conservative approach (extending your trading time frames)? Fortunately, the markets have evolved in ways that cater to traders of all styles and investment goals. So, no matter which avenue you choose, there is an accompanying binary trading strategy that can be matched to your trading character.

10 Tips for Winning Trading Binary Options Strategies

Strategies are an extremely important part of trading. Some binary options trading strategies are proven to work extremely well, while others may be shared with others prior to being fully tested. The following 10 tips can be used regardless of strategy and trade type. Each of these can help prevent substantial losses and should also help in the accumulation of higher levels of profits.

1:Never test a strategy by investing any amount that will make it difficult to absorb a loss.

Trading does involve risk and no strategy can place the trader in the money 100% of the time. Only invest amounts that equal a small percentage of your total account funds. Your binary options trading education is important to remember while trading.

2:Money management skills should not be ignored when using strategies.

The same principles of fund management should still apply regardless of whether the trade is extremely basic or strategy-based.

3. Be patient

When investing smaller amounts in order to test strategies, don’t expect to generate substantial profits. Patience is a virtue, and having this trait will allow for reasonable trades to be made while important skills are gained.

4: Never force any trade, regardless of how desperate you are to test a strategy.

Market conditions must be considered, and analysis should be completed. Profits most often come from waiting for the right trade and then purchasing a contract. Forcing a trade is never a good thing.

5: Remain aware of financial economic data releases each day.

These can greatly impact the price of an asset and could easily render a binary options strategy useless at times. Monitor financial news at all times in order to avoid a high number of losses. Be sure you can get your money out if you win. Avoid trading with brokers on our binary options scams blacklist and instead be sure using the cashier like olymp trade withdrawal or other respected trading platforms.

6: Watch for stagnation in price movement.

It is not uncommon for asset prices to remain very stable just prior to announcements being made in regard to them. Once the latest information has been processed by investors, the asset price should quickly begin moving again. These period could either be problematic or advantageous when using certain strategies.

7: When using strategies to trade currency pairs, capitalise on time frames when liquidity is at its highest.

This is often the time period when the London and New York markets overlap and are both open for business at the same time. Other market overlaps also occur and could prove to be excellent trading times for currency pairs.

8: Always note the outcomes of trades made using strategies.

Doing so will allow you to quickly determine which strategies are most effective. It will also allow ineffective strategies to be eliminated.

9: Regardless of strategy type, when several losses occur in succession, stop trading temporarily.

This time away can be used to re-evaluate the ever-changing market and adapt to current conditions.

10: Be willing to accept that some trades will end out of the money.

Emotions will play a role in trading. By being willing to accept loss as a part of the process, it will be much easier to press on and make the changes needed in order to profit more often than not. You need to learn itm and otm meaning in finance.

Strategies are too important to be ignored. New traders will want to make use of the most basic methods before moving on to more advanced methods. With time will come an understanding of how strategies are developed and how to alter existing binary options strategies so as to render them even more effective.

CONCLUSION OF BINARY TRADING STRATEGIES

The truth is, there is no holy grail trading system. If you can create one, please let us know. However, there are strategies that work that are available now or just waiting to be created. Figure out what type of trader you are during this phase and try to develop the best method possible. Use your binary options demo account wisely and don’t force any real money into the creation process. Once you have a good sign, run with it and see what it can do for you. If you have something that works over time, then you are in great shape.

Conclusion:

We make it our mission to not recommend anything but the best – which, according to industry experts, is IQ Option, the top regulated broker for your country with a minimum deposit of ONLY $10!

  • FREE $10,000 demo account
  • Award-winning trading platform
  • Licensed and regulated broker
Between 74-89 % of retail investor accounts lose money when trading CFDs

Latest Startegy Articles

Top Crypto Broker

Trusted Forex Broker

Please visit our sponsors

Join a million of
the best traders

Invest in your success

Copyright © 2020 All Rights Reserved BinaryOptionsU – RU

Binary Options Strategies

Below you can check the most profitable binary options strategies designed by Binary Options Hub just for you. If you are not yet ready, begin with our Binary Starter’s Guide. Trading binaries is rather easy, yet it requires a good binary options strategy. Binary Options Hub explains binary strategies in an easy and understandable manner, so it is not difficult to comprehend even for a beginner in binary options trading. Browse below to find the best binary options trading strategy! Trusted & Verified binary options trading strategy only.

Binary Ladder Trading Strategy

This advanced binary options trading strategy is perfect for traders experienced with pivot points. Many pros use this binary strategy daily.

Long-term Shot Trading Strategy

This strategy is designed for Touch / No Touch binary options. It provides high payouts and should be used for breakout binaries trading.

Capital Drawing Binary Strategy

This binary options trading strategy will help you to improve the binary options money management. Check this binary strategy now!

Binary Knock-on Options Strategy

One of the most advanced binary options strategies that do work. Be sure you are ready to take risks and profits offered by this strategy.

BreakOut Options Strategy

One of the basic binary options trading strategy. It has crucial importance. So be sure that you do read and understand it before trading!

Pivot Points Binary Strategy

Ready to implement some advanced math into Binary Trading? This strategy shows you how to use pivot points in Binary trading!

Diversified Option Strategy

Build a perfect winning grid using multiple types of binary options. See how Touch, boundary and regular options can bring profit.

Matryoshka Trading Strategy

Do not like to trade with a lot of different indicators? This strategy will allow you to do exactly that. Check out Matryoshka right now!

What is a Binary Options Trading Strategy?

As you may understand, binary options trading has evolved from a pure gambling activity to a systemised activity that can actually supply you with decent returns. Even though many traders still consider binaries as the instrument with significant risks and inadequate returns, this attitude is actually changing. When it comes to trading of any asset, the strategy plays an ultimate importance, this is why should dedicate substantial time in the development of your own trading strategy for binary options. In general, the strategy is here to provide you with a set of rules for entering the trade, supply your with the proper trading discipline and finally to assure that you have a higher win / loss ratio.

Should I Use a Pre-made Binary Options Strategy?

The short answer is YES. Binary Options Hub has composed a few common and proven trading strategies for you and by implementing them you can understand the market and the whole concept of binary options trading a little bit better. Also such binary strategies can actually help you in providing the fundamentals for developing your own personal trading strategy for binary options. It is recommended to try our strategies on the Demo account first, before you begin trading them on your Live binary options account. What is vital to understand is that such strategies are only useful for educational purposes. You may of course make money with these best binary options trading strategies, yet the strategy should always adopt the market behaviour and if you do not know how to modify your strategy according to the market changes, the strategy simply may stop working.

How to Develop My Own Best Binary Options Strategy?

There are a few things you need to look at when making your own strategy.

Best Instruments for Binaries

The first step is to identify the set of instruments you are going to trade. In general, there should not be too many instruments, nor there should be too few. Binary Options Hub would not recommend you to trade less than 4 instruments, as you simply may end up having low volatility and hence you are going to trade lacking proper knowledge, if you trade only one or two instruments. We would also advice against trading over 8 instruments, as it is quite hard to keep an eye on the technical and fundamental analyses for a larger count of the instruments.

Best Expiration Time of Options

Once you have determined the instruments you are mostly knowledgable about, it is vital to select your trading time frame. As you know, binaries can be traded online with the expiration time from 30 seconds to more than a year. Selecting your favourite expiration time is the most important part of the binary options strategy development. Usually Binary Options Hub would not recommend you to use anything smaller than 5 minutes and anything larger than a week, however, it should depend mostly on the analysis you are planning to perform and the strategy you are planning to use.

The Actual Binary Trading Strategy

Once you know the instruments and the time frame for your trading, it is now time to actually start developing the whole rationale behind your trades. You should generally focus on a few indicators that have prove working. The best way to do is to try our read-made binary options trading strategies and see which ones have been working for you. Then you do not need to copy the strategy but you rather need to extract the best parts of it. As for the indicators, they can work in your favour with the same chance of working against you, all depends on how you use it. Usually indicators are here to add a bit more clearance to your chart and explain your the past trend line moves, while forecasting the upcoming changes in the price of an asset. Once you have added a few indicators, you may actually see that you start understanding the moves on a chart little bit better. However, it is vital to note that adding too many indicators will remove any sign of a clearance from the chart. You will simply have too many indicators that contradict each other. This is why Binary Options Hub would not recommend you using more than 3 indicators in the same time, especially once you are just starting to develop your trading strategy for binary market.

Precautions Measures for Binary Trading

Overtrading of binary options is the most dangerous thing that can happen to a trader. It is important for successful binary options strategy to have a clear limit in terms of the trades you can achieve on daily and weekly basis. You should never trade just in order to compensate for your losses, you should only trade when you have a clear understanding of the potential results.

Arbitrage Strategies With Binary Options

Arbitrage is the simultaneous buying and selling of the same security in two different markets with an aim to profit from the price differential. Owing to their unique payoff structure, binary options have gained huge popularity among the traders. We look at the arbitrage opportunities in binary options trading.

A Quick Intro To Arbitrage

Suppose a stock is listed on both the NYSE and NASDAQ stock exchanges. A trader observes that the current price of the stock on the NYSE is $10.1 and that on the NASDAQ it is $10.2. She purchases 10,000 of the lower-priced shares (on the NYSE), costing $101,000 and simultaneously sells the same quantity of 10,000 higher-priced shares, costing $102,000. She manages to pocket the difference (102,000-101,000 = $1000) as profit (assuming there is no brokerage commission).

Effectively, arbitrage is risk-free profit. At the end of the two transactions (if executed successfully), the trader is not holding any stock position (so she is risk-free), yet she has made a profit.

Options Arbitrage

Options trading involves high variations in prices, which offers good arbitrage opportunities. While stocks may need two different markets (exchanges) for arbitrage, option combinations allow arbitrage opportunities on the same exchange. For example, combining a long put and a long futures position results in the creation of a synthetic call, which can be arbitraged against a real call option on the same exchange. Effectively, assets with similar payoffs are arbitraged against each other.

Additionally, other variations in arbitrage exist. A long position in a stock can be arbitraged against a short position in stock futures. Arbitrage opportunities can also be explored between correlated commodities and currencies (examples follow).

Binary Options

While the plain vanilla call and put options offer a linear payoff, binary options are a special category of options that offer “all-or-nothing” or “fixed price” payoffs.

Here is the graphical representation of the difference in payoffs between the two:

The linear (and varying) payoff from plain vanilla options allows for combinations of different options, futures, and stock positions to be arbitraged against each other (and a trader can benefit from the price differentials). The fixed payoff of binary options limits the combination possibilities.

The key idea of arbitrage is simultaneously buying and selling assets of similar profile (synthetic or real) to profit from the price difference. One of the biggest challenge with binary options is that there are hardly any assets that have a similar payoff profile. Trying combinations involving different assets to replicate the binary option payoff function is a cumbersome task. It involves taking multiple positions—something that is very difficult for timely trade execution and costs high brokerage commissions.

Arbitrage Opportunities in Binary Options Trading:

Within the above-mentioned constraints, the arbitrage opportunities in binary option trading are limited. Finding similar assets to simultaneously arbitrage against is difficult. The best available option is to go for time-based arbitrage. It involves identifying a market discrepancy, taking a position accordingly, and then booking the profits after some time when that discrepancy gets eliminated or the price target/stop-losses are hit.

NADEX is the popular exchange for trading binary options. Keep in mind that other markets for stocks, indices, futures, options, or commodities have different (and limited) trading hours. Multiple assets (stocks, futures, options) trade at different times of the day depending upon the exchange-enabled trading hours. Developments that happen when a market is closed may lead to rapid moves in prices when the market opens.

For example, there may be a news item that affects the FTSE 100 stock index and comes out when the London Stock Exchange (LSE) is closed. The exact impact of such news on the FTSE 100 index will be visible only when the LSE opens and the FTSE starts updating. Until then, speculations will be high about the perceived impact of the news on the FTSE’s value.

This index is the benchmark for trading binary options on NADEX. Since binary options trading is available for extended hours, a lot of volatility and price moves as a result of the news may be visible in FTSE binary options.

Suppose the LSE is currently closed and there are no updates to the FTSE index (last closing value was 7000). Assume last price for binary option “FTSE > 7100” was $30. As a result of the developing news, the FTSE is expected to rise once the market opens (say five hours from now), and this binary option value will start to rise (and fluctuate) from the current price of $30 to $50, $60, $70 and so on. Since there is no certainty about what will be the exact FTSE value when it will open for trading, the binary option prices will fluctuate up and down. During this time, experienced traders can bet their money on FTSE binary options for time-based arbitrage.

Once the market opens, the actual change in the FTSE Index values and FTSE futures prices will be visible. That will lead to FTSE 100 binary options prices to move towards accurately reflecting FTSE 100 values. By that time, experienced traders could have spotted overbought and oversold conditions in the binary options market and made profits (possibly couple of times).

Other binary option arbitrage opportunities come from correlated assets, such as the impact of commodity price changes that lead to currency price changes. Usually, gold and oil have an inverse correlation with the US dollar (i.e., if gold or oil prices rise, then USD currency weakens and vice versa). Experienced traders can look for arbitrage opportunities in associated forex binary options in such scenarios.

For example, a trader observes that gold prices are rising. He can short sell US dollar by selling the USD/JPY pair or by buying EUR/USD pair. Similarly, an increase in oil prices can lead to an expected increase in the price of EUR/USD. A binary options trader can take appropriate positions to benefit from these changes in asset prices.

Arbitrage in other binary options, such as “non-farm payroll binary options”, is difficult because such an underlying is not correlated to anything. One can still attempt time-based arbitrage, but this would be solely on speculation (e.g. take a position as the expiry approaches and attempt to benefit from volatility).

Binary Options: Better for Arbitrage?

High volatility is a friend of arbitrageurs. Binary options offer “all-or-nothing” or “fixed price” profit ($100) and loss ($0). Like plain vanilla options, there is no variability (or linearity) in returns and risks. Buying a binary option at $40 will result in either a $60 profit (final payoff – buy price = $100 – $40 = $60) or a $40 loss. Any impact of news/earnings/other market developments will lead the price to fluctuate (from $40 to $50, $80, $10, $15, and so on).

Arbitrageurs usually don’t wait for binary options to expire. They book the partial profits or cut their losses before. Since binary options have fixed price flat payoffs, any change in the underlying value can have a big impact on returns.

For example, if the FTSE closed at 7000, and the binary option FTSE>7100 was trading at $30, and then positive news about the FTSE comes out. The FTSE reaches 7095 and is hovering around that level in a 10-point range (7095-7105). The binary option price will show huge variations, as just a one-point difference in the FTSE can make or break the win-loss payout for a trader. If the FTSE ends at 7099, the buyer losses the premium he paid ($30). If the FTSE ends at 7100, he receives a profit of ($100-$30 = $70). This -$30 to +$70 is a huge variation based on a one point limit of the underlying (7099 to 7100), and that leads to very high volatility for binary option valuations, creating huge price swings for active binary option traders to capitalize upon.

The Bottom Line

Standard arbitrage (simultaneous buying and selling of similar security across two markets) may not be available to binary options traders due to a lack of similar assets trading across multiple markets. Arbitrage opportunities in binary options are to be picked from those available during off-market hours in associated markets or correlated assets. The unique “all-or-nothing” payoff structure of binary options allow for time-based arbitrage opportunities. High variations enable high profit potentials, but also bring in large potential for losses. Due to its high-risk, high-return nature, binary options trading is advisable for experienced traders only.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect Choice For Beginners!
    Free Demo Account!
    Free Trading Education!
    Get Your Sing-Up Bonus Now!

  • Binomo
    Binomo

    Only For Experienced Traders!

Like this post? Please share to your friends:
Binary Options Trading For Beginners
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: