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Binary Options Trading Strategies

Binary Options Trading StrategiesDESIGNING & IMPLEMENTING A BINARY OPTIONS STRATEGY

 

How to Choose a Binary Options Strategy

When you are searching for a binary options strategy you must first understand that not all trading strategies work and neither all trading strategies are suitable for your profile. There are several factors determining the adaptability of a trading strategy on a particular profile:

1) Time Frame (binary options time frame can be from 1 minute to some months)

2) Risk Allowance (Trading Risk when trading binary options is fixed and pre-determined so what changes the picture is time frame)

3) Asset Selection (If you are specialized in trading a particular market / asset then seek for a suitable strategy). The right asset selection is more important than the selection of the strategy itself.

 

Implementing a Binary Options Strategy

Choosing the right strategy might prove difficult, but implement it right is even more complicated. In any case, clear decisions and high discipline are absolutely essential in order to implement successfully any kind of strategy.

A trader must first identify an opportunity and then implementing the right strategy at the right time. Knowledge, practice and guidance determine in a high extend if a trading strategy will prove profitable or not. Take advantage of a Demo Account and practice your strategy hard. Keep track and measure with precision your performance before trade for real money.

 

Binary Options Tactics

 

Finding your Niche at the Market

In order to trade binary options profitably, you must first identify your own niche.  It takes research and practice to master a particular niche, but if you finally manage to master it, your winning potential will increase at least 50%. Today there is a huge variety of assets that can be used as the underlying instrument of a binary option trade {Forex currencies, indices, stocks and commodities}. The more familiar you are with a particular asset, the better your prediction will prove.

 

Take your Profits and don’t be Greed

When trading Binary Options you must seek for binary option brokers that will provide you with an Early Closure / Take Profit feature. Choose not to be greed. Instead target a certain winning percentage and try to reach it according to your time frame. When you reach it collect your profits and stop-trading for a while.

 

Stop-Loss Level as an Important Ingredient of any Strategy

Some traders believe that a stop-loss level is a strategy itself. Actually a stop-loss level is a key parameter for implementing any kind of strategy. Especially, day-traders should always have a stop-loss level which can be expressed as a percentage of their trading portfolio. Everyone can make a mistake when trading the markets, don’t try to prove that you don’t. Accept your mistakes and your losses and seek for another day to trade.

 

Don’t Use the Double-Up Feature

If I learned something after trading stocks 15 years is never to play “Double or Nothing”. This kind of strategy is a key characteristic of losers. If you made a mistake, admit it and close your trade. You shouldn’t double a trade just to cover your losses. If you are truly talented and your strategy is right you have all the time in the world to make money in the future. If you want to become rich in a couple of months you will probably loose all your money in a matter of weeks.

 

The Role of Technology when Designing a Binary Option Strategy

One of the most important factors when trading binary options is to find the right binary options platform to trade from. That is further more important for short-term traders who are more vulnerable to technological inefficiencies like delays etc. The platform that you will choose should not require any downloads and it should provide a simple web-based and user-friendly trading environment. Furthermore, you should select a binary option broker offering a trading platform that provides you with the right selection of assets. For example if you are a stock-trader then StockPair may be the best choice while if you trade the EUR/USD, OptionFair will pay you a maximum of 85% and therefore will probably be the best choice.

Compare at Binary Value According your Profile:

» Best Binary Brokers: Gold Traders

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» Best Binary Brokers: US Traders

 

Choose an Expiry According your Chosen Strategy

Choosing the best expiry time is a key factor when trading any market. The advantage of binary options is that they provide traders with a great variety of expiry times. An expiry time can be 60sec, 5 minutes, one hour, one day, one week, one month or even longer.

 

Types of Binary Option Strategies

 

1. Event / News-Driven Strategies

Event-driven trading strategies are based in a fundamental methodology that aims to exploit volatility opportunities following economic and political releases and developments. A news-driven strategy assumes the trader’s specialization in a particular market / asset. News is often already incorporated in prices and therefore it is difficult to determine the actual effect and the outcome of news in a market. There are many traders who don’t like the uncertainty of upcoming news so they prefer not to trade 1 hour before and 1 hour after news announcements. Maybe an event-based strategy is a good choice for a binary option beginner, given that he trades an asset that already knows. Sometimes it is better to trade on rumors and not on events. One of the most important rules when trading stock-markets is to buy on rumor and sell at the event {Buy the rumor, sell the news}.

 

2. The Market Pull Binary Options Strategy

This strategy is also called the Knock-On-Effect and it is based on the concept that the price movement of a particular asset will impact the price movement of another asset.  

For example:

(a) the US Dollar exchange rate affects highly the price of all commodities. Therefore, when the USD goes up against the other majors we should probably except that the prices of USD-based commodities (Gold, Silver etc) will fall.

(b) In another example the price of Gold is highly affected by the US inflation and FED monetary policies. So when, Federal Reserve easing its monetary policy, investors are afraid of inflation and thus buy Gold.

(c) In another example currencies of oil-producing countries like Norway or Canada are highly affected by the price of Oil. So when the price of oil goes down, the Canadian Dollar exchange rate falls. On the contrary, the currencies of oil-importers like China or Japan are loosing value when the price of oil peaks.

(d) Commodities like Gold, Silver and Copper are affecting the exchange rates of countries producing them, like Australia and Russia.

 

3. The Reversal Binary Options Strategy

The Reversal strategy is used when at an asset suddenly moves in a particular direction, but it is highly unlikely to continue or to stay at that peak and therefore it will probably move towards its original position. This strategy is effective but it requires high technical analysis skills.

 

4. The Straddle Binary Options Strategy

The Straddle is a complex binary options strategy that involves buying a Call and a Put Option on the same asset.  In other words the Straddle strategy aims to straddle an asset at both a high and a low price. Assets with a high volatility history are more suitable as the underlying asset of a Straddle strategy.

 

5.  Boundary Binary Options Strategy

The boundary strategy focuses on the upper and lower asset prices at a given time. This kind of strategy aims to forecast whether the price of an asset, will remain or not, between two points that form a boundary. A profit can be realized no matter the price of an asset goes up or down. Researching on historic asset price performance is crucial in order to profit from a boundary binary options strategy. Technical analysis should also be used in order to determine the right timing of execution and the choice of the expiry time of the trade. The boundary binary option strategy can be implemented on any kind of market conditions (bull or bear market).

 

 

Read More on Binary Value» Brokers Directory | » Trading Tips | » Options Glossary | » Options Platforms | » Trading Features | » Trading Links | » Rating Formula v.3.5 

 

» Binary Option Signals | » Binary Options Strategies | » Getting Started with Binary Options 

 

Binary Options Strategies

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