Binary Options Strategy
Following a strategy when trading digital options may significantly increase your chances to be profitable. However, you should stay realistic and be aware than you can never be certain of success.
Are binary options strategies infallible?
There is no perfect strategy in trading, no matter what any so called "Guru" or signal provider will tell you. All strategies have some flaws and weak points, and there is no such thing as a perfect mathematical model to achieve profits on the financial markets. When deciding to use a strategy you must be aware all the time that even the best strategy is no guarantee for success. However, this should not discourage you, because certain strategies can be very profitable most of the times. You only have to keep in mind that luck is a very important factor in trading, just as it is in life in general.
What type of binary options strategies exist?
Type 1: Strategies based on betting models - Those strategies presume that using specific patterns in terms of investment amounts and the right timing can generate profit no matter if the trader is skilled or not at market prediction. Those strategies presume that in certain situations you can design your option buying strategy to give you a high probability of winning. In this category you will find betting pattern strategies like The Grinding Strategy or strategies based on trading the news.
Type 2: Strategies on how to predict the direction of the market better - In this case the strategies are based on simple technical and statistical evidence that in some circumstances the market has greater chances to move in one direction over another. While technical analysis can be pretty complicated, there are much simpler ways of interpreting the charts, especially when it comes to binary trading.
Binary options simple strategy
Of course, this is not a rule and there will be many times when it won't happen, especially when the market is on a trend, but when the market is calm and fluctuations are at small levels (a low volatility) you will most likely see ups and downs constantly.
|If the current price is higher than the opening price (in the current sample the current price of 79.7199 is higher than the opening price of 79.6921) the price is more likely to move down, and you should buy a PUT option. In the opposite situation, when the current price is lower than the opening price you should buy a CALL option as the market is expected to move up.|
|Figure 1: USD/JPY one hour binary option chart|
After buying the PUT option you must wait until the expiry time, which is 15 minutes in this case. Let's see how the chart looked like after 15 minutes:
|The price moved down to 79.7032 and the option finished "in the money" generating a profit of 81% in only 15 minutes. As you can see, the price followed the tendency to normalize after a small increase and finished closer to the opening value. While this outcome is more likely to happen than the opposite, you should expect a decent amount of trades to end up the wrong way.|
|Figure 2: USD/JPY chart after option expiry|
You should also keep in mind when using this strategy that sometime the market is on a trend or some important news may be released that will shake the market to a degree that such simplistic analysis will be useless. This strategy is recommended on calm markets with small trading volumes and no news expected to be released in the following hours.
Binary options signals and automated trading systems
Some very experienced traders have developed their own complex trading strategies that render very good results. Such strategies and algorithms are available to everyone through special services that offer trading signals or even automated trading through their advanced systems.
Here is the list of the best binary options auto-trading strategies based on the actual results we had with them on our monitoring accounts:
More binary options strategies
Watch video about options strategiesBINARY OPTIONS TRADING: BINARY OPTIONS STRATEGY - BINARY OPTIONS SIGNALS (TRADING OPTIONS)
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More information about options strategies
Strategizing your investments is clinical for your overall binary options trading success. Just as trades vary, applying the correct binary options strategy is also a dynamic art all traders ought to master. In order to obtain minimal financial risk, reach maximum trading flexibility and simplify the entire trading process, below we have gathered some of the top trading strategies today's traders frequently apply.
Having a better control of your binary option trades is essential to your understanding about the financial markets behavior. The more you apply and follow these trading strategies, the more probability there is that your trade will end as a successful one.
Hedging/Straddle Binary Options Strategy
Applying the hedging/straddle binary options strategy is comprised of a simultaneous trade on one asset in opposite directions. This trading strategy includes risk management features which prevent you from enduring a full loss of your trades’ invested capital and the substantial chance to profit. The strategy is based on the presumption that "what goes up, must come down", and it works as follows:
- Choose your general direction: decide if you wish to invest in a “Call” or a “Put” option.
- Choose your underlying asset and invest according to the general direction you earlier decided upon.
- The trading strategy's tipping point; once the price of our underlying financial asset advances according to our predicted assumption, you make an opposing investment.
Despite the positive direction the trade has taken, traders ought to know that the potential threat of a sudden shift of the asset's general direction continuously lurks their trades. The accepted solution here would be to make an opposing investment.
If in step 1, your general direction leads you to invest in a “Call” option, in step 3 you will invest in a “Put” option. Consequently, you're now trading both “Call” and “Put” options, thereby minimizing the risk of losing on both options, and maximizing the chances of gaining from one of them.
In other words, the hedging binary trading strategy guarantees you'll end up “in the money”- its risk management in its finest form. To make things even better, if by the end of the trade the asset's market price was between the striking price of your first and second investments, you can actually end up benefiting from both trades.
The table below represents the USD/JPY price for a potential “Call” option. Let's assume the price will breach the descending trend line.
The price breaks the trend line and is retesting it before continuing its movement upward. Corresponding to the hedging strategy, at the retesting point, you invest in a “Call” option.
Once the price movement is corresponding to your prediction, i.e., the option is “In the Money”, you wait for an opposing trend line to break again toward a decline. As a result, you lowered your risk and doubled your potential to profit.
Hedging/Straddle Strategy Scenario Explanation
Normally, if you invest 0 in the USD/JPY option, as displayed on the chart above, and the asset's return is 85%, you either lose your 0, or alternatively, if you implement the above mentioned strategy, in the event that the trade ends up “In the Money”, you gain 0-even if one of the options expires “Out of the Money”.
Applying the straddle binary strategy will spring different results to your trade. If all of the conditions are correct; the price movement is in your predicted direction and you're “In the Money”, you can take this investment to a whole new level by investing in an opposing “Call” option.
Generally speaking, there are 2 possible outcomes to this specific scenario:
- If the market's price either rises or falls over the striking price of the “Put” or “Call” options at the end of the trade's time frame, the trade ends “In the Money” for one option and “Out of the Money” for the other option. Hence, you made 0 and lost 0, leaving you with a loss of .
- In the event that the market’s price stays between the striking price of the “Call” and “Put” options, the outcome would be a gain of 0.
Correction Binary Strategy
During the beginning and ending of round hours, assets tend to undergo unexpected surges (both upwards and downwards). These surges also occur prior to, during, and after important market announcements and are exactly what you should look for in order to apply the Correction binary trading strategy. The principle of this strategy is founded on the Correction rule. The rule states that if a price of an asset surges upwards or downwards and a gap appears between the current and previous price of the asset, the asset will then correct itself, and return back (close the gap) to its previous price.
Now that you know how the Correction rule affects an asset's market price, it is possible to leverage from it. Using the graphs' support and resistance lines, or the trend line that appears in technical analysis, you can identify price gaps. The Correction strategy asks you to detect such gaps and then execute a binary options trade in the opposite direction.