Binary options are the easiest financial asset to trade. Binary options are simple because they have a binary proposition at the heart. You either make a profit if your prediction is correct or you lose your initial investment.
Binary options work in a simple way, and the potential profits as well as losses can be predetermined and capped. Binary options trading is extremely popular with beginner investors.
Although the risks are minimal, they still exist. This is why you need to have a solid strategy for binary options trading. Inexperienced traders have lost their money due to volatility markets, lack of knowledge, and trading with unlicensed brokers. While the right strategy won’t completely eliminate risks, it can reduce them significantly.
The Best Binary Options Trading Strategies
Let’s look at some binary options strategies that can help you increase your success rate. Many strategies can be used together to create a trading strategy that suits your style.
Follow the Trends
This strategy is most widely used, for both binary options trading and general trading of financial assets. This is a common strategy: You track the price trends of any underlying asset that you trade.
If the gold price is trending upwards, which is often the case during inflation, then you base your predictions on the current price movements. You call if the price appears to be increasing, and you place if it falls.
This strategy is the most straightforward of binary options strategies. However, it’s not that simple in reality. While an asset’s price might be trending upwards or downwards, these trends aren’t necessarily linear. They instead zig-zag daily between high and lowest points.
You have two options. You can follow the trend by selling or buying binary options with longer expiration dates. This will allow you to predict the trend.
To understand trends, most traders use “candlestick” charts. These charts show a series bar graphs that represent the low, high and closing prices for the assets you are betting on. The “body” of the candle represents the range between the opening price and closing price, while the “wicks” indicate the highs or lows.
You can also trade using the zig-zag price swings. This is more risky because these swings are not as predictable or stable as the overall price movement. However, if you are able to profit more by going against the trends during these swings, then it is worth the risk.
If you are looking for a binary option trading strategy that works, then following trends is the best. However, they can yield lower returns than more risky trades. Trends aren’t permanent, so you could lose your money if something unexpected happens.
News Trends Strategy
This strategy is a variation of the previous. The trend strategy relies on technical analysis of the asset’s performance, but the news trends strategy scans the news and global events to find market-relevant signals.
Binary options guides will tell you that you should focus your attention on the news about the underlying asset you are trading for. Sometimes news events can turn the market around, causing the trend to be in the opposite direction from what your technical metrics are telling you.
Many news stories can affect the price of goods and services. There are many news events that can affect the price of goods and services.
To better predict the price movements of underlying assets, it is a good idea to monitor both technical indicators as well as news events.
60-Second Strategy
Binary options trading with a one-minute expiry is the 60-second strategy. This strategy is very popular for many reasons. The first is that you can trade daily for a lot more than what you can do with trades that expire daily or hourly.
Second, both beginners and professionals will find the 60 second strategy easy to use. This strategy relies on technical indicators that can be used to predict the price at expiration. The support and resistance levels are probably the most important metrics. These represent the typical highs or lows of the asset.
Binary options are a financial instrument that allows you to analyze technical indicators and improve your chances of success.
Traders who have more experience may be able to go beyond analyzing support and resistance levels. They can also factor in moving averages to their binary options daily strategy. These are useful for eliminating minor, unpredictable variations in price levels.
This strategy is most effective when the market is calm and the price levels are between support and resistance levels. It’s better to wait for the market to stabilize before you start 60-second trading.
There is a high risk of losing large amounts of money very quickly. The risks can be reduced if you have the right technical analysis skills.
5-Minute Strategy
Binary options traders also love 5-minute expiration trading. Trades with expiration dates of 5 minutes retain the volatility of 60 second trades but better reflect the overall trend, making your predictions more secure.
The 5-minute binary options strategy, like 60-second strategies requires traders to rely upon technical indicators, particularly candlestick charts, just as the 60-second strategy. To get the best data, you should review them at one-minute intervals. This is a trade type to be focused on and not a strategy to use. You should instead use the other methods that we have shown here, in both 1-minute and 5-minute trades.
Hedging Strategy
Binary options hedging (also known as “pairing”) is a strategy that allows you to simultaneously place a call and a put on the same asset. The trader can reduce their losses by “playing both” as they will always gain something, regardless of what the outcome.
This strategy is rooted in betting. You “cover” possible losses by betting on both sides. This strategy allows traders to remove many of the risky and speculative aspects from binary options trading.
This approach should be used to calculate the profit you will have at expiration for each scenario. You don’t want to lose money. This is not always possible and it depends on the ask and bid prices as well as the percentage payouts from each broker.
This binary options trading strategy can severely limit your profit potential as you will always have to pay the buy-in for each option. While you may make some profit, the risks are minimal.
Straddle Strategy
Straddle is a form of hedging that is best used when volatile markets are present. It is useful for when the asset’s price is likely to change but not the direction. This strategy works well with the news trends approach. You’ll need to be on top of important announcements.
If you know that assets of a company you are betting on are about report their earnings (which can affect stock prices), you will need to call and put an option. Both options must expire simultaneously.
Binary options straddle strategies allow you to trade for and against an asset, minimizing your risk. You can also play against current market lows (put when it is rising, call whenever it drops), to increase your profits. The prices for buying or selling are less likely to occur.
Pinocchio Strategy
Pinocchio’s strategy is named after a particular type of candlestick that is shown in graphs. The candlestick is shorter than the “wick”, but it is longer. The wick expands in proportion to its body when the current trend isn’t there to stay. This is just like Pinocchio’s nose growing whenever he tells lies.
If the gold price is rising but the graph shows that the price will turn around soon, then you can take the put option and bet it will fall. However, this strategy can yield significant profits. There are some caveats.
There are serious risks involved. Trends are there for a reason. They don’t change or stop easily. You’ll make less likely predictions when trading with the Pinocchio Binary Options Strategy. There is a high chance that you will lose money.
What are binary options and how to trade them?
Binary options, which are simplified options contracts, turn every trade into “yes or no” propositions: The parties involved predict whether or not an asset will have a particular price at a given date.
You can earn or lose money depending on your prediction. There is no third option. This is why the name “binary” was chosen.
You need to be familiar with the basics of binary options before you can choose a strategy. Binary options do not give you any kind of asset. You don’t own the stock you trade on and you do not get voting rights or dividends like stock owners.
Binary options are a great option for those who want to make a career out of binary options.
If investors are bullish on an asset, they will buy a binary option. Investors who believe that the price of an asset will fall will sell. These are also known as “call” or “put”.
Binary options basics should also be remembered that you are not trading against the broker but against other traders. Although the ask and bid prices are determined by the traders, the value is always between $0 to $100.
All trades will end in a yes or no outcome, as we have already mentioned. In other words, every trader will earn either $0 or $100 (minus any option’s fees and price).
You might want to predict the value of silver at five o’clock tomorrow. Binary trades have an expiry date that can be set hourly, daily or weekly.
You can buy the binary option for $60 if you believe silver will reach $1,000 before expiration. Person B, on the other hand thinks silver will reach or fall below $1,000 and sells the option at $40
If silver is indeed at the strike price at 5:05 p.m. tomorrow you will earn $100. The profit will be $40 (minus the $60 invested). This is known as being “in the money.” If silver prices fall below $1,000 tomorrow, you will lose $60, leaving you with $0.
Binary options brokers charge fees for trades regardless of whether they result in a trade. If your luck does not hold, the fee will be below $0.
Assessment of the risk involved in binary options trades
Risk assessment is a key part of any binary options trading strategy. This financial instrument has the advantage of knowing in advance what the risks and potential profits are for each trade. You won’t lose a lot of money overnight simply because the stock price drops for an asset.
You can still lose a lot of cash if you aren’t careful. You can trade multiple Bitcoin options simultaneously, even though a single trade has a limit of $100. You can make more money, but you could lose more depending on how high the payout percentage is.
These risks are inherent to the market and there is no binary options trading strategy that will help you eliminate them. The bid and ask prices are a good indicator of the safety of a binary options trade. These prices reflect the likelihood of the binary option trade being executed.
Binary trades that are most likely to occur based on technical indicators will have high bid/ask prices, often exceeding $80. This increases the initial investment and reduces the potential for buyers to lose the trade.
Binary trading occurs in volatile markets, so the ask and bid prices will likely be closer to $50. This means that traders expect the odds of the asset’s worth ending up on either end of the strike price to almost be equal.
Finally, if a stock is unlikely to hit the strike price at expiration, its bid and ask prices will be very low, around $15. This allows you to make small but easy profits if you sell the option. It’s a cheap way to buy in and has a low chance for success.
Practically every binary option strategy that works depends on risk assessment. Before we go any further, let’s discuss the risks associated with binary options trading. With options – unlike traditional stocks trading where you can retain the stock regardless of its price falling, you could lose all your investment if markets do not go your way.
There is a lot fraud in binary options trading, with brokers offering unfair terms and refusing to pay traders. If you are in the US, check that the broker is regulated by the Commodity Futures Trading Commission and Securities and Exchange Commission.
Last Thoughts
We have highlighted the top binary options trading strategies that you can use when dealing with this financial instrument. They are both useful for novice traders and more experienced traders, and each one is unique.
It is important to be aware of all the risks involved in binary options trading. You should never gamble with money that you cannot lose. Stick to strategies that suit your skill level and trade with underlying assets that you are well-versed in.
FAQ:
Which strategy is best for trading binary options
We’ve highlighted the best strategies you can use to trade binary options, each with its own pros and cons depending on market conditions and your knowledge.
- Follow the trends
- Trends in the news
- Strategy for 60 seconds
- 5-minute strategy
- Hedging strategy
- Straddle strategy
- Pinocchio strategy
Can binary options make you money ?
Binary options trading can make you money. But it come with risks, and most traders lose their money over time if they don’t apply good trading strategies and good money management of their trading portfolio.
How do you win in 60 seconds binary options?
Technical indicators are the most important thing you can rely upon when trading 60 seconds. You must first keep an eye on the one-minute candlestick charts and look out for resistance and support levels. To eliminate the variation inherent in this type of trading, it is important to consider moving averages.