Top Five Successful Strategies for Trading Binary Options
Trading in binary options is one of the most popular trends in the financial markets of today. Both novice and experienced traders are rushing to involve themselves in this investment portfolio. Just like most other trading platform or business, you must have a solid strategy in order to frequently make money. If you have no strategy or a tactic to assist you trade in binary options, you may consider yourself gambling. Relying on luck is not actually safe in trading binary options as it will suddenly not workout for you and you may end up losing all of your investment. You will need a good technique that you can use each time, which will assist you make the right decisions. However, you have to employ a strategy that you understand well and which frequently increases your chances of winning.
Bet or Trade? Strategies are generally grouped into two categories.
These categories are:
• Betting Model Based Strategies – in this strategy, it is presumed that the creator will employ betting strategies, whether they are familiar with financial markets or not. These strategies use different tactics that are designed to increase the chances of winning. Strategies based on the news are the best example in this category.
• Market Behavior Strategies – In these strategies, the creator relies almost fully on technical and statistical data that are readily available or that they have researched and worked on. While these strategies are a bit harder to comprehend or master, they are the most reliable ones since they are objective. There are techniques created to help you understand some of the data, such as charts and which will make it easy for a new trader.
The popular strategies to go for are:
Fundamental Analysis Strategy
This strategy is focused on the analysis of the behavior of the overall performance or attributes of a company. As a creator or trader in binary options, you are concerned with knowing about the health of the balance sheet, income statement and the cash-flow statement of the company before you actually buy an option. The other factors that you should lookup include the employee and the business partners’ satisfaction. In short, this strategy tries to look at the total picture of the business they want to invest in their stock and at times the overall industry.
Technical Analysis Strategy
This is a quite famous strategy in options trading. It is majorly concerned with the study of the past, using different parameters such as charts in order to tell the future price of an asset. This method is not concerned with gathering the intrinsic value of an asset. It is quite useful in options trading because as a trader, you do not need to delve into the company’s financial statements. Among the tools used in technical analysis include Bollinger bands and Moving Average among others.
Basic Options Strategy
This strategy is quite famous among options traders. It is designed and used by a trader to safeguard him/herself from incurring total loss on their investments. You will pick an underlying asset or currency that you are interested in and then if the market movement of the strike price is directed towards a good direction, say upwards, you place a call option. At the same time, you will place a put option on the same asset. Let us use an example; The GBP/USD currency option is going at 1:4000. You place the call option of $100 which will expire in 30 minutes. The give out is 70% and 15% if you lose. In the first 15 minutes the asset is going at 1:4015 which is good. At this particular time, you buy a put option for the same asset at 1:4015 expiring in 15 minutes at $100. The giveouts are the same as those of the call option. At the end of the 30 minutes there will be two outcomes;
• Your 30 minutes call option wins and the 15 minutes put option losses. You would have earned $185 from the 70% call winnings and the 15% consolation refund from the put option (the opposite can happen, put option wins and call option losses).
• Both the call and the put options end up in the money. You will receive $340 ($170+$170). Since it is nearly impossible to lose on both options, the total risk of losing in this strategy is only $15 in order to win $140.
Algorithmic and signals
There are apps which are sold and which are very good at analyzing the market data. You may find it appropriate to invest in such an app. This app is installed on your computer and gathers data that you need and then analyze it to bring out the best possible outcomes. Technical and fundamental analysis data are in use here. The computer will then select a trade for you to trade in. You could even go ahead and create the app to be actually trading for you. However, you need to frequently update the raw data that the app selects its analyzing details from.
Co-integration Trading Strategy
There can be two stocks in the market that have a high similar relationship. This could be because they are in the same industry and are sold in the same market, hence influenced by many factors the same way. Given the high similarities between such a pair of stocks, you will find out that whenever there is a space between them it will close very soon. The space can be created by the weakening of one stock temporarily. The main job here is to identify the space. After identifying the space, you should buy the call option for the stock that is weak or a put option for the asset if the stock higher in price is bound to reduce. Eventually, the two assets will come to correlate and that should be the �point of exit’.
Strategies, just like investment options, are many and you could end up with one which provides you consistent winnings. If you are a new trader, research well and identify the one strategy that works best with your trading portfolio and pattern. If you are a little more experienced, you can develop your own strategy or combine two existing ones to form a hybrid.
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