Today, one of the most popular trends in the financial markets is trading in binary options. Both beginner and experienced traders are hastening to incorporate them in their investment portfolios. And like all other trading platforms, you need a strategy to use in order to constantly make money.
If you plan to just rely on luck, it is not very safe to trade in binary options as sooner or later it won’t work for you, and you could lose your entire investment. Instead, you should have a solid technique that you could count on and use each time to make the right predictions. Furthermore, you need to utilize a strategy that you comprehend and that continually increases your chances of winning.
1. Trading the trends strategy
When the market moves up and down, it will seldom move in a straight line. Rather, the market zig zags, taking three steps forward and two steps back. These movements are referred to as trends, and they are predictable, which is why they are an excellent basis for a strategy.
You have two basic possibilities to trade trends: following the trend as a whole or make riskier trends by following each swing separately. You can also combine both of these approaches and trade a trend simultaneously in multiple ways.
The classic way to trade a trend would be with a high/low option. High/low options predict that the market is going to trade higher/lower than the current market price after a specified period of time, which is perfect for trends. To trade on an uptrend, you would invest in a high option and to trade on a downtrend, you would invest in a low option.
2. Trading the news strategy
The significant news will often have a huge impact on the market. When a company surpasses the market’s expectations, the price will climb, and when the government publishes those disappointing unemployment data figures, the entire market will plummet.
Nevertheless, taking news and turning it into a precise trading decision is hard. Unlike trends that permit the use of mathematically exact predictions, the news does not provide you with any indication for how far the market is going to rise/fall or for how long the market will rise/fall.
3. Trading candlestick formations strategy
For newcomers, the trading candlestick formation may be the easiest strategy. Candlesticks are a special way of displaying market movements. Rather than displaying thin line price movements, candlesticks display market movements in the multiple candles form. Each candle aggregates the movements of the market over a given period of time and then displays the period’s high, low, opening and closing price.
This simple change allows candlesticks to tell you everything you need to know about a specific period. You are provided with the opening and the close, along with the full trading range, which means that you will know every price the market ever reached in the specified period. Line charts use only one of these prices for their lines, ignoring all of the rest, and they deny you most of the information a particular period has to offer.
4. Fundamental analysis strategy
With this strategy, you focus is on the analysis of the overall performance of a company. Trading in binary options, your interest lies in knowing how healthy the balance sheet, income statement, and the cash flow of the company are prior to buying an option.
The other factors that need to be looked at are employee and partner satisfaction. In a nutshell, this strategy works when looking at the overall picture of the business or if you are thinking of investing in the industry overall.
5. Technical analysis strategy
This is a popular strategy in options trading, which is mostly concerned with studying past trades, using different parameters like charts in order to forecast the future asset prices. This method isn’t concerned with the fundamental value of an asset. It is very useful in options trading because as a trader, you don’t have to research the company’s financial statements.
6. Basic options strategy
This strategy is extremely popular among options traders. It is designed and integrated by traders to safeguard themselves from total losses. You choose an underlying asset/currency that interests you and then, should the market movement of the strike price head upwards, you place a call option. At the same time, you also place a put option on that asset.
7. Co-integration strategy
There might be two stocks in the market that have a highly correlated relationship. This could be a result of them being in the same industry and trading in the same market, hence it will be affected by a number of factors in the same manner. Given this highly correlated relationship, you will discover that when there is a gap between the stocks, it will soon close. The gap can be the result of the temporary weakening of one stock. Your goal is to identify the gap.
After you have done so, you should buy the call option for the stock that is the weakest or buy a put option for that asset when the stock is at the higher price and is likely to come down. Sooner or later, the two assets are going to come to the correlation path and that will be your ‘point of exit.’
There are many strategies, and you could easily find something to provide you with consistent winnings. If you are new to trading, make sure you do your research thoroughly and identify the strategy that suits you best for your trading portfolio and pattern. When you get a little more experience, you will be able to create your own strategy or even combine two existing strategies to develop a hybrid.
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