When it comes to trading, you do not have to be a seasoned veteran broker to make a good profit. Observe these 5 golden rules of trading to give yourself the best chance of succeeding in the fastest growing method of investing in the financial markets.
5 Golden Rules to Trading
Rule No.1 Do Your Homework
Before making a trade, there has to be a reason for believing that the asset value will either go up or down. You can’t just rely on a gut feeling, successful traders base their trades on cold hard facts – be they fundamental analysis i.e. economic news and data or technical analysis i.e. the charts. There are plenty of Daily Market Reviews on offer, particularly here at binaryoptionstrategy.com so there no excuses not to be informed of events past, present and future. The same applies to getting chart information.
There is no shortage of free technical analysis and signal services available on the internet, making your job, as long as you put the time and effort into it, a whole lot easier.
Rule No. 2 Know Your Assets
It is very important that you understand the assets you trade. Top investors appreciate the connections between assets and anticipate the various knock-on movements. With so many assets being offered by a growing number of different platforms, it is far more advisable to specialize in a few assets than try to understand them all. The more you learn about an asset, the more you will understand why it is moving in a particular way, making predicting its movements much easier. Popular assets due to the widespread availability of news are Gold, Oil, and the EUR/USD.
Rule No.3 Manage Your Money
Money management is an important facet to successful binary options trading, but often overlooked. Make sure you decide in advance how much money you are able and willing to invest on each trade and how much in the entire trading session. How you trade should depend on your experience, the strength of the market movement at the time, the range of different assets you are trading AND the money you are willing or able to trade. Binary Options can form an integral part of someone’s overall investment in the financial markets but make sure the trades are planned and the investment levels decided beforehand.
Rule No. 4 Be Adaptable But Stay Strong
This may sound a little contradictory but a key advantage of binary options is that you can profit in bearish, bullish and volatile markets. Be flexible and choose the best trading strategy for the current conditions and be strong enough to stick with it if it’s the right technique for the trading conditions. For example, the ‘Straddle’ technique which involves buying and selling at low and high points in a volatile market can double your profit if both trades end in-the-money. However it is no use when the market is moving strongly in one particular direction. So have flexibility in your strategies but stay strong with a potentially winning strategy. If all the indicators are pointing one way, go that way and be strong once you’ve gone that way.
Rule No. 5 Practice!
Most platforms offer some sort of demo account. Some are time restricted, others not. They exist for your benefit, so use them! A demo account is probably the best way to familiarize yourself with the platform as well as the actual customer service being offered which is also important. Use a demo account to try out new techniques and trading strategies before you implement them with real money. Remember… Practice makes perfect!
So go out there and start trading Binary Options – the quickest and easiest way to invest in the financial markets!
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?
Generally speaking, there are two main categories of strategies when it comes to binary trading:
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
The strategy that we are going to present is a very simple “Type 2” strategy. It’s purpose is to help you predict the direction of the market movement and have a high percentage of options that finish in the money. This strategy is based on the assumption that markets tend to correct themselves after movements in one direction, and the price usually goes up and down. This means that if the price has raised in the previous timeframe, it is more likely to fall in the next one.
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.
Binary options usually have a small timeframe and are ideal for this type of technique. The trading platforms of the brokers will show you a recent chart of the asset that is well suited for the option’s timeframe. If an option expires in 15 minutes, you are likely to see the chart for the last 45 minutes and an empty chart for the next 15 minutes like in Figure 1:
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:
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.
More binary options strategies
Here is another interesting strategy that helps in predicting the asset movement that can work great with certain pairs: Cointegration Strategy
If you want to see more binary options strategies we recommend you to visit the strategy section of Binary Options World (www.binary-options-world.com): Binary Options Strategies
There you will find more “Type 1” trading strategies, including strategies for news trading (TOSNT and ASBOCT) and the so called “Grinding Strategy”.
Strategies for gain in binary options
Different trading strategies
Just like stock trading, binary option trading requires the knowledge and use of strategies to put the odds on its side to gain in the long term. There are two main types of speculative trading strategies in the world of professional trading: it is the technical (or graphic) analysis and fundamental analysis that we will analyse in the first place. We will then deal with the two empirical methods that are most widely shared on the web: the martingale and trading with the traders’ tendency tool.
Trading with technical analysis
The technical analysis – or chart analysis – involves studying the exchange rates charts of different assets in order to predict their future orientation.This type of analysis is based on the Dow Theory. This theory, realized by ??a great financial analyst and co-founder of the Wall Street Journal, on the principle that the “market remembers”. This means that what has been observed in the past, reiterates itself again today and in the future. In other words, the analysis of decades of charts histories has enabled the technical analysis to identify specific contexts where it becomes possible to predict the future orientation of an exchange rate with a significant reliability. The technical analysis therefore consists of studying the charts using technical indicators (to have access to certain digital information or additional charts) and observing patterns of graphics and / or candlestick charts patterns. This type of analysis is most commonly used by traders. Many books and websites will inform you about its learning, its method of application and the different strategies associated with it.
Trading with traders’ tendency indicator
The other empirical method regularly seen on the web consists of monitoring a tool for “indicator of traders’ tendency” (also called “tool of traders’ sentiment“), provided by the online broker. This tool describes the balance of positions at the purchase and sale of each index at a given moment. Provided by the broker, the tool shows you the percentage (%) of their clients with positions at the purchase and the percentage (%) of their clients with positions at the sale (in real time) for a defined financial asset. The clients of an online broker cannot trade on Wall Street but some have the audacity to trade “by instinct” (and ignore those who use the martingale method mentioned above…). Therefore, this type of tool becomes completely obsolete and its reliability is totally uncertain or even completely absent. Once again, the Binary Oz team warns you against this type of strategy and invites you to avoid following it.
Trading with fundamental analysis
Fundamental analysis is the second branch of market analysis for binary option trading. This method focuses exclusively on economic statistics and the overall economic climate to predict the future orientations of the exchange rate. For example, the crisis of 2008 was an excellent opportunity to stake downwards on the main publicly-traded companies, especially the banks and investment funds. On a smaller scale, dozens of economic indicators are published daily (such as the unemployment rate in a country, for example). All these economic figures are available in economic calendars available online on the internet. The real-time monitoring of these new ones can help you take decisions to increase or decrease the principal instruments traded in binary option, including the currency pairs of the Forex market.
Trading with a method of Martingale type betting
There are many websites or ebook extolling the merits of using a martingale. What is a martingale? A martingale is a betting method that consists of increasing the amount of the initial investment at each loss until a gain is achieved. Suppose you stake € 20 upwards to the EUR / USD exchange rate. The principle of the martingale will lead you to stake double your bet until your winning position of closing. In our example, if you lose your transaction, this principle will invite you to repeat the same bet for an amount of € 20. If your position closes again at a loss, you should then bet this time an amount of € 40. The principle is to offset losses of previous bets until achieving the gain that was initially sought. The risk can only become very large if you suffer a long series of consecutive losses. By leveraging € 40, then € 80, then € 160, € 320, € 640, € 1028 … In a few blows, the amounts to invest become astronomical. The result: Your account is empty and you just have to file new capital and file a dispute against the person who extolled the merits of this strategy.
Our advice: never use any Martingale.
Being the winner in Binary Options is not obvious
And yes, being a winning trader in binary option in the long term is not disconcertingly simple. If this were the case, we would all naturally be rich…! Nevertheless it must be recognized that certain particular traders earn a very good living. Here, we will explain the principal points that all such winning traders must meet.
How to gain in binary options?
How to minimise the risks
Minimising risks constitutes a good starting point to avoid bankruptcy. The best method is to follow the rules of capital management, also called “risk management” or “money management” by professional traders. This common sense rule consists of not:
– placing big bets
– putting all your eggs in one basket
– do not invest too much available capital
It is advisable not to bet more than 5% of one’s capital in one position. Thus, if you have € 1000 on your binary option account, it is not advisable to bet more than € 50 in a single transaction. In the same token, it is not advisable to bet on a too large number of instruments that are correlated in the same direction. For example, it is not advisable to bet simultaneously on the fall of the EUR / USD, EUR / GBP, EUR / CAD, EUR / JPY, EUR / CHF … etc. In this case, you understand that a single jump upwards of the Euro currency (EUR) could jeopardize all your positions.
The psychology of the winning trader
The psychology of the trader plays an important role in the likelihood of his / her gain or loss. In fact, the principal loss factor of a trader in binary options is directly due to his / her cognitive biases. The typical error is to lose all sense of money and bet more and more important sums to fill a high loss that has been suffered. Under no circumstances should one bet excessively; one must keep in mind a strict trading plan and a method of rigorous capital management. Being governed by one’s emotions and the desire to earn more money or to erase a loss by taking more risks always leads to loss. In contrast, a winning trader will be disciplined, Cartesian and will never let emotions interfere in his / her choice of trading (or at least, as much as he / she can.).
The best methods to gain in binary option
In conclusion, the best method to gain in binary option is to study the technical analysis and fundamental analysis, to develop a strict trading strategy with a rigorous capital management plan (and stick to it), and to not be ruled by one’s emotions (which lead many amateur traders to lose…).
Binary Options Strategies
Successful binary options traders approach the market with two key tools: Some great Binary Options strategies and a money management strategy.
These two tools are an absolute necessity for any trader looking to be successful. Here on BinaryOptionsStrategy.net, we will provide you with all the information necessary to create your own trading strategy and your own money management strategy.
This article will explain you the basic of these two binary options strategies, and provide you with links to all relevant fields. It is the perfect starting point for you to create your own binary options strategy.
The binary options strategies
1. Trading strategy
Binary options are short term investments. Therefore, timing is just as important to your success as correctly predicting the direction of the market. Your binary options strategies for trading should clearly define the signal you want to trade, and when you want to enter the market when the signal occurs. Based on technical analysis, there are a number of possibilities:
- Trading the breakout: You can trade the market breaking out of a continuation or a reversal pattern. More accurately, you have to define whether your will invest in a binary option in anticipation of the breakout, in reaction to the breakout, or in reaction to the pullback. Which option you chose depends entirely on your preferences. Of course, you can also combine these events and trade all three of them, if you like.
- Trading trend lines: Trend lines can be traded the same way as support and resistance levels. You can invest in the impending turnaround when a trend approaches a trend line, and you can invest the price breaking through a trend line.
- Trading percentage retracements: In a trend, retracements usually end at a percentage of 40 to 60 percent of the prior advance. Investing in a turnaround in price direction around these levels of a retracement can provide you with good trading opportunities.
- Trading the gap: Sometimes prices take a big jump in either direction. The created gap is likely to close again. You can invest in the closing of the gap with a binary option.
- Trading technical indicators: Technical indicators can provide you with great insight to what the market is doing. Applied the right way, technical indicators can also generate signals you can trade with binary options.
- Trading candlestick formations: Candlestick formation can provide you with short term indications about future price movements. By being able to recognize and interpret candlestick formations, you can find many attractive trading opportunities.
- Trading a combination of these techniques: Only the most risk-tolerant traders should base their trading strategy on only one signal or technique. Usually, the results of your strategy can be improved by combining techniques. For example, you could trade candlestick formations in the direction of the main trend around percentage retracements. A strategy like this should help you win a higher percentage of your trades than trading any of these techniques by itself.
2. Money management strategy
Without a good money management even the best trading strategy will ruin you eventually. In binary options, you will inevitably lose some trades. Therefore, the main goal of your trading approach cannot be to win all trades, but to win enough trades to end up with a net profit in the end. Money management is the tool that will help you achieve that.
Good money management consists of a number of rules, most importantly that you should only invest a fixed small percentage of your overall capital in one trade. This percentage should not be higher than 5 percent. By this logic, if your total capital is $1,000, you should never invest more than $50 per trade. A rigorous money management such as this will help you survive losing streaks and make a constant profit.
In the right sidebar you get a total overview of most of the strategy articles here on BinaryOptionsStrategy.net – And you can find the rest of them below:
- Contrary Opinion Strategy
- Perfect Binary Options Strategy
- Best Binary Options Trading Strategy
- True Trading Range
- The Hammer and the Hanging man
- Head and Shoulders formation
- Engulfing candlesticks
- Channel breakouts
- Island reversal
- Gaps likely to close
- Contrary Opinion Oscillators
- Flag Pattern
- Triangle Pattern
- Rectangle Pattern
- Pennant Pattern
Enjoy – and welcome to BinaryOptionsStrategy.net.
Further reading and references
1.Dynamic hedging portfolios for derivative securities in the presence of large transaction costs (A Marco, PS Antonio 1994)
- Paul Wilmott on quantitative finance(Paul Wilmott 2013)
- Mathematical modeling and methods of option pricing(L Jiang, C Li – 2005)
- Quantile hedging(H Föllmer, P Leukert – Finance and Stochastics, 1999)
- Hedging by sequential regression: An introduction to the mathematics of option trading(H Föllmer, M Schweizer – Astin Bulletin, 1989)
- Robust hedging of barrier options(H Brown, D Hobson, LCG Rogers 2001)
- Trading Binary Options(A Nekritin 2012)
- Options trading volume and stock price response to earnings announcements(C Truong, C Corrado 2014)
- User-interactive financial vehicle performance prediction, trading and training system and methods(Peter Hancock, Jeffrey Saltz, Andrew Abrahams, Sanay Hikmet 2008)
- To pay or be paid? The impact of taker fees and order flow inducements on trading costs in US options markets(RH Battalio, A Shkilko, RA Van Ness 2011)
- System and method for creating and trading credit rating derivative investment instruments(D O’Callahan, D Salvino, C Shalen 2005)
- Static hedging of exotic options(P Carr, K Ellis, V Gupta 1998)
- Method of creating and trading derivative investment products based on a volume weighted average price of an underlying asset(Dennis O’Callahan, Catherine Shalen 2006)
- Currency derivatives: Pricing theory, exotic options, and hedging applications(DF DeRosa 1998)
- Understanding the implied volatility surface for options on a diversified index(D Heath, E Platen 2004)
- Derivatives: principles and practice(RK Sundaram, SR Das 2011)
- Event-driven trade link between trading and clearing systems( Baecker, J Buddendiek, K Carnahan 2008)
- On pricing barrier options(P Ritchken 1998)
- Derivative securities and system for trading same(Bradley J. McGill, Evan J. Winston)
- One-touch double barrier binary option values(CH Hui 1996)