A solid trading strategy is necessary if you want to have a chance of being a profitable binary options trader. Unfortunately, a lot of traders often jump in head first when they begin, not thinking about the disadvantage that they are putting themselves at as they move forward and gain more experience in the industry. Trading is tough, and if you want to make money, one of the big things you need to do is to have a solid trading strategy before you ever make your first trade.
Here, we’ve outlined four of our favorite binary options trading strategies. These are perfect for beginners because they are not too complicated, but they are effective enough that top level traders use them. Our goal is to help you make smarter decisions when you trade so that you can be one step closer to your goals.
15 Minute Range Trades
The 15 minute range trade is perhaps one of the simplest trades you can make, and it is extremely simple to do. You need to create a chart for the asset you are looking at, and determine if there is a specific range that the asset is trading within. Because assets oscillate, this is very common. Once you determine that a range exists, you simply wait for the asset to touch one extreme of that range, and then take out the opposite position. If it’s at the top of the chart, take out a put option. If it’s at the bottom, then take out a call option.
This can also be used when the asset is moving in a specific direction. Rather than a range bound asset, you are now looking at a price channel. The same concept as above applies, except you only want to execute trades that go along with the dominant direction. If the asset is moving up in price, you will only take out call options when the price reaches the bottom of the channel. If you watch enough binary options brokers you will see how the prices move. Eventually things will happen naturally. In this type of trading range you will sometime have to trust your gut.
Momentum trading can be very profitable, but only if you have a firm understanding of technical indicators. Luckily, many charting packages will do all of the work for you so that you don’t actually need to understand how the charts are constructed. Looking at a few short term MACD indicators, for example, can let you know when an asset is overbought or oversold, and when a change is most likely to occur. This is not a foolproof method, but with the right charts it is very easy to get started with. It’s also a great way to double check other a trade when other strategies are used.
Trading the News
When a big event occurs, it is often easy to predict the movement of an asset. For example, if a central bank announces that they will be increasing interest rates, then you can say with great certainty that the currency impacted by it will increase in value. Let’s say that the U.S. Federal Reserve announces a 0.25 percent rate hike for treasury bonds. The U.S. dollar is almost certain to increase in price against other currencies. Taking out a series of call options that reflect the strong dollar and the weaker opposing currency, can be beneficial to you. You can use a service such as Trade the News to help get information fast. This could help you take quick trades on the 60 second trade like we talk about next.
This is a tried and effective trading strategy, but only when used in conjunction with another strategy. Just taking out positions that reflect the news without referencing technical data will likely result in losing trades.
60 Second Binary Options Series
60 second binary options are extremely popular, but they are also quite risky. In fact, most experts highly recommend that you do not attempt trading these unless you are very experienced and have a large cushion already established in your account. However, there are ways to reduce the volatility that you will experience when you trade these ultra short term options. By taking out a series of three to four trades on the same asset in the same direction, all within a few seconds of each other, you can reduce the likelihood that you will have a bad trade just because of bad timing.
How does it work? Well, first you need to determine the overall trend of the asset. Let’s say you are anticipating that the asset will be moving up for the next few minutes, so a call option is the right move. Now, you take out your first trade, wait about 10 seconds, and take out your second. Then another 10 seconds before you take out your third. If you see your first trade going against you at this point—about 20 to 25 seconds into it—then you can use your discretion on whether you should take out a fourth or not. When done right, this alleviates the risk that is inherent in 60 second trades. As long as the majority of your trades are correct (2 for 3 or 3 for 4), then you will have made a profit with this strategy.