When trading binary options, the motto is: Cash or Nothing. This sounds a lot like gambling. However, with stock market knowledge, the chances of success are above the typical 50:50 probability. Binary trading is anything but gambling, provided you go about it the right way. But in order to maximize profits, you need to understand the realities of the financial markets and perform the appropriate analysis. You can get valuable information about binary options trading on https://www.binaryoptions.com/.
What Are Binary Options and How to Trade Them
Binary options work like a bet on the further share price development. Therefore, some brokers are even registered as betting providers and not as financial companies. However, this is the exception. The trader must predict whether the price at the end of the term of an option will be higher or lower than currently. If he is right, he receives a fixed percentage as profit, regardless of whether the price is just one cent or several euros above or below the target price. For example, if you bet on a falling DAX, you can easily make a 70 percent profit with many brokers if the index is even a fraction of a point below the initial value at the end of the term. However, he does not win more if the DAX has fallen several points in the meantime. Likewise, the loss is always the same if the forecast was wrong. In this case, often the entire stake is lost.
The Best Binary Options Trading Strategies
To successfully trade with binary options, a good strategy is necessary. But how do you recognize it? There are a few conditions that should be met in any case:
Following the Trends
This strategy is a very popular binary options strategy. It's based on the well-known stock market wisdom "The trend is your friend". Which means that in the financial markets it is rarely useful to oppose the trading behavior of the masses and rather to follow the general trend. To do this, it's essential to identify an existing trend, ideally when the trend has just formed. Since the beginning of a trend represents the optimal entry point for a trader. The difficulty here is that trends are usually easier to recognize if they have already existed for a longer period of time. To analyze the trend of binary options, you should into the following aspects into account:
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continuation of the trend is more likely than its reversal.
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use charts for binary options trend analysis
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use trends quickly
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fixed payout in binary options brings advantages
News Trends
In news trading, binary options are traded in the direct temporal context of market-relevant news - e.g., quarterly figures of companies, press conferences of central banks or the publication of economic data by authorities or economic research institutes. Events like these trigger strong price movements on the markets. News trading with options allows participation in these swings without having to forecast the exact direction of the market. With knock-in options, returns of several hundred percent are possible in just a few hours.
60-Second Strategy
The 60-second trades are almost always the classic call/put trade with binary options, where the trader simply determines whether the prices will rise (call) or fall (put) during the term of the binary option. With the 60-second strategy, the term is limited to exactly one minute. Friends of ultra-short-term speculation with high return opportunities can get their money's worth. But of course, with this 60-second strategy, as with all trading activities in general, there is a risk that the trend will "break" exactly in the 60-second time span, causing the trader to suffer losses. So, timing is crucial for a successful binary options 60 seconds strategy. All in all, this strategy is suitable for beginners without experience as well as for very experienced professionals.
5-Minute Strategy
With the 5-minute binary options trading strategy, a certain asset expires within 5 minutes. If you decide to use this strategy, you need to predict whether the price of the asset will rise or not before the expiration time is reached. Even though trades with 5-minute expiration dates retain the volatility of 60-second trades, they reflect the overall trend better, making your predictions safer.
Hedging Strategy
Market investments are constantly exposed to a certain degree of risk. Using the hedging strategy, you can reduce the risk to an almost negligible level and hedge profits. This works by placing both a call and put on the same asset simultaneously. By this so-called pairing, you can minimize losses, since you'll gain something regardless of the result.
Straddle Strategy
The goal of the straddle strategy is to profit from changes in the stock price in both directions. This strategy is a combination of a purchased call option and a put option, both with the same strike and the same underlying. If this is not possible, they choose a strike as close as possible to the current stock price. Compared to other strategies, the cost of a long straddle is high compared to other strategies. Therefore, it is mainly suitable for volatile stocks. For a profit, significant price gains or losses are necessary.
Pinocchio Strategy
To use the Pinocchio strategy, you need to consider the candlestick chart, which consists of one or more candles. In the shadow of the candle there is a strong marker that gives an indication of a successful trade. You then have to identify the long shadow of the candle. It helps in estimating the rise or fall of assets. If this strategy is used carefully, the trade can be risk-free. If a trader with no financial background wants to trade risk-free, this is a recommended strategy.
Conclusion - Using strategies prevents high losses
Before starting binary trading, it is absolutely necessary to study the market trend and use the indicators. Using various strategies and methods, you can trade binary options comparatively risk-free.
