Binary Options Strategy
Welcome to our binary options strategy section. Here you will find a beginners guide to strategies, leading on to more advanced information about things like money management, and articles on specific strategies.
Basic Strategy For Successful Trading
Strategy is one of the most important factors in successful binary options trading. It is the framework from which you base your trade decisions, including your money management rules, and how you go about making money from the market. There is no one Holy Grail unfortunately, if there were then we’d all be using it!
The two most very basic categories of strategy are:
Fundamental strategies focus on the underlying health of companies, indices, markets and economies and while important to understand, is not as important to binary options as the technical aspect of trading.
Technical trading, or technical analysis, is the measurement of charts and price action, looking for patterns and making educated guesses, speculations, from those measurements and patterns.
Strategy simplifies your trading, takes guesswork out of choosing entry and reduces overall risk.
The text book definition reads like this; a plan of action designed to achieve a goal or overall aim, the art of planning and directing operations in order to achieve victory. When it comes to trading the goal is to 1) make money and 2) not lose money.
The number one method of achieving this goal is to use a rules based approach to choosing entries that relies on ages old, tried and true technical analysis indicators. There are dozens, possibly hundreds if not thousands, of ways to trade the market, all strategies. They can be categorized in terms of the tools used, the time frames intended, the amount of risk associated with and many other ways, these being the primary.
- Price Action/Scalping Strategies – Price action strategies rely on the movement of the market to time entry. These can be trend following or not, long or short term and utilize bullish or bearish positions.
- Trend Following/Directional Strategies – Trend following strategies target assets that are trending strongly to pinpoint a series of profitable entries with a high rate of success.
- Range Bound/Short Term Strategies – 99% of the time the market, or an individual asset, is not trending but trading in a range within a high and low mark. These strategies focus on support and resistance levels, reversals within the range and short term trends as asset prices move up or down from support to resistance and vice versa.
- Long Term/Momentum Strategies – These are the less risky of the strategies as they target stronger signals and longer term time frames. These signals have a higher chance of success but take longer to develop and longer to unfold than other types of signals.
A technical analysis indicator is, most often, a mathematical formula which converts price action into an easy to read visual format. Common types of indicators include but are not limited to moving averages, trend lines, support and resistance, oscillators and Japanese Candlesticks.
Strategy is 1 of the 2 pillars of risk management, the other is money management. You control risk by targeting only good signals, weeding out obviously bad signals, and never putting so much money on one trade that it will wipe out your account.
Money management is the control of your overall trading fund. It should clarify trade size, and long term financial management – leaving you to focus only on trading. A well thought out money management structure should simplify:
- Trade size
- Risk management
- Future growth
A trader with a clear financial plan should not need to be concerned with whether they can trade tomorrow, or if their trade size is correct or how they might grow investments in line with their progress. All those decisions are controlled by managing their overall capital with a clear plan.
This is the most common method of viewing price charts. The candlesticks give an easy to read view of prices, open high low and close, that jumps off the charts in way that no other charting style can do. They are the basis of most price action strategies and can be used to give signals as well as to confirm other indicators.
Support And Resistance
These are areas of price action on the asset chart that are likely to stop prices when they are reached. Support is found when prices stop falling, this happens when buyers step into the market and are said to be “supporting prices”. Resistance is found when prices stop rising, this happens when sellers enter the market (or buyers disappear) and are said to be “resisting higher prices”. These areas, often represented by horizontal lines, are good targets for entries and possible areas where price action may reverse.
These lines connect highs and lows formed by asset price as it moves up down and sideways. A series of higher lows and higher highs is considered to be an uptrend and a sign that prices are likely to move higher, a series of lower highs and lower lows is considered to be a downtrend and a sign that prices are likely to move lower. The trend line can be used as a target for support and resistance, as well as a an entry point for trend following strategies.
Moving averages take an average of an assets prices over X number of days and then plots those values as a line on the price chart. Moving averages come in many forms and are often used to determine trend, provide targets for support and resistance and to indicate entries. There are dozens of methods of deriving moving averages, the most common include Simple Moving Averages, Exponential Moving Averages, volume weighted moving averages and many more. They can be used in any time frame, and set to any time frame, for multiple time frame analysis and to give crossover signals.
Oscillators may be the single largest division of indicators used for technical analysis. They include tools like MACD, stochastic, RSI and many, many others. These tools, in general, use price action and moving averages in a combination of ways to determine market health. They are displayed as a stand alone tool, usually as a line that ranges between two extremes or above and below a mid point, that can help determine trend, direction, support/resistance, market strength, momentum and entry signals.
With any form of trading, psychology can play a big part. A lack of confidence can mean missed trades, or investing too little capital in winnings trades. At the other end of the spectrum, over-confidence can lead to over trading, or increased risk – either of which could wipe an account very quickly.
So the trading psychology of the trader is very important. It can also be actively controlled or managed (at the very least, acknowledged). It is another often overlooked area of trading skill, but one well worth spending time to consider.
Read more on trading psychology and learning from experience.
A Basic Binary Options Strategy
Here is an example of some basic rules for a binary options strategy.
- The trend is your friend, only take trend following entries.
- In an uptrend only enter when prices are near support, in a downtrend only enter when prices are near resistance.
- When prices are near support/resistance wait for a confirming candlestick signal.
- When the candlestick signal appears wait for stochastic and/or MACD to confirm, a bullish crossover in an uptrend or a bearish crossover in a downtrend.
- When rules 1 through 4 are met, enter the trade, only use 3% of account on each trade.
- When choosing expiry use 2XCandle length. IE, if you are using 1 minute candles then 2 minute expiry, if 1 hour candles then 2 hour expiry.
- If the trade fails examine why it did not work, make adjustment if necessary and move on to the next trade. If the trade works move on to the next trade.
No strategy is going to be profitable if you trade with an unreliable broker. These are our top recommended trading platforms for trying out your strategy.
Binary Options Trading Strategy
Binary Options Trading Strategy
The lack of knowledge while developing a binary options trading strategy can be a serious obstacle on the way to success. That’s why you should be practicing your method for a while and overtime cover all possible faults it has. There are several tips you can use developing a strategy. First of all try and learn as much as it’s possible about the markets you want to trade in. Then choose the asset you want to trade and learn about those factors that can cause the change of its price.
Is it difficult to create a winning binary options trading strategy? No, but it takes a lot of dedication. You may spend hours trying to make a method that will bring you profit in 9 cases out of 10. Don’t get discouraged if your very first attempt was a failure. After a while, you will learn the markets so well, that a hidden gem may pop up and save you. Keep trying to find your strategy, but mind that there is no the holy grail for binaries. The chances to find one are minimal. Plus no one will guarantee you profit. All you need is to win more then you lose. We’ll break down some of the things to help you with your strategy for binary options.
Creating your own method with binary options trading strategy
If you feel like there is a need to make your own strategy to be a successful trader this is where you want to start. After you watched the markets for sometime and noticed some tendencies there you have to think about things that might work to win some profit. Don’t waste your time trying to learn more about details. Look though and analyze your previous trades. It will help you to understand whether you are you a short term or long term trader.
Do you prefer binary options 60 seconds trades or it feel comfortable to trade daily. Gather all the information and then go from there. As soon as you are ready with it you may pick the assets you want to trade. Watch the charts and you may notice some patterns that can be helpful in future or may use different indicators to decide whether it’s OK to place the trade. After a while everything should come together for you to start testing your strategy. If you find something that potentially can bring you profit, you should test it. It’s crucial to check everything before real money is at stake.
Binary options trading strategy. Copy other traders
Don’t be ashamed of it because copying another person’s trades is a typical practice and it really works. Take the binary options trading strategy you found surfing the Internet or while reading a book and do your own testing. Make sure it works in the way the book or web-site says it does. Again, proof of the trading is in the testing. After several tests you will see if the trading strategy is successful or not. Again, don’t get upset if it doesn’t work in the way you wanted.
How to make profit using copytrading read on our website.
Create your own method using another strategy
If you are confident about your skills you can try out someone else’s binary options trading strategy and frame it up to yourself. You can use a moving average or any trading indicator to help you. As always there are many things you can do to improve an existing strategy. But it doesn’t mean you should reinvent the wheel. History knows some examples when people took a good idea and made it worse. As an outcome you can start to think that the original strategy isn’t good. You can always switch between strategies.
For more detailed information, please read about Top 5 trading stratagies in binary options.
Testing a binary options trading strategy
Never ever skip this step, because testing a binary options trading strategy can save you tons of money. How do I test the strategy? Just open a binary trading demo account and get started. The only tiny recommendation is to download a charting software to see the price action. Bring the two together and start your testing.
Binary options trading strategy. Conclusion
The truth is, that there is no one-box strategy. However, there is a variety of strategies are available now or just waiting to be created. While developing a strategy take into consideration what type of trader you are and frame that strategy in accordance with your needs. For testing use your demo account and don’t force any real money into the creation process. Once you get a promising tendency, run with it and see whether it’s going to be profitable. After a while when you see that the strategy you developed works, then be sure you are in a great shape.
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