Binary Options Strategies

Binary Options Strategies

 

Following a strategy when trading will definitely increase your chances of success. This holds true with any investment instrument including binary options . Although binary options are simple to understand, using either your own strategy or one developed and tested by other traders, is always a good idea.

Binary options strategies can be divided into two main categories:

The first is based on trading models that suggest that particular arrangements in terms of investment amounts and the correct timing will generate profit in all situations without considering whether or not the trader is skilled at market prediction. So in certain situations a trader can design his own option buying strategy in order to give himself a high probability of winning.

The other group of strategies is based on simple technical and statistical data that under specific circumstances creates a situation whereby the market has greater chances to move in one direction over another. Although technical analysis is usually somewhat complicated, with binary options there interpreting the charts is not as complex.

Sample Strategy

Here’s an example of a strategy that uses technical analysis. This strategy can help you predict the direction of the market movement so you come out with quite a few profitable options.  This strategy is based on the supposition that markets tend to correct themselves following movements in one direction whereby the price switches over and heads for the opposite direction. Basically, if the price went up in the previous timeframe, it is far more likely to fall in the next one. This may or not happen. If the market is on a trend, it won’t usually occur. But if the market is calm with few fluctuations, this strategy often has good results.

Binary options usually work within small timeframes and that’s why this type of technique works well with them. Brokers will show you the trading platforms of a recent asset chart. For example, if an option expires in 15 minutes, you will most likely be shown the chart for the last 45 minutes and an empty chart for the next 15 minutes.

If the current price is higher than the opening price the price is more likely to move down and you should buy a Put option. In the opposite situation, when the current price is lower than the opening price, you should buy a Call option as the market is expected to move up. After buying the PUT option you must wait until the expiry time, which is 15 minutes in this case.

In the usual scenario, the price will follow the tendency to normalize after a small increase and will finish closer to the opening value. Although this outcome is usually what happens, don’t be surprised when quite a few trades to go in the opposite direction.

It is important to keep in mind when using this strategy that sometimes the market is on a trend or some important news may be released that will shake up the market somewhat and these simple analysis will prove useless. This strategy is recommended during calm markets with small trading volumes and when no news is expected to be released within the following hours.

 

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