Trading Strategies

Binary Options Strategies

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When you have some experience trading binary options, there may well be a number of binary options strategies that you would like to adopt in order to put your profits to a maximum. When it comes to investing in equities for example, there are strategies that traders have embraced over the years. In some cases, these strategies may pay off. In other cases, maybe not. However, due to the fact that binary options are quite straightforward, this makes it easier for you when you want to put into place effective binary options strategies.

Trading on Market Movements

One of the underlying binary options strategies is trading on different market conditions. The fact is that if you want to trade binary options effectively, you will need some moderate understanding of the financial markets. Now would be a good time to start! You should know from now that without even a basic understanding of the financial markets, you will not be a successful binary options trader. From the outset, professional binary options traders take on binary options strategies from the outset. You need to take your chance and trade binary options on market movements. It is true that this can be risky, but when money’s at stake things can always be risky. All you have to do is regularly follow the financial markets and implement your binary options strategies.

Call and Put

A common binary options strategy that many traders adopt is placing both a Call and a Put on a variety of binary options that they trade. The reason for this is that it is most likely that these traders have a fairly good judgment of the coming market movements. When you are looking at which binary options strategies to implement, you need to ask yourself is the market going to be higher or lower by a certain expiry time? If you think higher, you will place a Call. On the other hand, if you think lower, you will place a Put.

Short Time Period

If you like to minimize your risks, a popular binary options strategy that you can take on is getting in and out of a binary option in a short time period. If you decide to adopt this binary options strategy, then you will pick the 1 hour expiry time. The good thing about this binary option strategy compared to the other binary options strategies is that you don’t have to be in the trade for long to make a lot of profit. Please note that the pre-determined profit level doesn’t make a difference if you choose 1 hour, 1 day or 1 week expiry times.

Long Period

For those of you that are keen on adopting binary options strategies that may entail higher risks, trading binary options over a longer period may be the preferable choice for you. In this case, an expiry time of 1 week or month may be more attractive for you. Most traders that adopt this strategy usually are professional, and are long-term binary options traders.

It’s Your Choice

The one thing that you need to take note of when taking on binary options strategies, is that a binary options strategy that work for one person may not work for the other. Consequently, you will have to do what is best for you, meaning that it’s your choice. The great thing about this is that over time, your binary options trading potential will be so great that you won’t even need to ask anyone again about binary options strategies.

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Trading Strategies

Each investor has his owns methods and systems of trading binary options. The strategies listed here are not fool proof nor is the list exhaustive, but they are industry accepted methods which are deemed beneficial by many investors.

The Reversal
This is based on the concept that if an asset suddenly moves in one direction, it is unlikely to remain at that peak but will move back towards its original position, if not all the way. So, an investor should buy an option, Call or Put depending on whether the price has risen suddenly or fallen suddenly, on the assumption that it will soon return and stabilize. Of course, no-one knows when an asset has reached its peak. So close monitoring of the asset and researching why it peaked is vital to deduce the likelihood and timing of its return.

The Straddle
This strategy is more complicated as it involves buying both a Call and Put option on the same asset. The premise is to straddle the asset at a low point and at a high point, so that the area in between the two options can be a double success for the investor. This is often used when the volatility of the asset is high and so an investor wishes to protect himself. An expiry level in between the two strike prices would be ideal, however if it falls outside of this parameter, then at least one option would expire in the money. The Call and Put options do not have to be bought at the same time. Rather an initial option can be bought with a longer expiry and the second purchased once the asset’s direction is more established.

Note that the straddle in binary option trading is different from with vanilla options since the purchase price and exercise rights differ between the two.

The Knock on Effect
This is the most logical of the strategies. The idea is that a move in one asset will have a knock on effect to another asset. For example, the price of a stock may affect the price of the index in which it trades. Or if a country heavily relies on a particular asset, then a change in that commodity’s price may affect the country’s exchange rate. The key here is to understand the connections between assets and be prepared for movements in either one.

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