Basic Binary Options Trading Strategy
A Basic Binary Options Trading Strategy
If you are new to trading you will be seeking a workable binary options trading strategy to get you started or even if you have been trading for some time perhaps things haven’t gone so well and you just want a reminder of the ‘back to basics’. Well you will see strategies and learning material all over the place, to get access to these sometimes you will be asked to subscribe or even pay a fee to get somebody else’s take on a strategy. Be warned that complex and mind boggling strategies may just work in very precise circumstances or may not work at all or great for the market at the time of release but not worth your time after this scenario. For that very reason the basic strategy is there to see you through a slump or to get you off to a healthy start. It’s not mythical or science fiction, just simple to understand and it doesn’t promise to be amazing and magical only a common and reliable trading strategy.
You firstly need to understand support = put and resistance = call. This is simple logic, there’s nothing here more than reading charts to help you make your prediction.
Identifying areas of support or resistance by looking at chart rhythms and flows can help you to predict the likely asset movement or behaviour to follow. This is called technical analysis, don’t become alarmed and detached thinking that this is too difficult! It’s not, you are predicting future movements by past behaviours. Doesn’t sound so hard does it?
When you look at the chart above do you see where the potential trading opportunities were in past movements? Do you see an average price? Can you see where a ‘put’ trade in an area of ‘resistance’ would have been appropriate? Likewise in areas of ‘support’ where a ‘call’ option would have set you up for profit.
The second red line from the top of the image shows you an average, so when the price goes away from here it won’t be long before it heads back unless there is a notable change in the market. For example, you have noted that economic predictions show that the USD is expecting negative data at 3pm today, you are now armed with information that enables you to make an educated trade that is likely to be a trade against the USD. You will be looking for ‘put’ options, of course this will depend on the currency pair and what the competition currency is expecting.
However for a 60 seconds trade you will need to be quick to make a valuable prediction, so if the price is only marginally away from the average it will be difficult to predict the likely direction, but if it is sitting at the higher or lower end away from the average then you are likely to place your trade to predict that the price will head back to the average. To do this you choose call if it is currently below the average price and this means you predict the it will increase in value or put if the price sits above average meaning you expect it to decrease in value.
This type of binary options trading strategy is quick and easy to understand, there are more complicated forms of trading and at some point you will be using other tools to make your predictions but for short trades this strategy works well. The more time you spend looking at charts, the more you will be able to see the natural behaviour of assets as they continue with an overall trend. An asset will hardly ever if ever continue in one direction without interruption, however this does not mean that the overall trend has changed direction. You can make money on pullbacks and the bounce as an asset continues its overall trend over time.
For short trades, from 60 seconds and up to a few hours you are likely to profit from the ebbs and flows of an asset trend. Look for these rhythms with your chosen asset and you will be in the money. To benefit from these tides you are likely to use the classic binary options trading where you choose your asset, your prediction and the amount you wish to invest. Upon expiry you will collect a profit immediately if you have chosen correctly, if you followed the flow of the asset you are likely to have made money on your trade.
Simple and Exponential Moving Averages = SMA&EMA
To use this binary options trading strategy you are using both the simple and the exponential moving averages of your chosen asset. The simple moving average is the overall momentum of an asset over a period of time, and the exponential is where you are considering the most recent movements of more importance than past events. For example, GBP/JPY currency pair over the last week has seen an upward movement. In the last five minutes it has seen a dramatic pullback and is now climbing back up. So using this information you have witnessed a pullback and if you had placed a call option at the point of the drop you will be looking at a healthier profit than if you placed a call option before the pullback. If your option was opened before the pullback you are likely to have lost this option. Therefore we can see the importance of understanding the rhythm of an assets travel during the SMA. This will stand you in good stead for the next movement once it has completed its climb back or the bounce to an overall increase. This is when you will be using the put options to profit on another likely pullback.
So here you have it, a simple and workable basic binary options trading strategy, use it well and enjoy your profits.