Binary Options Trading Strategies

Trading Strategies for Binary Options

Binary options is choosing between Call and Put options. A Call option, on the one hand, gives the option holder a right to buy an asset at a predetermined price within a limited period. If by the time the option expires and the asset fails to meet the predetermined price, the option loses its value. A Put option, on the other hand, gives the option holder a right to sell an asset at a predetermined price within a limited period. Interested purchasers buy puts if the price of the asset is bound to fall. This, however, is just a simplistic explanation of binary options, but you’ll eventually get the hang of it as you learn more about employing the right binary option trading strategy.

In this section we will be looking at following binary option trading strategies:

5 Minute Trading Strategy

The 5 minute binary option trading strategy is all about making the most number of transactions in a single session. It is a good technique for beginners. Not only does this trading strategy help them understand the basics of technical analysis, but it also leads to profits as they proceed with the method.
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60 Second Trading Strategy

One of the newest innovations in effective trading is the 60 second binary option trading strategy. This strategy specifically targets those who want to earn money faster by trading a short expiry time of only one minute. This type of strategy takes advantage of the price fluctuations which are always evident in the markets.
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Boundary Binary Option Trading Strategy

The boundary binary option trading strategy, which is sometimes called “tunnel trading,” is an offshoot of binary trading’s basic principles. With this, you still make a bet as to the outcome of an asset or commodity’s value within a set time frame, but you make it more specific.
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Bollinger Band Trading Strategy

As one of the best binary option trading strategies that work, the Bollinger Band trading strategy basically anticipates the subsequent movement of a particular asset via the data that is supplied by the 4 binary option trading indicators. These indicators are as follows:
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Basic Investment Trading Strategies

A wise investment strategy always involves getting as much reliable information as you can about an investment opportunity. Trading is more than just looking at the fancy numbers streaming red or green on an electronic board. In fact, intelligent investing requires a full understanding of what these numbers represent and of information about the present economic and political climate that may affect stock value in the immediate and foreseeable future.

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Here are some basic trading strategies that you will find helpful when investing in binary options:

1. Fundamental Examination Strategy

Description: This strategy analyzes macroeconomic conditions such as industry-wide legislation, political atmosphere, and market reception matched with the company’s financial stability and management capability. These factors have direct and indirect effects on the value of a security. A viable action can be formulated depending on the vulnerability of securities to any sudden changes in any of the enumerated conditions. The purpose of this strategy is simply to arrive at a hypothetical price value based on qualitative appraisal of each of the conditions.

Application: Based on the price figure derived from the strategy, the investor can now compare the hypothetical future price and the current trading price. A simplistic appreciation of the strategy should look like this:

 

Current Price Macroeconomic Conditions Company Stability Price Deviation
Legal Conditions Political Atmosphere Market Reception Finances Management
$5.00 N + + + +3 (-1)

 

Evaluation of the financial markets entails a detailed appraisal of the many different factors that may be affecting the price of a security after a certain period. In the above illustration, a coup against the government (political atmosphere) may result in a decline in stock prices which can however be mitigated by neutral legal conditions, upward market reception, good company finances, and positive management.

Caution: This binary option trading strategy is more effective for those who have a firm grasp of how some economic factors impact the market prices more vis-à-vis others.


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2. Technical Appraisal

Description: The technical appraisal is concerned with making a thorough assessment of the rise and fall of prices on record. Analyzing patterns will give you a good idea of how prices will behave within the prescribed period stipulated in the binary options trading conditions. Pricing behavior is not only impacted by seasonal patterns but also by changes in the economic conditions within the specific time frame.

Application: Looking for historical prices of securities should be easy as they are archived in financial websites of stock exchanges and partner institutions. With these data available for consumption, it will be easy to plot the rise and fall of stock prices in a given period. A simplistic appreciation of the data should look like this:

 

2013 2014 2015 2016*
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
+ + + + + + (+) (+) (-) (-)

 

The above example of historical data from 2013 to 2015 gives you an idea of how security prices behave in each quarter of every business year. For the purpose of this example, let’s say that in the 2nd quarter of 2015, a fire broke out in one of the main factories. This development dampens whatever good start the company had for 2015. Fortunately, with good management skills, the company was able to cope with the loss of valuable assets that were consumed by the fire, effectively driving company stock prices up in the next quarter. With all this information pooled together, one plausible prediction for 2016 (as shown in the table above) is that the company shares will perform well in the first half.

Caution: When looking for patterns, keep in mind that two points only make a line. It takes three or more points to make a pattern. If you choose to employ this binary option trading strategy, make sure that historical data should include at least three business years. Also, as illustrated above, always take note of the reason behind breaks (2Q, 2015) in pattern.

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3. Technology and Social Trading

Description: Financial software coding has now become a lucrative industry. People who are experts in both finance and programming are a rarity, but they make a lot of money from writing financial software codes for companies. Financial applications are designed to accept financial data and process them through a carefully-coded system before displaying predictive information, thereby making the lives of investors and the jobs of management people easier. These applications are so effective that influential people are also able to predict the likelihood of bankruptcy, mergers, and even hostile takeovers.

Application: Financial applications are downloadable in both the Apple App Store and the Google Play Store. These apps are written with specific investor needs in mind. For example, the Bloomberg app allows its user to customise the app interface so that it only displays data and information about securities you want to keep an eye on all the time. Among the data flashed by the app are the securities’ archived data, current performance, and, more importantly, predictive information.

Caution: Some apps are more trustworthy than others. Applications especially coded to devise binary options trading strategies are available for download.

These three investment strategies are not independent of each other. It is up to you how you can use these binary option trading strategies to arrive at a reasonable conclusion before making any investment decision.