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How do I trade binary options?
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How to Trade Nadex Binary Options in 6 Steps
- 1. Log on to Nadex platform. Sign up is simple and free, the minimum deposit is low at $250. Some US and most non-US applicants will need to verify their identity or residential address by sending in the required documents. This is meant to protect user’s account and to comply with AML/KYC rules.
- 2.Choose an asset. Use the Asset Finder tool in the left sidebar window. Assets are listed by asset class, asset and expiry.
- 3. Choose expiry. After clicking on your chosen asset class and asset expiry information will appear, click on your target expiry to.
Binary Options Affiliate Programs
The Complete Guide To
Binary Option Affiliate Marketing
So youвЂ™ve heard a few things about Binary Options. Some good, some not so good, and some just downright confusing. В You may not even be sure what these are let alone how to become an affiliate orВ start promoting this instrument.
Good news.В This article is going to solve all these questions for you and maybe a couple you didn’t know to ask. ItвЂ™s going to provide a definition with some easy to understand examples, you will see how and why you should be promoting binary option trading, how to sign up to an affiliate program and youвЂ™ll even see some examples of the earning potential these programs offer.
What are Binary Options
Binary Options are a simple financial instrument which allows anyone to trade price fluctuations in markets throughout the world – without having to own anything.В
ItвЂ™s easier to think of these options as a cross between the more technical financial market trading and simple gambling. You basically pick the market you are interested in, for example: NASDAQ share market or EUR/USD foreign exchange pair, decide whether you think the price will go up or down over a certain period of time and then purchase the corresponding Binary Option.
Types of Binary Options
As these Binary Option markets have grown, platforms/brokers have started to offer different types of Binary Options. В
The traditional method – outlined above, is whatвЂ™s known as a вЂHigh-Low Binary OptionвЂ™ and is the one we will focus on today.В
Others you might come across include: вЂOne-Touch Binary OptionsвЂ™ (where the price just has to touch a certain point during your specified time) and a вЂRange Binary OptionвЂ™ (which allows traders to select a high and low to determine a range the price will fluctuate between during the course of their OptionвЂ™s time frame.)
It will depend on the specific broker as to what types of Binary Options are offered so you will just need to do a little research to make sure the type you want is offered when considering a broker.
Best Binary Options Broker!
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Typically, when you buy a Binary Option, you have to hold it until it finishes (or is вЂexecuted.вЂ™) Again, this can vary between brokers and some may allow you to exit the trade before the Option is executed but there will generally be a lower pay out or a fee associated with this action. В You need to read the terms and conditions for each broker to find out their exact processes.
U.s. vs Rest of the World
WeвЂ™ll just take a second here to advise that the Binary Option market has some big differences between the US and the rest of the world. В
The most important thing to note is that most foreign binary option brokers are not legally allowed to sell to residents of the U.S. unless they have been registered and regulated with the Securities Exchange Commission (SEC) or Commodities Futures Trading Commission (CFTC.)
This just means that if you are considering the idea of becoming an affiliate for a Binary Options brokerage, you need to identify where your target audience lives and thus what Binary Option brokers are appropriate for you to promote.
В If you will be targeting people living in the U.S. you might want to check out some Binary Option platforms that are operating there.
A trading example
A more thorough example of a traditional High-Low Binary Option trade including some technical terms is explained below:
Earlier I mentioned that you could think of the Binary Option as something between a straight up gamble and a fully blown financial market activity like buying shares or trading foreign exchange.
This is because Binary Options use the financial world markets as a base to calculate the вЂwinвЂ™ or вЂloseвЂ™ scenario for the option. В ItвЂ™s like you are gambling on the price change, however, because itвЂ™s based on real world actions (and not just a dice roll or flip of a card) anyone trading Binary Options will feel more in control as they can make decisions based on research.
Binary Options are also known as вЂAll-or-Nothing OptionsвЂ™ or вЂFixed-Price Options.вЂ™ This is because there are only two outcomes to your Binary Option contract – you win or you lose. В And both outcomes have pre-determined numbers.В
LetвЂ™s say youвЂ™ve been researching about Company X. YouвЂ™ve looked at their financials, read about their Board and seen some positive articles in the news lately. В You decide that you quite like this company and feel itвЂ™s going to increase in value. В One method for investing based on this research is to buy a Binary Option. В You might purchase one stating that the share price of Company X will be above $12.54 at 3:15pm on a particular day.
You pay $100 for your Binary Option and it has a pre-agreed payout of 65%. В That means that when the option is executed (or completed) – which will be at 3:15pm on the particular day you chose when purchasing it – you will either be right or wrong with your investment. В
The share price will be above $12.54 as you thought, or it will be lower.В
If you were right and the price was higher at the specified time, you вЂwinвЂ™ (or your option has finished вЂin-the-moneyвЂ™) and you receive $165 back.В
В If you lose (finish вЂout-of-the-money) then you receive $0 back. В
No matter where the price ends up when the Option is executed, you cannot вЂwinвЂ™ more or less than $65 and you cannot вЂloseвЂ™ more or less than $100. Your risk and return is fixed from the outset.
ProвЂ™s and ConвЂ™s of trading Binary Options
The simple nature of Binary Options means itвЂ™s a great instrument to allow people to be involved in the financial world without needing to have complete understanding of how the sharemarket works or how to buy and sell foreign exchange. В ItвЂ™s also more interesting than simply gambling as the results are based on real world contracts and activities, giving investors more control in the outcomes.
There are no liquidity concerns, as you are not purchasing any underlying assets and platforms/brokers can create any number of different options which provides plenty of variance for traders to choose from. В This also means that traders can buy Binary Options based on any asset class around the world – giving them exposure to any product desired.
The fixed price aspect of these options provides a safety net in a sense that you cannot lose more than the option cost. В You cannot become liable for any further losses no matter how вЂwrongвЂ™ or how вЂout-of-the-moneyвЂ™ you were when the Binary Option was executed. On the flip side, your return or вЂwinвЂ™ is also set to the predetermined amount. This means when trading Binary Options itвЂ™s easy to consider the risk-reward scenarios as you already know your exact two outcomes before any purchase is made.
The downside of these Binary Options are that unlike traditional options, the holder does not have any right to purchase or sell the underlying asset. В This means in the example above, your investment is simply mirroring the changes in the share price of Company X – at no time do you own any shares or have the option of owning any shares from your Binary Option.
Trading in binary options is highly speculative, involves an outstanding risk of loss and is not suitable for everyone but only for those investors who: (a) understand and are willing to assume the economic, legal and other risks involved; (b) are financially able to assume the loss of their total investment; and (c) have the knowledge to understand binary options trading and the underlying assets.
How do Binary Option affiliate programs work?
Now that you know what Binary Options are and how they work, we need to learn how to sign up to act as an affiliate and how to promote Binary Option trading to your audience. В
How To Register
This is the easy part. В All you need to do is browse through the available affiliate programs and compare them to find the best one for you – services differ in terms of commission rates, customer service and support in creating adverts and content. В
Once you know who you want to sign up for (and it may be more than one depending on your personal situation) you can simply click on their sign-up link, fill in your details to create an account and begin advertising your affiliate link to your audience.В
This is where it can get a little trickier and where some of you may prefer the programs with more customer service and support overВ higherВ commission.
How do you promote Binary Option trading to your audience
Now that youвЂ™ve signed up to an affiliate program and have your very own affiliate link you need to consider how to promote this to your audience to get the best results.
You might have a website with a certain number of visitors each month, a dedicated email list or maybe even a growing Facebook page or twitter account. There are many forms that your lists can take these days but no matter what platform you use, itвЂ™s important to tailor your adverts to your specific audience.
Generally there are three types of traffic interested in Binary Options trading; Traders, Gamblers and those who want to вЂmake money online.вЂ™ Each of them have different вЂneedsвЂ™ in terms of what they are looking for online and what type of advert or content will convert them into a user and earn you that commission. В
Gamblers are more likely to be after a thrill or a quick, simple way to get started. В They may be attracted by the flashing banners or an interesting sign up bonus (as an affiliate member, your program partner may offer you some exclusive sign up bonuses you can promote.) В Make sure you donвЂ™t bore them with in-depth technical terms or even too much detail on what Binary Options are.
The other group not too interested in technical terms are those who fall into the category of вЂwanting to make money online.вЂ™ В These people donвЂ™t want a lot of jargon or big financial phrases in the explanations but they will require more nurturing than the gamblers. Adverts targeting this group need to throughly explain the process and the risk/reward presented by Binary Options trading in layman terms and probably walk them through various examples.
Traders are the final group likely to be interested in Binary Options and are probably the most вЂfinanciallyвЂ™ educated audience. В You can make use of more technical terms in explanations and adverts containing more information, in-depth reviews or comparisons are likely to be more effective in achieving a conversion.
Now that we know there are different platforms your audience is connected on AND that your audience might fall into different categories of traffic based on their needs, we need to think about the most effective way of delivering your affiliate link to them. HereвЂ™s a few ideas to get you started:
- Banners – this is probably the most common method of promoting your affiliate link and simply means placing a banner on your website or within an email. В This will just look like another advert except your payoff is potentially a lot higher. This is also the easiest as most affiliate programs will already have a supply of pre-built banners you can simply add to your webpage. Likely to be more effective with the gambling traffic type.
- Discussion – if your audience is built around reviewing financial products, or ways to make money online then it could be as easy as doing a write up about Binary Option trading. You can even use the information in this article to help explain it if you need. With this method youвЂ™re simply telling your audience about Binary Option trading and then recommending your chosen partner and sending your audience to their page through your affiliate link which is inserted into your article. В If youвЂ™ve used simple terms in your explanation then this might be the best method to target those who вЂwant to make money online.вЂ™
- Reviews/Comparisons – this is a slightly more in-depth method and may involve building a new website or adding pages to an existing one. В If youвЂ™re targeting an email list, Facebook page or twitter account then perhaps it will be in the form of a blog post series. This strategy really starts to pay off if youвЂ™ve joined multiple affiliate programs. As you review and compare each program, just insert your your affiliate link at the bottom of each write-up and then no matter who your readers choose to go with, you should be rewarded with a commission. В The other benefit of this strategy is that you are providing education about this relatively new concept and beginning to set yourself up as an expert in the Binary Options trading arena – meaning more traffic and more commissions.
Why Promote Binary Option brokers?
The world of Binary Options trading is exciting. Once youвЂ™ve explained to someone how it works, and they realize the simplicity and speed with which they can get started and begin earning profits, conversions can be a lot easier than through other affiliate products.
The Binary Options market has experienced incredible growth since 2008 when the US Securities and Exchange Commission (SEC) ruled that Binary Options no longer had to be traded on an exchange and the advent of online trading kicked-off.
Since then, growth has been exponential and experienced a serious increase of interest after 2020 when some jurisdictions reclassified Binary Options trading from a gambling product into a financial instrument.
Even if we just look at the Nadex, which is a regulated US exchange for Binary Options, we can see that in the last year, when comparing the second quarter (Q2) of 2020 with Q2 2020, the volume and total number of trades is up nearly 40%. вЂThe growth in trading volume reflects continued mainstream enthusiasm for exchange-traded binary options and spreadsвЂ™.
As the Binary Options trading market matures and becomes more regulated, growth will continue. If you can establish yourself as a respected source of information, comparisons, reviews or discussion to your network now, then there is great future potential for your business.
There are numerous benefits of becoming an affiliate and promoting Binary Options trading to your audience. These are some of the reasons why you will achieve great responses to your promotions and high conversions:
- Simple processes – from opening an account to doing your first trade, operating in the Binary Options market is very simple. Accounts can be set up in minutes online and the individual brokers you are promoting generally have great customer support which assists with conversion of your audience.
- Education material – most brokers offer free education materials and demo accounts. В This is a great lead in for your audience, especially if they are unsure and want to learn more about the market. В Whilst itвЂ™s very simple to understand and get started, there is also a lot of education available to enhance their chances of becoming a successful trader.
- Scale of Complexity – this market appeals to a wide range of groups because traders can be as involved as they want. В If they are more of a вЂgamblingвЂ™ type then they can get started immediately and place their trades. However, for those that like to feel more in control and make вЂcalculated decisionsвЂ™ there is a lot of education they can undertake in order to learn principles about the financial markets or a specific commodity they intend to trade on. This in turn builds confidence and excites them about the prospect of trading through Binary Options.
- Competition – as the market grows it becomes more competitive and brokers offer all sorts of promotions to attract new clients. The more offers there are, the more likely your reader will sign up to trade with one of your affiliate brokers.
- Trading System – low trade size (low minimum deposits and trade values), high returns (up to 90%), limited risk (your potential loss is known and set at the beginning of a trade), and short term trade periods (from 60 seconds) all work to create a trading product that is very appealing to a wide range of different people.
Types of commissions
There are multiple different ways for you to earn a revenue as an affiliate of these brokerage firms. You will need to decide what type of revenue suits your needs best and then compare what methods are offered by each broker.
- CPA (Cost per Acquisition) – you will be paid a certain amount for every new client that signs up with the brokerage firm after using your link. The revenue really does vary between firms but you may commonly see $200 – $400 per acquisition. One important thing to find out is how your reader will be tracked (how the вЂcookieвЂ™ is treated) – which means if someone uses your link but ends up signing up a few weeks later do you still get paid? В Some firms offer вЂforever cookiesвЂ™ meaning that at any time in the future if that person signs up you receive your commission. В
- CPL (Cost per Lead) – similar to CPA, cost per lead pays a set amount per lead provided to the firm. This typically generates a smaller fee of around $10-$40 per lead, however not many programs offer this type of commission structure.
- Revenue Share – this deal rewards you for every trade the investor makes with that brokerage in the future. В The rate is usually around 35%-40% and is either based on new deposits or net revenue generated by the investor.
- Hybrid – this is a mix of the CPA or CPL and Revenue Share options. В Generally you will receive a smaller lump sum payment for each acquisition and a lower percentage return for the revenue share. В This may be something like $150 per CPA and 20% revenue share.
How much is possible to earn?
ItвЂ™s very hard to estimate how much you could earn because of all the varying factors – how big your audience is, how successful your promotions are, which affiliate program you join and what commission structure you choose.
For arguments sake, lets say you have 10,000 site visitors per month and convert 0.1% of them into a customer for your chosen affiliate program which pays you $300 CPA. This means that every month, you are converting 10 people into traders for your brokerage firm and are receiving commissions of 10*$300 = $3,000.
It gets harder to predict potential income under revenue share or hybrid commission structures but have a play around with this equation based on your own audience size, conversion rate and commission details. You might be quite surprised.
What to consider when choosing a Binary Options affiliate program?
Congratulations on making it this far. Now that you have a solid understanding of what Binary Options actually are and how the various affiliate programs work, itвЂ™s time to drill down and identify the right program(s) for you. В
You can visit our list of trusted affiliate brokers to compare them against your new-found knowledge. В
Remember that the key points to look out for are:В
- Location – whether the program is legally allowed to offer services to clients in the US if thatвЂ™s where your audience is.В
- Reviews – read as much about each broker as possible to make sure you have an understanding of how they work and what their track record is.В
- Support and Customer Service – how easy is it to work with each firm and what level of service do they provide to the clients you send their way.В
- And finally, commission – what payment structures are offered and what are the rates. How does this compare to what you need?
If you go in open-minded and remember to research each broker using the points weвЂ™ve covered here, you should come out feeling very confident as an affiliate partner for a trusted Binary Options brokerage, and ready to start converting your hard-earned audience into real dollar returns.
Binary Options Strategies
Why To Use Strategies While Trading Binary Options
There’s no doubt that financial instruments can appear intimidating. When news about the financial markets appears on TV, you’ll often see financial traders sweating over complicated-looking graphs on multiple computer monitors or barking at each other across crowded trading floors. The commentary will describe exotic investment vehicles that can seemingly only be understood by people with PhDs in rocket science. To be clear, there are financial instruments that are very hard for the layperson to understand, but that’s not true of all of them.
Binary options are more popular than some investment vehicles because they are less complicated. There’s a clue in the name, ‘binary,’ because as an investor you’re only having to choose between two options: will the value of an asset go up over time or down? Traders will place a bet on whether the price will increase, which is called a call, or decrease which is called a put. So, in terms of probability, you could look at binary options trading as a bit like gambling on a coin toss.
Now, having said that, binary options trading carries a high level of risk and can cause you to lose all of your funds, and it’s because of this risk that binary options strategies are so important. You can trade safely if you do your research and put effective binary options strategies in place. We’re going to help you spot the market signals that will help you to do just that.
For a start, here are your golden rules:
- don’t invest all your capital at once
- be aware of how your asset is moving before you invest
- never invest more than 10% of your total equity in a placement
Reasons to Use Binary Options Strategies
Although we think binary options strategies are worthwhile, you could just as easily go with gut instinct, flip a coin or consult a horoscope to help you decide what to do. You might even be successful here and there, but long-term this is a surefire way to lose all of your capital. Probability won’t let you win with random behaviour, any more than it will let you win 50 consecutive coin tosses. To win consecutively as a trader you will need binary options strategies, and we are using the plural because you will need more than one.
Binary Options Strategies – Description and benefits
The main reason to use any trading strategy is that it will stop you from making emotional decisions. As a trader, all of your decisions need to be grounded in logic and rationality. There is very little room for hunches or luck. The other benefit of using binary options strategies is that they allow you to do active ‘field research’, meaning that if you take a defined approach to each investment and document it, and may be it fails, then you can tweak and refine it, and if it succeeds you can use it again and maybe try to improve. The markets are your laboratory where you go about testing your trading strategies, over a set number of trades and a set period of time. When you hit your time limit then you can look back and ask yourself whether your strategy is working, is it making you enough money, could it be improved etc.
Any other approach is going to leave you guessing. If you base your trades on guesswork, then you won’t know why they succeeded or why they failed. Using binary trading strategies will give you something more concrete to base your future adjustments on.
It’s important to know not just why you succeeded or failed, but why you succeeded or failed. Conducting a series of stand-alone trades with nothing to link them is as reckless as hoping for those 50 consecutive heads to come up in a coin toss marathon. When you trade, you shouldn’t just be crossing your fingers each time and being surprised by every outcome. And long term, the law of averages says that the best thing you can hope for is to break even, which is no way to make a living. It may not even be a feasible ambition because to break even you have to win more than you lose, and that seems highly unlikely without binary options strategies.
Money Management Strategies – What They Are and Why You Need One
A lot of people fall into the trap of developing a trading strategy but not a money management strategy. It’s all very well choosing what kind of asset you want to trade and how much risk you want to be exposed to, but you also need to give some thought to money management, because it will help you to build the kind of account balance that will see you through bad periods and help you sustain winning streaks.
Let’s consider the effects of having no money management strategy on someone who gambles a tenth of their balance on a single trade. If the trade doesn’t win, they now have to increase their account balance by 20% just to break even. If three trades in a row go south, then they will need a 30% jump in their account balance to get back to the breakeven point. This is a common scenario that can dig you in deep quite quickly.
Lots of losing streaks are longer than three trades, so you can see how money management strategies play an important role within binary options strategies. Without a good money management strategy, you will undermine your efforts even if you have a good trading strategy in place. Losing streaks will inevitably happen, so you must have a plan to deal with them.
Analysis and Improvement Strategies
There is no Rosetta Stone of binary trading strategies. The only constant with the markets is change, so the best traders need to adapt all the time. You could say they constantly evolve, even when they’ve become highly successful. It’s not like there’s a magic point that they get to where they know everything, and every trade they make is a winner. That day never comes. But they do get to the point where they analyse every trade deeply and thoroughly. If there’s any magic then it lies there.
By analyzing and improving your trading and money management strategies you’ll remove the parts that aren’t working, refine the parts that are and become more profitable over the long term. Even if you’re already making money, but you aren’t trying to constantly improve, who’s to say that you aren’t actually leaving profits on the table?
Types of Binary Options Strategies
There are three common elements to binary options strategies.
- Using signals to guide you
- Deciding how much of your funds to trade
- Constant refinement
To create a successful strategy, you need to understand as much as you can about every aspect of it. Here’s how to do that.
Step 1 – Using signals to guide you
A signal is something that tells you that the price of an asset is about to move one way or another. Asset prices move all the time of course, but what if there was something that could let you know which way it was going to move before it happened? There is, and we call this thing a signal.
Signals can be created using news events and/or technical analysis. Getting signals from news events is probably the more common one among new or inexperienced traders. Things like company announcements, industry announcements, governments releasing inflation figures, these sorts of things can all be viewed as signals that can affect prices.
If you want to develop a working strategy, then you need to think about what news events to expect and when. Most binary options trading platforms will feature economic calendars, so you’ll be informed that in a couple of days’ time a firm’s earnings reports are due. This kind of pre-warning will help to inform your analysis.
The best binary option trading platforms will also let you know what’s expected in that earnings report. This will help you to make decisions about which way the market is going to move before the report comes out.
A news-based approach to trading has the benefit of being fairly easy to learn and understand. It’s not like you need to gain secret knowledge. You’re just taking common knowledge and thinking about its implications for the asset that you’re interested in.
The disadvantage of news-based signals is that they don’t stop markets being unpredictable. For instance, if an earnings report shows that a company has boosted its profits, you might think that that’s a positive result. But that same report might suggest that profits were expected to be higher, or that the company expects to face stiff competition. There are all sorts of unknown quantities that can spook the markets and pull the rug out from under that good news.
Technical analysis gives traders a narrower view than that offered by the news. It focuses on how an asset price moved in the past, with the aim of finding patterns that may offer clues about how the price will move in future. This is an area that can become a rabbit hole of complexity—make no mistake—but the underlying principle is fairly straightforward. You try to work out future behaviour of an asset price based on its past behaviour.
So, the question is, which one of these binary trading strategies should you be using; a news approach or a technical analysis approach? Well, everyone is different, with different strengths and weaknesses, so the best advice we can give to you is to try them both and see which one works best for you. Either of them can bring you success if they gel with you.
Now, you may be wondering how much that little experiment is going to cost you. What if you’re terrible at using the analytical approach and it ends up costing you a fortune? Well, there’s no need for concern. Most decent brokers will be able to offer you a demo account to practice on. You’ll have full access to the trading platform, you won’t be using real money. You’ll get the chance to trade in binary options with zero risks. Sure, you won’t make any money with your demo account, but you won’t lose any either. Instead, you will have an ideal testbed on which to see how your strategies play out.
The last thing to say about signals and strategies is to concentrate on the short-term. Some investment strategies try to predict asset price shifts over long periods of time, even up to a decade. In binary options trading, you’re not really interested in this kind of information. You’re more concerned with what the price will do in the next two minutes, or hour or day.
Step 2 – Deciding how much of your funds to trade with
Money management strategies vary in their complexity. A simple one will have you investing the same amount for every trade, but it’s risky and doesn’t take your overall level of profitability into account or how much capital you have at your disposal. So, we only mention this because you might hear it mentioned and we want you to avoid it.
Another one that you may hear about is the Martingale money management strategy. The idea behind this approach is to recover from your losses as quickly as possible by increasing the size of your trades after each loss. For instance, you could set an amount of money that you will trade with, and if you experience a loss then you double it. If it’s successful then you aren’t just back to where you started, you’re ahead.
It shouldn’t be too hard to see that there is a problem with this strategy. Namely, if you experience a losing streak that won’t quit then the Martingale strategy would have you increasing your investment on every following trade. So, if you had a run of 11 straight losses, number 12 would be a gamble that was 2,048 times bigger than that first trade. Unless you’re a billionaire, it’s going to be hard to keep that kind of optimistic speculation going.
It all comes down to how good you are at making predictions and how good you are at ending losing streaks. You need to keep in mind that there are no certainties in binary options trading. Even surefire trades that you would stake your life on can end up losing, and losses can easily turn into streaks, even if you’re the best trader in the world because at the end of the day nobody has a crystal ball. That’s why the Martingale money management system is not for everyone. It does have its place, but it needs to be employed with caution, so it may not suit beginners.
A percentage-based system doesn’t come with as much risk, so it’s the one that the majority of traders usually prefer, especially binary options trading newbies. It’s a fairly simple concept. The amount of money you put into a trade is based on the amount of money you have in your trading account. It’s kind of the opposite of the doubling down approach that the Martingale strategy uses because after each losing trade your subsequent trades will be for lower amounts. But if you win, your following wagers will be for greater amounts, because your account balance will have gone up.
This conservative approach is designed to preserve as much of your capital as possible so that you can trade for as long as possible, and it gives you the best possible chance of clawing your way back from successive defeats and capitalizing on your successes.
The only variable for you to consider is what percentage of your balance to use. Typically, a trader who is not risk-averse will probably go for around 5%, while everyone else will probably prefer something nearer to 2%.
As an example, let’s assume you feel comfortable with 5% of your balance being invested in a trade. A $500 account balance gives you a $25 trade. If your balance dropped to $300, your trades would now be only $15. If your balance rose to $800, each trade would be $40.
With this strategy, you will only be gambling with what you can sustain. It’s a measured approach that adapts to your current situation and prevents you from throwing good money after bad when you eventually stumble into a rut of successive losing trades, and it won’t let you become overconfident if you win a few either. For these reasons, it’s one of the binary options strategies that’s hard to fault.
Step 3 – Constant refinement
Diaries aren’t just for moody teenagers. They are also essential for developing you into a better trader. It doesn’t matter whether you have a little black book or an Excel spreadsheet. Whatever works for you. The important thing is to record every trade that you make so you can build up a body of ‘evidence’. In time you’ll have a detailed history of what works and what doesn’t, and that will help to ensure that the trades you make in future are successful more often.
A diary is like a silent partner for beginning traders. It allows you to look back at trades and give yourself good advice. Try placing trades based on both technical analysis and news events signals but record them separately in your diary so you can see which one works the best for you. When you’re involved in the day-to-day business of trading, you may not realize exactly how you’re approaching it, but your diary will always tell you the truth. So, for instance, you might think that technical analysis suits you best because you’re getting twice the profits that you’re making with signals. But your diary will tell you that you’re actually spending twice as much time studying technical analysis, so it’s an unfair comparison. Maybe you’re getting greater returns per hour of invested time looking for news events signals. Only your diary can tell you.
A trading diary also delivers the kind of granular detail that is essential to fine-tuning any of your binary options strategies. This is important when you get to a decent level of competence and are only looking to improve by small amounts—icing the cake so to speak. But you can only do this if you understand the details of what you’re doing well enough to tweak them.
Don’t forget to use your trading diary to check every aspect of your trading strategy, including money management, your choice of assets, and the size of each trade.
When you get in to the detail, consider noting which days of the week are best and which times of day are best for the best results. Do you perform better with some brokers and some trading platforms? Make a note of it; it’s all-important.
Having said all that, try not to succumb to information overload. Although you’re recording everything you don’t have to change everything at the same time when you’re trying to refine your approach. If you do that it’s hard to know which aspect of the change worked. If you change broker and then asset class and then trade amount all at the same time and you have a run of successful trades, how will you know which one of those three things that you changed contributed to those successes? It is far better to change one thing at a time, then you will know that it was responsible for the change.
Binary Options Trading Strategy Examples
Let’s take a more detailed look at some binary options strategies. The ones listed below are some of the most frequently used, but there are plenty of others available as well. As you learn more, you’ll no doubt come across traders who split, combine and adapt their binary options trading strategies to suit their own goals. You’ll probably be tempted to try this kind of thing yourself, but it’s important when you start out to learn the basics and save the customized approach for later. Whichever one you choose, don’t forget to combine them with a money management strategy too.
Example 1 – Trading the Trends
Asset prices usually move in line with a trend. You’ll often see a zigzag of ups and downs that are actually all part of a larger upward or downward trend. When you understand the shape of the trend you begin to see that the zigzag movements can be predictable in certain situations, and when you can predict those movements you have an opportunity to execute profitable binary options trades.
To put it simply you have a couple of main options: you can gamble on the overall trend or on each of those zigzags. Trading the overall trend means looking at the big picture. You’re not interested in trying to capitalise on the minor ups and downs of an asset price. Instead, you are looking at a shift in price over the longer term.
Trading on swings in price requires that you place more trades, which is inherently riskier but potentially more rewarding.
Upward trend – New highs and new lows will usually be higher than past highs and lows in an upward trend.
Downward trend – New highs and new lows will usually be lower than past highs and lows in a downward trend.
Of course, you shouldn’t lose sight of the fact that you are free to use both approaches to trading. It’s a free country!
One of the most frequently used ways of trading trends is with High / Low options. Every binary options trading platform will offer this kind of trade. With a high option, you’re betting that the price will go up and with a low option you’re betting that the price will go down. The only variable is the period of time during which you think this will happen.
A riskier, but potentially more profitable variation of this is called a one-touch option. Instead of just betting on whether the price will go higher or lower, you’re predicting whether it will hit a specified number called the target price.
Example 2 – Trading on News Events
This is a fairly popular type of trading strategy. You will use the news as your source of intelligence. When a company reports greater profits or a new and exciting product then the theory states that generally, this will cause more people to want to own shares in that company and this demand will push up their price. The opposite is true if the company announces bad news of some sort. In both cases, binary options traders are in a position to make money if they can anticipate the direction of the next shift in the share price.
The downside of this type of approach is that it is not clear cut. When you trade on the basis of news events you place your fortune in the hands of fate.
So, it’s a good thing that there are other strategies that you can take to increase your chances of successfully trading binary options. Here are three of them.
Boundary options – when you’re certain that an asset price will change but you can’t be quite sure which way it’s going to go then a boundary option can be really useful. With it, you set two target prices, one of which is below the current price and one of which is above. The difference between them is called the price channel. If the asset price passes either of them then you win. If it only moves inside the channel then you lose.
Trading the breakout – The breakout represents a window of opportunity. It’s the time, anywhere from 30 seconds to several minutes after a piece of news about an asset goes public. It’s the perfect opportunity to use a high/low option because it’s here that traders will try to limit their losses or alter their positions for profit, and so it’s here that you’re likely to see significant fluctuations. You’ll sometimes hear breakout trading being called the 60-second option because the timeframe is literally that short.
Intelligent High / Low trades – it seems counterintuitive, but sometimes good news may result in falling prices in the markets. That’s because even though the news may appear to be good on the surface, such as a rise in manufacturing productivity, if the markets were expecting a greater rise then the news comes as a disappointment which they will then adjust for. If you can predict when such things will happen then high/low trades can help you to profit from them.
Example 3 – Using Candlestick Formations
As a new trader, you might find this strategy the most difficult to understand, but the good news is that once you do it is going to be the simplest one to put into practice and profit from.
When you look at a typical graph of an asset price then you’ll be looking at an oversimplification that features a before and after. If you want to know more (and you do) then look to candlesticks to fill in the details.
Candlesticks appear on an asset’s chart over time. The bottom of the Candlestick indicates the lowest price it reached during a particular time period and the top indicates the highest price it hit. In the middle you will also see the opening and closing price, so a candlestick gives you an easy to digest view of the price range fluctuations for that asset in that particular time period.
Now the way to use candlesticks in trading is to recognize different formations of them. Once you can do this you can better understand which way the price will go next.
For instance, if you see a candlestick with a gap then that means the asset price jumped significantly higher or lower. Gaps are unusual because prices usually move in a much more gradual fashion, hitting the majority of price points on the way. When one appears during a period of low trading volume then it’s telling you that there is likely to be a quick correction.
This can happen just before a market closes for the day when there aren’t many traders left placing trades. The gap can be produced in this situation by large trades, but that doesn’t mean that the asset is strong. Maybe the gap wouldn’t have appeared if more trading had been going on, so knowing this you can estimate the gap in the price of this asset and use that information to plan your trades.
If gaps appear when trading activity is high, but the price is not moving much then this can indicate that there may be a new breakout, or surge in that direction. Again, use this information to your advantage when you trade.
If a gap appears when trading volume is normal and there’s a trend in one direction, it might suggest that the trend is accelerating. Good intelligence to have for your next trade.
Developing a Binary Options Strategy Without Risking Money
If you’ve taken all of the advice in this article on board then you’ll no doubt be wanting to test your new binary options strategies, but you still might be reluctant to get your feet wet when you are aware of how easy it is to lose money. You don’t want to blow all the money in your trading account on testing out your theories, do you?
That’s where a binary options demo account comes in useful. Every half-decent broker will let you use their trading platform demo fashion, gambling nothing more than numbers on a screen instead of money from your account. It’s probably the best way there is to start testing (and recording in your diary, naturally) your binary options strategies, without losing your shirt.
One of the beauties of binary options trading is that there is virtually no limit to the kinds of assets that can trade in. Trade on those assets that are most familiar to you such as euro-dollar exchange rates. Consistently trading a single asset will help you to gain that all-important familiarity with it to help you predict changes more easily. There are two types of strategies explained below that can be of great benefit in binary options trading.
1. Trend Strategy
This is a popular strategy, and it is also called the bull-bear strategy. To implement it you’ll need to keep an eye on the rising, declining and the flat trend line of the traded asset. If you see a flat trend line and think that the asset price is about to climb, use the No Touch Option.
If the trend line shows that the asset is going to go up, choose CALL.
If the trend line shows a decline in the asset price, choose PUT.
This method works just like the CALL/PUT option but in this instance, you decide on a price that the asset mustn’t hit during the time period you specify. So, save Facebook’s share price is $490 and the trading platform says the No Touch price is $495. If it doesn’t hit $495 during the time of the trade, then you win.
2. Pinocchio strategy
Use this strategy when you expect the asset price to fall or rise dramatically. Choose ‘call’ if you think it’s going to go up or ‘put’ if you think it’s going to go down. This one is best tested on a demo account before you go live.
3. Straddle Strategy
This approach is best used when the market is volatile and when you’re expecting significant news about a particular asset to break. This is a strategy that’s much respected throughout the world of trading. It lets you avoid choosing between CALL and PUT; you put them both on the selected asset instead.
The overall plan is to use PUT when the asset’s value has gone up, but there is a suspicion that it will go down again soon. As soon as the decline starts, put the CALL option on it, because you expect it to rebound soon. You can also use this strategy in the other direction, by placing CALL on a low-priced asset and PUT on a rising asset value. This boosts your chances of success by covering you in both directions. The straddle strategy is a favourite of traders when the market or asset is tending to fluctuate.
4. Risk Reversal Strategy
This is one of the most popular binary options strategies because it’s designed to reduce the amount of risk involved with trading and boost the likelihood of securing a profitable trade. With this approach, you place CALL and PUT options on an asset at the same time. This can really help when assets are volatile.
5. Hedging Strategy
This is another one of those binary options strategies where you place both call and put positions, with strike prices that overlap. The thinking is that at least one of them will pay out. You can make more than if you just select one option, and if you lose then it will still be a lot less than the straight loss you would suffer from just one option. It’s a useful tool to add to your trading bag of tricks.
6. Fundamental Analysis
Binary options strategies almost always require that you have knowledge of the underlying assets that you are effectively gambling on. The theory with fundamental analysis is that you really go to town on understanding the business whose share movements you are interested in understanding. To do this you need to get to grips with things like their earnings reports and financial statements.
As a trader, this review helps you to understand how the company has been performing and how its stock reacts to particular market news. If you know well enough what kind of shape the company is in and what kind of events have caused its share price to fluctuate, then you’ll be much better placed to predict and therefore profit from future changes.
We hope that this guide has been useful in preparing you to take your first steps with creating your own binary options strategies.
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