Risk Free Binary Options Trading ¦ Binary Options South Africa

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Forex Binary Options Risk Hedging Strategy

When does a trader become more professional? In many ways, when his main task is not to earn more, but earn with minimal risk. It is at this moment that he begins to interest position hedging strategies.

If you start to understand this issue in more detail, you can find many trading hedging strategies that are considered successful and worthy of attention. Among them you will find locking, i.e. opening the opposite direction of the transaction for the same asset (example: initially unsuccessfully open transaction buy by EURUSD hedged by a deal sell by EURUSD, while the size of the loss is in the “lock” until the moment when it is not possible to close both positions in plus or with minimal loss), hedging asset with a high positive or negative correlation (example: transaction buy by EURUSD insured by a transaction buy by USDCHF; assets traditionally have a high negative correlation), and others, on a principle similar to these core ones.

Other binary options articles

Binary Options Hedging

In this article, ForTrader.org magazine suggests you try another version of a hedging strategy that uses an asset from another market, but similar in nature to the main one. We are talking about binary options on currency pairs. ABOUT the concept of binary options, & lt; / RTI & gt; types of and application, we talked a lot in previous releases, so we only recall that binaries are a simplified derivative financial instrument, similar in logic to “betting” transactions. At the same time, having a high percentage of profit with a positive execution: 80-100% and higher, with a loss the size of the contract is completely lost. In addition, the basis of a binary option can be any other traditional asset: stocks, indices, bonds, futures, metals, including Forex market instruments.

So what does this give us? The basis of a binary options trading hedging strategy is solely the fact of a high percentage of profit, which can cover the losses of traditional trading with the correct calculation of risks. Consider an example.

Using the One Touch Binary Option to Hedge Risks

So, we have an open position to buy at EURUSD 1 lot at a price of 1,35914 with stop loss at the level of 1,35503 (41 points) and takeprofit at 1,36822 (91 points). We opened the deal on the basis of technical analysis (see Fig. 1).

At the moment, the deal is in positive territory and we are confident that the price will move up, however, we do not want to lose the profit we have already made. In this case, there are several options for further action:

  • Continue to hold the position unchanged.
  • Close position with current profit.
  • Set a stop order in the breakeven zone.
  • Hedge a position.

How to work on the first three points, everyone knows, and the choice among them depends entirely on the strategy of the trader. But what does it mean “hedge a position“, Let’s figure it out.

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So, we assume that EURUSD will grow at least one more day, and in general with a high degree of probability it will close on takeprofit. But there are still fears of a strong pullback, for example, in case of news release from the Fed in a negative way, so we have a desire save your money.

Fig. 1. An example of an open transaction.

To do this, look first of all at our stoploss. He makes up 41 item, taking into account the deposit, leverage and transaction volume, 1 point at us costs $ 10. As a result, under adverse circumstances, our position will close at a loss 41 * 10 $ = 410 $. With a good combination of circumstances, the profit will be 91 * 10 $ = 910 $. Therefore, when buying an option, we need to win back at least $ 410. Given 90% profitability, we need to buy one-touch contract for 1 day for sale at a price of $ 460 with profitability in case of execution of $ 414.

What do we do as a result? The “one touch” option works in such a way that for any touch of the price of the mark indicated by us, we get a designated profit. At the same time, a stoploss transaction is being closed, therefore, having a loss on a currency pair of $ 410, we get a profit of $ 414 on the option. The difference of $ 4 is taken away. In the case of continued movement and triggering of takeprofit, our profit decreases by the size of the contract: $ 910 – $ 414 = $ 496. In both cases, we remain in the black.

Nuances of using binary options hedging

It is important to understand that using a binary hedge option is only profitable when profit on the main trade is significantly higher than the stop.

Also, existing profits should be considered: if it is higher than your earnings if takeprofit is triggered, minus a hedging position, then, of course, it is more reasonable to simply close the deal. Those. in our case, if the current profit is already 50 points or $ 500, or close to that, then it is more profitable to take profits than to hedge with a maximum increase in output of $ 496.

Also, when working with options, you should include the time parameter in your strategybecause it is mandatory when concluding a deal with binaries. If you are not sure that during the day, as in our example, there will be flat movement, it is better to use the break-even transition, so as not to get two minuses instead of one small plus.

One way or another, as in any other form of insurance, you bear certain risks. It is required to think over options in advance and calculate profitability, especially in transactions with binary options. However in many cases this method is very profitable, especially if you are trying to withdraw the account from the minus with already locked positions.

FORTRADER magazine experts

FORTRADER Magazine is a large team of experts in trading in financial markets. Traders, managers, investors, programmers, testers, technical administrators – we all work for you every day for many years. Sometimes we write articles together, then the whole journal becomes the author.

A Realistic Approach To Binary Options Trading In South Africa

There is a lot of discussion going on about Binary Options as a means of getting additional income in South Africa and as a result, Binary Options trading is getting more and more popular. Several times, it has been portrayed as a solution to all your financial needs with the possibility of making tangible sums of money in minutes, but in reality, is this the case? Let’s explore the real aspects of Binary Options trading and all there is to know.

What is Binary Option

A binary option is a financial derivative in which the investor forecasts the price direction of an underlying asset such as stocks, commodities, indices, currencies and even events. If the forecast is correct, the investor earns a fixed sum of money. If not, the amount he loses is also fixed. Basically, a trader/investor would have to foresee if there would be a rise of fall in the value of the underlying asset within a certain time frame and make predictions accordingly.

Popularity and Regulation of Binary Options Trading in South Africa

Binary options trading is becoming increasingly popular in South with a growing number of people getting involved. There has equally been a comparative increase in the number of brokers offering this option of trading.

The activities of Binary Options brokers fall under the regulations of Financial Services Board (FSB) which is the governmental entity that monitors organizations that are in the field of financial services with the aim of ensuring that consumers’ rights are protected.

Key Things You Should Know About Binary Options Trading

As with any other type of trading, there are key things you should know about binary options before starting to trade:

  1. Binary Options Work With Stocks, Currencies, Commodities And A Lot Of Other Assets

Binary options are considered a financial derivative. What this means is that each trade has an underlying asset in the form of stocks, commodities, currencies etc. However, you are trading on the price movements associated with these instruments and not on the instruments itselves.

  1. You Can Know your Profit/Loss Beforehand

Unlike the regular day trading, in Binary Options trading, you get to know your profit or loss before you make a trade

  1. Strike time, Strike Price and Expiry Time Are the Key Components you Should Familiarize yourself with

A strike time is basically the time at which a trade was placed and the amount placed is the strike price while the expiration time is the moment when the binary option expires.

Let’s say the trader chooses an instrument like Microsoft stock and the binary option has an expiry time of 2 hours then, he predicts if the stock would have dropped or increased in value at the end of the 2 hour period and If the stock goes in the predicted direction, the investor earns a profit and if it goes against the direction of prediction, a loss is recorded.

  1. You Can Only Lose Up to Your Initial Investment

There are no margins or additional losses in binary options trading. Thus, you know how much money you will be risking before committing to a trade.

  1. Don’t Overlook Risk Management

In any type of financial trade, risk management should always be taken into consideration. The rule of thumb in terms of risk management is to not invest more than 2% of your total capital on any single trade. That being said, if you have $500 to invest, don’t invest more than $10 on a trade. This will ensure that you will have enough trades to recover in case of an early loss.

  1. Binary Options Isn’t a Get-Rich-Quick Scheme

Unlike what you may have heard from many dubious brokers, you won’t get rich overnight with binary options. There is a learning process to binary options and it could take some time to master it depending on your commitment.

Why Research is Very Important in Binary Options Trading

A good trader needs to understand the risks and the rewards involved in these often-misunderstood instruments. To achieve a level of success, a certain amount of analysis (both fundamental and technical analyses) should be done especially with respect to how trending news in the company, industry, country or region might affect the price of the asset. This helps the potential investor to predict with some level of certainty, the foreseeable price direction of the financial instrument of interest.

Importance of Selecting a Reliable Broker

Many binary option “brokers” have had history of questionable operations, data and price manipulations, promising unrealistic results, refused or stalled withdrawals. In such scenarios, there is no real brokerage in its sense rather, the customer is unwittingly trading against the broker. To advise traders against such unethical behaviour, services of platforms like binaryoptions.org.za which review and recommend brokers based on various standards of measurements are usually helpful.

Here are six steps to take when choosing a reliable broker:

  1. Capitalization and Trajectory

It is better to choose a broker that has a rather large capitalization. The amount of capitalization almost always attests as to the reliability of the broker. This is because capitalization shows a solid business with good capital and ability to offset risks. Also, ensure the broker has its share of experience in the field.

The more assets offered, the more trading opportunities you will have to diversify your risk.

  1. Check Out Terms and Conditions

Also, read the terms and conditions of your binary options broker. This is especially true for brokers that offer bonuses. These bonuses many have many restrictions. This way, you can choose the one broker that favours you the most.

As with any other service, you want to be sure you get help when you need it.

A payout that ranges between 75% to 90% in this industry. The higher the payout, the higher your profits

Binary Options can be a good way to generate additional income if research and analysis is done well but as with any other type of business activity, it is important to prepare oneself beforehand before engaging in it.

The activities of financial service providers in South Africa are regulated by the Financial Services Board (FSB). Ensure that any broker of your choice is regulated and has valid FSB licence and registration number, this way, you are guaranteed an acceptable level of safe trading and transparent deposit and withdrawal process.

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