For successful long term success with binary options trading, the key element is: Trading Strategies. A strategy which consistently makes a profit can be seen as a successful binary options trading strategy. This generally requires a method that wins more trades than it loses, however it should also ensure that the win payout covers more than the losses. Simply winning is not sufficient for a long term profit, as the general payout is less than 100% of the investment amount. The art of trading binaries profitably has a similarity to betting in the sports world where expectancy is the trait that links both. The way to derive long term profit from binary trading, is where the expectancy (or the theoretical profit within a trade) results in a positive expectation from that trade.
Strategies in binary trading focuses on identifying trends and circumstances that repeats and a trade can be made with a positive (profitable) expectancy. This could be as simple as:
Should the asset “X” decrease in its value for three successive sessions, then open a call option for the duration of the next session.
This is an example of a very simplistic trading ‘strategy’. Often the simplest strategies works the best, and they should not be very complicated (although they could be).
Types of Trading Strategy
To identify strategies a few different techniques are available. New traders may wish to explore them as each has the potential to be profitable with the correct usage.
The example above is a traditional or basic trading strategy, and here’s also alternative methods:
Charting and technical analysis charting (which is the analysis of technical indicators and graphs) are usually the first consideration for constructing a strategy. The trends and patterns within pricing charts have been written about extensively, and can be directly applied into a trading strategy. Although it is not easy to keep to a simple trading strategy while at the same time diving into technical analysis, this route does give some insight which may not have been obvious elsewhere.
Fundamentals
A prerequisite for most trades or forms of investment, analysing the fundamentals is vital. However, with binary options trading the time scales are often too short for the price to be shifted in the expected direction. However, with study of the fundamentals, some trade insight can be gleaned which can be applied to a potentially successful strategy, especially for the longer term trades. With the availability of longer term trades by some brokers, such as a month or two months ahead, this strategy may have a good potential.
The Benefits of a Good Binary Options Strategy
First and foremost, the simplification of making decisions regarding when and where to trade. The less guess work there is around entry and exit points at a crucial time for a trade, the better, especially for the less advanced traders.
A strategy that can be applied repeatedly will clearly highlight opportunities, while many opportunities could be missed without it. Good strategies encourages good money management, discipline and is a good indication of the potential to have positive results. Although traders without a strategy may have some success, it would be much more challenging. Newcomers to binary trading would benefit from devising their own strategy, as they would learn during the analysing process better techniques to evaluate strategies offered by others. Such a solid grounding experience would make a novice trader more resistant to false promises of quick fortunes to be made by using someone else’s trading strategy, or costly software.
A good place to start experimenting with trading strategies are demo accounts where capital does not have to be risked. Read our complete list of demo broker accounts here.