Binary option is proving to be one of the most lucrative forms of investment because most fundamental strategies related with binary trading do not require prior experience. Unlike other investment methods, the trader only needs to predict the movement of the underlying asset. As the price can either go up or down, it is easy for the trader to make a decision. This article provides a brief overview of the five most helpful binary options strategies, which can further increase odds of winning.
This is one of the oldest and most powerful trading strategies in the book. Recent research based on behavioral science theory have also proven that most trends have an underlying psychological factor that continues to push the price in one direction. Therefore, always keep an eye on the trend during a particular time frame. For instance, if the trader has opted to remain in the trade for 4 hours, they should analyze the ongoing trend on the 4-hour chart. Similarly, longer time frames such as a day requires analysis of daily trend. Just remember, investing against the trend is similar to standing in front of a moving locomotive.
News Trading Strategy
Experienced traders have successfully utilized the strategy for years. To initiate the strategy, a trader waits for the opportunity when the price of the asset is expected to move quickly in one direction. For instance, investors knew that Britain’s decision to exit or remain with the European Union will make a big impact. Under these conditions, it is always a good idea to buy or sell an option, particularly binary options. By doing so, the investor can take full advantage of the move in either direction without risking large sums. Actually, the strategy also requires little very little knowledge of the market conditions because binary options allow investors to replicate huge moves without buying the asset at a full price.
Risk Reversal Strategy
Just like the news trading strategy, risk reversal is similar in the sense that it also takes advantage of the volatility in the price of an asset. However, unlike Pinocchio, the investor places both a PUT and a CALL by buying and selling an asset at the same time. The idea behind such a risk reversal strategy is to gain from the movement of the asset irrespective of the direction. Hoping that the expected volatility will likely end “in-the-money”, investors have used this strategy to execute highly profitable trades during news events.
Hedging is a strategy that is mostly preferred by expert investors who want to protect their profits. It is also used during uncertain times when the investor is unsure of the future direction. For example, if an investor has bought a profitable Forex pair that has proven highly profitable, the investor may decide to sell the binary option of the Forex pair to hedge against the risk of losing the profit. In an ideal situation, selling a binary option will act as an insurance because it will cost a fraction of the overall profit, if utilized effectively. On the other hand, if the price of the Forex pair falls abruptly, the binary option will also gain at the same time. As a result, any loss from the falling price of the Forex pair is neutralized by the gain in binary option. In the end, the overall profit remains intact except the small premium.
Despite the fact that these strategies are used by professional traders for years, these four traditional techniques have proven their effectiveness in the long-run. Therefore, anyone using binary options should use them as a primary tool for investment success. For more information, traders can browse the website of any trusted provider of binary options. For instance, TorOption broker offers binary options for multiple instruments, which can be used to understand the dynamics of different markets before deciding how to trade. They offer a variety of tools for market analysis including market review, real-time charts and economic calendar. Perhaps, it is time that you start considering lucrative investment opportunities offered by binary options.