Coming Up With A Basic Binary Options Strategy
Have you ever wondered how the same traders manage to turn a profit over and over? It’s not magic. Like everyone else, they incur losses. But over time, they manage to make money on their trades. The “secret” to their success is less sexy than you might think. It’s having a binary options trading strategy and sticking to it, even when doing so seems unwise. That single principle has made a lot of traders very wealthy.
A trading strategy and this will help your success.
You need to have a system in place that allows you to evaluate trades without the distraction of emotion. It’s the difference between hoping that your trade ends in the money and having the conviction of knowing it should.
You may be thinking, “Where can I find a winning binary options trading system?” The fact is, you develop it over time, and make slight refinements along the way. The process takes experience, patience, and maybe even a few hard knocks, but can result in a strategy that helps you to consistently make profitable trades.
In the space below, we’ll give you a few pointers toward developing your binary options strategy. This isn’t meant to be a full-fledged trading course. Rather, our goal is to give you the jumpstart you need to put together your own profitable trading system.
Putting Together Your Binary Options Trading Strategy
Your trading strategy should accommodate the level of risk you’re willing to absorb. Risk and return are inextricably linked. The greater the risk, the higher the potential return. For example, a $1 lottery ticket might deliver an astronomical return, but there’s an enormous risk of losing your “investment.” By contrast, a mutual fund might return 5 percent (if you’re lucky), but the chances of losing your investment are much smaller.
Binary options trading carries a relatively high degree of risk. That’s the reason you’ll see potential returns of 100 percent or more. Having said that, you can develop a trading strategy that reduces the risk in your overall trading activity.
Your binary options strategy should also be consistent with your trading philosophy. For example, do you prefer to ride trends, taking advantage of price momentum. Or do you like to watch for major dips and try to time the swings? Do you stick closely to one specific commodity or do you prefer to spread your trades across multiple commodities, stocks, and other assets?
These details will help to form the foundation of your trading system. The next step is to choose the tools you want at your disposal.
Tools Of The Trade: Candlestick Charts, Pivot Points, And More
A lot of beginning traders are tempted to sign onto a binary options signal service. These are services that send you trades to execute. There are legitimate services out there, and they can definitely give your trading activity a boost in the profit department. But here’s the problem…
First, they don’t guarantee a profit. You’re paying a monthly fee for the service, so getting profitable advice is important. Second, it’s easy to become dependent on the signals, and never take the time to formulate your own strategy. If the service goes away, you’re essentially back to square one as a novice trader.
We recommend getting acquainted with the tools profitable traders use when trading binary options. Learn to read candlestick charts. Get your hands dirty with pivot points. Get accustomed to identifying support and resistance levels. Learn how to use Fibonacci retracements.
You don’t necessarily need to employ a ton of analytical tools every time you execute a trade. Oftentimes, just watching the support and resistance lines will give you a heads up regarding when to get in (or out). The important thing is to learn how to use the tools. Remember, a proficient carpenter may not need a hammer for every job, but he knows how to use one when the need arises. That’s how you should approach your binary options trading system.
Let Your Trading Strategy Guide Your Decisions
The benefit of having a trading strategy in place is that you can rely on it when the road ahead is uncertain. You can let your system dictate your moves.
For example, suppose you’re watching the price of gold and have noticed that it has fallen below $1,600. The average investor doesn’t know whether it will continue to fall or if it will make a comeback. You, however, have noticed that the price has broken through its first support level. Your trading strategy suggests betting on a further decline. While the average investor is left to guess on the direction of gold’s price, you can execute the trade with confidence.
This is not to say your binary options strategy will always lead you to make accurate predictions. No system is infallible all of the time. But over the long run, you should be right more than you’re wrong.
Here’s an analogy: If you’re playing blackjack, you assume the dealer will bust if he’s showing a 6. It doesn’t always turn out that way, but sticking to that system works over the long run. Same with trading binary options. Let your system guide your trading decisions.
Refine Your Binary Options Strategy Over Time
Your trading system will be in a state of constant refinement. Don’t be afraid to make changes if your data warrants doing so. As noted earlier, no system is perfect. As you gain experience with binary options, you’ll notice that your strategy contains holes (it happens to everyone). The more holes you can plug, and the faster you can plug them, the better you’ll do with your trades.
You’ll also learn new trading techniques from other traders. Test them and note the results. If the results are consistent, try to incorporate the new methods into your own trading strategy. This can be a great way to improve your system, helping you to squeeze more profit from it over time.
Rules Of Engagement: Principles Of A Sound Binary Options Strategy
Leaving aside the technical aspects of your trading system, let’s talk about a few rules you should have in place. A couple will seem like common sense, but it’s still worth mentioning them.
- First, regardless of how much experience you have with trading binary options, never wager more than you can afford. If you have to choose between buying groceries and watching your trade expire out of the money, get the groceries. There will always be another trade tomorrow.
- Second, sit down and learn how to read candlestick charts. We made this point above, but it’s impossible to overstate it. The charts will become a key part of your success as a trader.
- Third, if you follow a particular asset long enough, you may eventually convince yourself that you know it like the back of your hand. You know it so well, in fact, that you’re never wrong with your forecasts. Stop for a second. You’re in a dangerous place. Once you become convinced you can do no wrong, the market has a way of teaching otherwise. Rely on your trading system. Look at your data. Make your decisions accordingly.
- Fourth, don’t be overzealous when you first jump into binary options. Take it slow and get some experience under your belt before putting a ton of money into your trades. You’re going to make mistakes. Everyone does in the beginning. Get your education on the cheap rather than blowing your entire bankroll right out of the gate. There are several reputable binary options brokers that offer demo accounts. Take advantage of them. Practice with a demo account here
Should You Buy A Binary Options Strategy Course?
We recommend avoiding the strategy courses you see for sale online – at least, in the beginning. You’ll gain a lot more insight by developing your own trading system based on experience. Along the way, you’ll also meet plenty of folks offering advice on binary options trading for free. Reach out to some of these people and get to know them. Put their methods to work and monitor the results.
You’ll find that doing the hard work on your own will give you a much better grasp of trading than would be possible from studying an expensive training program. If you’re still enthused about buying a strategy course down the road, go for it. You may discover that you could create a more effective course yourself!