If you’re like a lot of people in the investment community, you’ve been hearing about binary options for a while now, especially regarding how much money they can make you. Therefore, it’s understandable that you’re probably anxious to get started on your own binary trading fortune. Before you do, though, spend some time thinking about what kind of strategy you’re going to implement to see the best possible results.
The most basic type of binary trading strategies is simply the trend strategy. Given how easy it is, this is probably the best place to start. However, just because it’s very basic doesn’t mean you can’t hope for big things. Many very experienced traders continue using this method and wouldn’t consider handling binaries any differently.
In the simplest terms, you’re just investing in the direction that a trend shows an asset should move. It’s not necessarily that simple, though, as you obviously need to have some understanding of where the trend will break. This is why it’s so important that you really study a certain asset before trading binaries—it will make it easier to leverage this otherwise simple approach.
Here’s another simple, but powerful strategy you can use in many situations, though again, you’ll need to have a high-level appreciation for a certain asset class.
A straddle strategy works when you have reason to believe breaking news is on the horizon and will place order onto an otherwise volatile market. Find an asset where its value is increasing and place a put on it. Then, when the decline comes, move to a call option. The idea is that the breaking news you’re anticipating will bounce it back to the other direction.
Obviously, you can do the exact opposite too. The point is that a straddle strategy gives you a unique angle from which to take a choppy market and see serious gains.
Risk Reversal Strategy
An example of the unique nature of binary options—and a fantastic strategy—is the risk reversal method. Essentially, it comes down to betting on two opposite outcomes for an asset, something you can really only do with binaries. This is another example, too, of binary trading strategies even the experts still use.
Place call and put options on the same underlying asset—especially if it has a fluctuating value—and you’re guaranteed at least one positive outcome. It’s a natural hedge and could be the only strategy you ever need.
Of all the binary trading strategies we’ve looked at so far, this is definitely the one that will take the most time to pull off. However, provided you do, you could see some serious gains. It could also create a fairly safe opportunity to come back to again and again.
Fundamental analysis is exactly what it sounds like. If you’re going to be using stocks as your primary binary options asset, then you’ll simply conduct a thorough study of the company you’ll be trading on. This will mean looking at things like earning reports and financial statements. Once you know the company through-and-through, you can predict which direction it will take and profit either way.
The other huge advantage of this strategy is that, provided you keep up on your analysis, you could end up with a company you understand so well that you can return to it again and again for future profits.
Don’t go trading binaries wildly just hoping it will work out. Instead, try out one or two of the binary trading strategies we mentioned above so you have a clear path between you and profits.