Many traders struggle hard to convert small investments into outstanding larger profits. The possible high returns usually lead them to binary options trading, but the development of useful, working strategies becomes an overwhelmingly hard task.
These days, with the internet packed with self-proclaimed experts promoting their methods and indicators, it is hard to distinguish what works from what does not. This is further complicated by the highly variable nature of financial markets, making even the slightest misstep very costly in terms of losses.
Pocket Option is a binary option trading platform that makes everything simple. The firm claims to have a perfect platform for both newbies and experienced traders, with its intuitive interface and chic tools. It provides real-time charts, a wide range of technical analysis tools, flexible trading settings, and more. Thereby, it tailors the ideal space for checking and rechecking different trading strategies.
Top 8 Binary Options Trading Strategies
For trading in binary options, a good, solid strategy is needed. This article presents several proven trading strategies that can help traders take maximum advantage to get potential return, well managing the risk associated.
1. Learn Binary Options Trading
Before going into the details of specific strategies regarding binary options trading strategy, one must know what binary option investment really is. Rather financial derivatives, binary options, help traders make speculation on the price movement of an asset.
This simply means that traders determine if the price goes upwards or downwards in a certain time lapse. If yes, then they will have a certain fixed payout; otherwise, they do not get anything because their invested money went in loss.
2. The Follow-the-Trend Strategy
One of the simplest but most effective trading tactics in binary options is the trend-following technique. The strategy involves spotting and trading along with the direction of the predominant market trend. Below is how you can do it with Pocket Option:
- Identify a Trend: Use technical indicators such as moving averages or trend lines, which show in which direction the market trend lies at present. Pocket Option offers real-time charts and indicators to properly detect trends.
- Trade in the Direction of the Trend: Once the trend has been identified, trade in that direction. For example: buy a call option when in an uptrend and buy a put option when in a downtrend.
- Set Stop-Loss and Take-Profit Levels: Stop-loss and take-profit settings help you manage your risks by securing exits from the trades at pre-determined points to protect your capital.
3. The Straddle Strategy
The straddle strategy is a widely popular strategy for traders when a large move in the market is expected, but the direction is unknown. Here’s how it works:
- Buy Call and Put Options: Acquire both a call and a put option of the same asset, with a common strike price and expiry date.
- Profit on Volatility: This strategy gains when the prices move by a considerable amount in either direction. If the market has moved enough, one of the call or put options will turn profitable, which potentially may cover both options costs and even create some profit.
4. The Iron Condor
The Iron Condor is more complicated, consisting of the combination of calls and puts bought and sold. The strategy is applied when the operator expects equal, small movements in the market and is looking forward to an income maker with fairly stable conditions. This is how one can work it:
- Write a Call and a Put Option: Write a call and a put option at the same strike price but with different dates of expiration.
- Buy Call and Put Options: To limit the possibility of potential losses, buy a call and put option.
- Benefit from Range Bound Markets: Since the strategy gains whenever the market is restricted to a predefined range, it does well when markets lack volatility.
5. The Covered Call Strategy
The covered call strategy involves holding a long position and selling a call option to generate additional income by receiving premiums, as depicted below. Here is the procedure:
- Hold Underlying Asset: Purchase of the underlying asset, such as stocks or exchange traded funds, and holding the same.
- Sell Call Options: Sell call options with an above-market strike price to the current price level of the asset.
- Receive Premiums: Receive the premiums from the sale of call options.
6. Binary Options Trading Risk Management
The need to develop an effective risk management strategy cannot be overstated since it dictates one’s long-term success in binary options trading. Some of the tips used in managing risk include:
- Diversify Your Portfolio: Never risk your whole capital on one trade. Be diversified among different assets and strategies to minimize risks.
- Stop-Loss Orders: Setting stop-loss orders over trades whenever its value has registered losses at a level already set by the investor, so as to automatically get out of that trade.
- Limit Leverage: Avoid excessive leverages, as it will simply have the effect of supercharging your losses if the market goes against you. Always only use leverage you are comfortable with.
7. Use of Technical Indicators
Technical indicators are key tools in binary options trading. Pocket Option provides a variety of indicators to enhance your trading decision:
- Moving Averages: Use moving averages to pinpoint existing trends and signs of potential entry and exit.
- Relative Strength Index (RSI): The RSI helps measure overbought and oversold conditions and points at possible reversals.
- Stochastic Oscillator: This is one more of the indicators based on the potential overbought scenario, this showing reflect the indication of the trend reversals.
8. Generate and Refine Hypotheses
No strategy is perfect out of the gate. Testing and adjustment to refinement of strategies for your binary options trading should be ongoing. Here’s how:
- Paper Trading: Practice your strategies by placing hypothetical trades on a demo account or using paper trading, allowing you to gain practical experience without any real-money risks.
- Check Performance: Step back at regular intervals and analyze your trading performance in terms of the achieved results and areas for improvement.
- Stay Current: Keep up with market news and trends to adapt your strategies accordingly.
Conclusion
There is an attractive profit potential in trading binary options; however, it requires a well-thought-out strategy balanced with effective risk management. These strategies can lead to the greatest rates of success if executed using the Pocket Option platform and include the following: trend following, straddle, Iron Condor, and covered calls.
It’s a continuous learning process of adaptation that holds the key to successful binary options trading. Join the trading online communities, be in touch with bulletins related to the trends in the market, tune your strategies from time to time; only this kind of determination will make a difference in trading, leading to your financial goals.
