Binary Options Trading Strategies and Online Trading
Online trading is fast becoming popular among some investors and has seen growing interest in recent times. Binary options trading is particularly popular among investors who want to invest through online trading. This growth in interest has led to the development of binary options trading strategies designed to help investors improve their chances of trading binary options successfully. But what exactly are binary options?
Binary options are special types of options in which the trader either receives a fixed, predetermined amount of compensation or he receives nothing at all. The term “binary” implies and signifies that there are only two possible outcomes that can result from the trade. If the option expires at a strike price that is below the market price of the underlying option for a call option (in the money) or at a strike price that is above the market price of the underlying asset for a put option (in the money), the trader will receive the agreed compensation for the binary option. Otherwise, he will receive nothing. Those investors who invest in binary options usually do so through online trading platforms that are unregulated for the most part. Very few binary options are traded on regulated platforms. For this reason, binary options do present a certain level of risk. However, investors can mitigate risks and protect themselves by only trading with reputable online traders. Binary options trading strategies are many but there are few popular strategies that traders like to use.
Binary Options Trading Strategies.
Generally speaking, there are two basic types of binary options trading strategies that exist. The first type of strategy is based on the concept of odds and probabilities; very similar to betting. The second type of strategy is based on using market data to analyse the market in order to make more accurate predictions. The first type of binary options trading strategy places great weight on timing as well as on the amounts that are traded. There is always a 50/50 chance that the investor will make the right choice and end up in the money. However, there are several factors that investors should take into consideration that can make it more or less likely for them to hold a particular position about a binary option. One popular binary options trading strategy that investors use is the Martingale or Grinding strategy.
The Martingale or Grinding Strategy for Trading Binary Options
With the Martingale or Grinding binary options trading strategies, the investor will invest a certain amount in a trade and will continue to double the original amount invested in each trade until he records a win. These particular binary options trading strategies are based on the premise that as long as you continue to double up the amount invested; even if you lose, as long as you keep doubling up your losses, eventually you are bound to win since your chances of winning are 50/50. Here is an example of how the Martingale strategy works:
Let’s say you invest $10 to bet that the currency will go UP within the next 15 minutes and the established payout is 70%.
Amount invested – $10
Assume that you lost this bet because the currency went DOWN, instead of UP. This means that you would lose that $10.
You bet again that the currency will go UP but this time you have to double your investment and add something extra to it. So this time you invest $26.
Let’s assume that this time you win because the currency went UP as you predicted.
So you would make back your $26 plus, the 70% payout which would give you a total of $26×1.70 = $44.20.
The total amounted invested = $10 + $26 = $36
Your profit = $44.20 – $36 = $8.20
One advantage of the Martingale or Grinding strategy is that it is simple and appropriate for beginners since it does not require much knowledge about trading. In addition, it is likely that the investor will eventually win.
On the other hand, the Martingale strategy of trading binary options usually requires a large investment to cover any potential losses. If there are a great number of consecutive losses, the investor may end up investing huge sums of money and running out of cash before a win is made. When using the Martingale or Grinding Strategy, it is best to keep your initial investment on the lower end to avoid having to make huge investments in case you lose and have to double up.
Momentum and High Probability Trading Strategies are another popular type of binary options trading strategy.
Momentum and High Probability Binary Options Trading Strategies
The Momentum and High Probability Binary Trading Options Strategies require the investor to have knowledge of how to analyse market movements using techniques such as candlestick charting, moving averages, Fibonacci retracing and so on. The investor should have the skill to spot high probability situations by analysing what is happening within that particular market. The key to being successful with this type of binary options trading strategy is being able to accurately read and interpret the signals in order to increase the chances of making a win.
Trading binary options is an exciting way to invest. However investors should be aware that while they can make substantial profits, there is also the possibility of making losses. Those who are keen on binary options trading should take the time to understand how the financial markets work so that they can improve their chances of success at binary options trading. Also, it is advisable to seek out a reputable online trading platform. If you are new at trading binary options, you could benefit by using a binary options demo which will show you the basic idea behind binary options trading.