Binary Options Trading Strategies
Use the following trading strategies for maximum gains:
High Volatility Strategy
Assume you are bullish and expecting a big move in the underlying market, but the volatility is going to be too much for you to stomach. You could use binary options as a way to trade direction with the expected volatility while keeping your exposure limited.
In this case you could buy out-of-the-money binaries; this is where the binary strike price levels would be higher than the current price of the underlying. The higher the strike, the cheaper the initial cost reflecting a bigger trade disadvantage but offering a much higher net payout if the binary finishes in the money.
For example, you might find an OTM binary strike that's trading at $25. If the underlying market surges upward as you expect and finishes above the strike at expiration then the binary settlement value will be 100 and you gain $75. If you're wrong and the binary expires at 0, the settlement payout is zero and you lose your initial cost of $25.
Low Volatility Strategy
If you're expecting the underlying markets to be flat, a strategy that could be effective would be using in the money binary options. Buying binaries would mean the underlying is already over the strike or selling binaries means the underlying is already below the strike. If the underlying market stays flat, as you expect, then your binary finishes in the money.
If gold is currently trading at 1800, for example, you could buy a binary option with a strike price of 1795 that might be trading at $75; it is more expensive, since it's already in the money and has a higher probability of paying out at expiration. If the gold market price stays flat, or even slips a small amount, the binary will finish in the money as long as the gold price finishes above the 1795 strike at expiration. Your profit would be limited to $25 with a possible loss of $75. You're following a more conservative strategy, so the payout is smaller.
Binary Options Tips
Success can be achieved and risks can be minimized by keeping the following tips in mind when investing in binary options:
Find a good binary options broker
A solid broker who knows his stuff can make all the difference.
Trade long term
Develop a long term plan and resist the temptation to get drawn into fads that don't fit into your overall strategies.
Resist the urge to over-invest
New traders often lose money by getting carried away and over-investing. Invest with both rational thinking and self-control.
Keep a clear head
Emotions can create havoc with one's trading. Everyone, but beginners especially should avoid trading when they are emotionally disturbed.
Prep yourself before trading
Studying the market, look at graphs. Keep apprised of trading news.