Binary options trading involves risk and it is therefore in the best interests of all traders to be decisive in the trading strategies that they employ. Although no method, or system of trading, can result in 100% profitable outcomes for each, traders can use high probability methods in order to reduce the risk of exposing their accounts to losses. Due to the fact that binary options have an average ‘in the money’ profit of around 80% for successful trades, whilst losses are between 85% and 100% of the initial investment, trading strategies are required in order to provide traders with an edge to make money in the markets.
What types of trading strategy can be used?
There are broadly two categories of trading strategy that can be employed. The first of these is the least recommended but that which also requires the least amount of knowledge of either binary options or financial markets generally. This category is based on purchasing binary options based on betting models which are applied to binary options. The second category is perhaps the most sustainable for those looking to develop their trading skills and trade binary options on a longer-term basis. This second type of strategy, however, requires traders to learn techniques how to spot indicators of market direction and areas of strength and weakness. Needless to say, these skills can be very useful in developing a profitable and sustainable trading strategy.
Does the Martingale strategy work with binary options?
The Martingale strategy is a method of covering inevitable losses with larger winning positions. This is done by increasing the investment immediately after a losing trade until a winning position allows all of the previous losses to be recouped. As losing and winning positions are something which all traders have to deal with, Martingale tries to use the frequency of winning positions to off-set the losers. The problem with Martingale, however, is the possibility for a trader to experience several losing trades in a row, each one a larger loss until an account is depleted. Trading with Martingale therefore requires not only a decent trading strategy with a high frequency of winners, but also a very large initial trading account to allow for a large drawdown. For trading binary options, Martingale should therefore be used with caution.
Momentum and high probability trading
For all binary options traders, the skill to see when the market is highly likely to continue higher or lower, or when it may be ready to reverse is one of the keys to successful trading. These skills can be developed quickly and easily, ranging from learning how to interpret a single trading indicator to looking at price-action on a chart. The ability to spot the high-probability situations which signal that purchasing call or put options has a high chance of success is the real key to success. Indicators which can help with this are moving averages, stochastic and MACD. Combining these with price action analysis such as basic candlestick analysis and the application of Fibonacci retracements on a chart will provide an excellent basis to make profitable binary options trading decisions.
