Strategies

Basic Trading Strategies

Each investor will invariably have this own trading strategies for binary options as well as trading methods and systems. The simple strategies explained in brief here are far from perfect however have grown to become accepted trading theories when trading binary options.

“The Reversal”

The reversal effect is based around the idea that if price of an asset has sharp sudden movement in on direction price will move back towards its original price range. The theory state that sudden rises or falls will soon stabilize.

“The Straddle”

This is a bit more complicated than the reversal strategy and involves both call and put options on the same asset simultaneously. The theory stats that to straddle an asset at this low point and high point will create an area between these two strike prices that would mean double the profit for the investor while still hedging his own positions. This will often be used when specific assets are highly volatile. Call and Put positions should not be placed at the same time and this can be used with longer expiry times, normally 1 hour or more. Of course most binary options brokers these days will allow traders to use weekly or even monthly options, with lower return rates. It is important to know that the straddle strategy is much different when trading binary options as to trading with vanilla positions since the purchase price and in trade rights of the trader differ greatly in these types of trades.

“The Knock on Effect”

The knock on effect is a logical strategy that states an asset will have a “knock effect” on another asset moments later. For example, the price of EUR/USD is traditionally associated with the price of GBP/USD and most movements by one pair should be reflected by the other.

“Double Red”

The double red is fairly simple, as is the knock on effect. When trading with your binary options brokers the strategy of trading is to wait until one red candle stick comes directly after another on a 5 minute candle stick chart. Often when this occurs there is a slight “pull back” on the price action were you should be able to get in at a good price and continue the downward trend.

Inside Bar

What is an inside bar?

An inside bar is a candle of series of candles which are 100% inside the range of the previous price action on a specific assets. On a smaller time frame this will appear on your charts in a triangle shape and should be easy to recognize.

The strategy states that once an inside bar formation has been spotted in either an up or down trend a horizontal line should be drawn on the main candle which is the candle where current bar is inside the formation. If you are in a down trend you should draw this line to towards the wick. Once the next candle has closed, above or below this line, you should wait for a pull back and enter your position.

Problems Of Binary Options:
The major problem is leaving all the investment if people create the bad call. Some agreements permit people to find back somewhere between 5 to 15 percent of their investment, which is still a huge loss. People should be adept at learning and guessing temporary market problems before attending in such a deal. Reselling assets at a markup assures a get back of investment. It reduces the problem of reducing the money in terms of agreement completes in out-of-the money.