Binary Options Strategies

As mentioned in our ‘How to Trade Binary Options’ section, binary options trading is built to be simple both to understand and use, and so is ideal for both inexperienced and experienced traders.

Whilst it can be difficult to apply trading strategy to something as volatile and fast-moving as Binary options, Binary traders can attempt to estimate the future movement of a product in various ways that we describe below.

  • 01

    Trader Sentiment

    Traders’ decisions can often be influenced by observing the positions that other traders have taken for particular products. Traders can do this with the ETX Binary platform, which provides clients with the ability to use a ‘trader sentiment’ tool for each product. The tool displays the percentage of traders that have opened positions on each side of the option.

    However, although this technique can be useful, there is no certainty that the positions that the majority of traders take will mirror the real-life movement of an option.

    In addition, it is uncommon for the vast majority of traders to all trade in the same direction for a given option. Typically, sentiment is approximately 50:50, rendering it difficult to gather a great deal of information from the way that sentiment is leaning.

  • 02

    Observing Trading Trends

    Analyzing past market performance can sometimes be helpful in indicating a market’s future direction. However, this kind of analysis, even if it is viable, generally only has a chance of being applied to long-term trades, as long term and short term options have different patterns. Financial markets are fast-moving and highly variable in the short term. This renders it more difficult for traders to apply a trend strategy in the short term with any degree of accuracy.

    Additionally, the theory essentially postulates that trends exist up until signs show that they have ended. This therefore means that past performance may not necessarily be indicative of future results.

  • 03

    Keeping up with Financial and International Events

    Keeping up to date with international news events can potentially help traders to take advantage of short-term market trends. For example, changes in government, natural disasters, and releases of economic reports can all affect the value of a currency. It is important to study the news carefully, however, as incorrect analysis of an event’s influence on a particular market may lead to losses if the markets move in the direction opposite to that forecasted.

    For example, if the Governor of the Bank of England issued a public statement about an upcoming rise in interest rates and Sterling started to rise, one could predict that in the short term, the value of Sterling will continue to increase. Nonetheless, there is no guarantee that this trend will continue or even occur, as another event that you may not have noticed or considered may cause Sterling to decline.

  • 04

    Be Wary of ‘Get Rich Quick’ Schemes

    Those thinking about trading binary options should be aware of the following point; it is vital to approach any binary options trading site or software that promises a high success rate or guaranteed profits with the utmost caution. Trading is not a low-risk enterprise, and any site that claims otherwise should be viewed with a healthy amount of skepticism.

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