Strategies

The Basics of Binary Options Strategies

Binary Options is the easiest and most intuitive way of trading financial instruments. It reminds us somewhat of Forex trading, which has recently become accessible to anyone who is even slightly interested in the financial markets and economic news. In comparison to Forex, Binary Options is much easier and the trader does not need to install any additional software and spend all their free time on training, analysis and learning trading strategy. The trading process in binary options is carried out directly inside the internet browser, and generally the platforms are made in an intuitive way that even real beginners can grasp. The key to success in this kind of trading is to determine a few strategies that will guide you the right way.

What is a Binary Options Strategy?

Binary Options trading is by itself dependent on price movements of a financial instrument, such as a currency pair, a company share, metal, etc. The price is always moving and this is what actually generates the trader’s profits or losses, but the question is does the price move chaotically or is there a system in the way it moves? Well, for those who are looking at a chart for the very first time it may seem so, but in fact we can determine some laws and repetitive principles in these price movements, and this is where we get the strategies from. Binary Options strategies help us get some clarity about the reason and the way prices are moving and they can even make these more easily predictable, so that we can make a profit out of this. The strategy is a precise plan that accurately establishes what we should do to achieve a certain result, so it is really difficult to start trading without such a plan. It is like building a house without an architectural project: you never know what you will end up with.

The Price Trend

Most of the Binary Options strategies are highly dependent on price trends, which refers to the price’s direction. Naturally, we can define 3 price states:

  • Upward trend or uptrend– is when the price goes up for a given period;
  • Downward trend or downtrend – is when the price goes down;
  • Sideways trend is when the price of an asset moves without any distinguishable direction and goes horizontally.

Generally the strategies that refer to solid forms of upward and downward trends can generate more profits. This is why you should rely on trend strategies that include simple and clear steps.

Binary Options Strategies and Market Analysis

It is simply impossible to create a strategy without considering market analysis. The analysis involves questions, observations and answers to everything related to the price movements:

  • What caused the price to move in an uptrend?
  • How many times did the price hit a certain level today?
  • What was yesterday’s highest price value?

Such questions and the answers to them form the actual analysis which we distinguish in two types: technical and fundamental analysis. Based on this, we can say that there are 2 types of strategies: a group that depends on technical analysis and another that derives from fundamental analysis.

Fundamental Analysis Strategies

Fundamental analysis is based on the analysis of economic and political news and their effect on asset price. The strategies based on such analysis will depend on economic news and events that might have a major impact on the price. It may be a change in the political environment or a statistic, reports on the dynamics of various indices, etc. To organize these future events much easier, the Binary Options trader uses the Economic Calendar, which is a schedule with all the major events that can affect the market.

Technical Analysis Strategies

A considerable part of Binary Options strategies, relies on technical analysis. This type of analysis is a forecast method based on the analysis of charts, by using technical indicators and considering timeframes. Such strategies focus entirely on price movements rather than on reasons and the causes behind them. Some of the strategy examples include: Pinocchio, Doji, Triangle, Double Bottom, MACD strategies, Bollinger Bands strategies, etc.

The above are important for you to grasp and the first real stepping stones that turn a binary options gambler into a binary options trader. Once you are able to define a set of suitable strategies for yourself, you can start making for consistent profits with Binary Options trading.