Having a trading strategy removes guess work from trading consequently lowering chances of losses. Strategy allows traders to make calculated smart moves to increase their chances for a win. A strategy is crucial in trading binary options as it is a case of loss or gain and no in between. All strategies are not equal. Some use complex indicators that require high level of expertise. However, some strategies are easy for beginners to understand and implement. Below are binary options trading strategies for beginners.
Trend strategy works by identifying uptrends and downtrends then using indicators such as Fibonacci and the Japanese candlestick to identify an ideal price to trade at. An asset is said to be on an uptrend if its price reaches a new high higher than the previous one and the new low is also higher than the previous one. On the other hand, a downtrend is when the new high is lower than the previous one and the low is lower than the previous ones.
Trend lines are drawn on the price chart connecting either two higher lows in an uptrend and two lower highs in a downtrend. A third touch point is then determined using divergence lines, candlesticks or Fibonacci to predict the future of the trend. If a positive prediction is made, then it would be ideal to either sell or buy accordingly.
1-2-3 simple system
This strategy works by identifying a three-point pattern in the price chart. For a valid 1-2-3 down, point 1 should be the highest point and it should follow an uptrend. Conversely ,1-2-3 up pattern is such that point 1 is the highest point in the pattern and it should follow a downtrend. The ideal time to trade is when the second point, usually referred to as the resistance point is broken. It is inappropriate to join the market when point 3 is lower than point 1 in an up pattern or if point 3 is higher than point 1 in a down pattern.
Binary options hedging
This is a money management strategy that helps to manage risk. The strategy aims to keep losses at the bare minimal while locking in profits. It works by placing two opposite bets on a binary option trade but with a bias on one. Assuming that a trend analysis predicted a bullish move, then the trader will invest a higher amount on a call and a lower amount on a put for the same trade. That way, even if either the call or the pull loses, it will not be a total loss for the trader as one of the bets will have made a profit, however minimal.
Ideally, a binary options trading strategy should be inclusive of three main aspects: money management strategy, trading strategy and analysis and improvement strategy. However, the outlined beginner binary trading options are rather simple therefore they do not incorporate all the three aspects. Each can be used alongside another complementary strategy to be able to cover all aspects so as to minimize trading risks.