In financial derivatives market, binary option trading is emerging significantly, attracting traders from all over the world. Hence why choosing the right strategy for trading cannot be left aside. Picking to win strategy is created by Binary365 team and it’s a set of actions that traders can do to protect themselves and their investments and gain profit in the long run.
Most traders highlight binary trading as just 3 easy steps; registering – finding a binary options platform, selecting an asset to invest in and placing a bid. Even though these are the most crucial steps, trading involves a lot more than just merely selecting from a set of options. Every step has to be carefully and tactfully taken.
Step 1 – Choosing the most suitable binary options platform
The strategy begins by a very basic point – signing up with a broker. But there are so many brokers, which one should you choose? Recently binary options market has seen a large increase of brokerage services so extra caution is recommended. When deciding which platform to choose, it’s important for an investor to familiarise himself with features the broker is offering. During the process of ranking binary option trading platform a trader has to pay attention to the following things:
- List of assets available
- Minimum trade amount
- Fee/Commission structure
- Minimum deposit
- Demo account availability (if you’re new to the market)
- Trade expiration times
- Return percentages
- Deposit/Withdrawal options
- Other trader reviews
- Special offers and bonuses
- Support and others
These features and amounts vary from broker to broker but the following information may help you to understand the overall market situation.
What’s common in the binary option market?
- Minimum deposit: most brokers require a deposit of €200 or €250. However, it’s possible to find brokers that offer lower minimum deposit options but it’s not that common in the industry.
- Minimum trade amount: the amount varies from €10 – €30 among the top binary option platforms.
- Trade expiration times: on most platforms expiration times are starting from 30/60 seconds and go up to daily/weekly. Thus a trader has to look at his needs of trading before starting off.
- Lock out period: lock out period concept (or ‘early closure’) is important; closing a trade prior to expiration time. This is an option where a trader can close a deal quicker than expected. It’s being used to when the market is going it a different direction to cut losses.
- Return percentages: returns on successful deals range from 60% to 80% and on unsuccessful deals from 0% to 15% of the initial investment.
- Special offers: many brokers offer a bonus on the initial deposit. Such promotions usually provide traders with additional 20% to 50% on the initial deposit as a bonus. It’s a common practice in the industry. However, caution is recommended, as accepting additional funds to trade, may require a certain amount of trades before money can be withdrawn from the account.
- Demo account: practice accounts are very useful to try the platform before engaging with any broker.
- Fees/Commissions: don’t worry if you see that a broker is charging a small percentage or a certain amount when you want to withdraw your funds. These costs shouldn’t be high but it’s common because of the transaction costs.
This gives a brief insight into the market and what to expect when signing up with a broker. In the very beginning you need to figure out what’s important for you, i.e. what minimum deposit is acceptable, how quickly you’d like to withdraw your funds, which assets you’re willing to trade etc. Going into the market blindly can be risky.
Step 2 – Choosing an asset to trade
This involves selecting an asset; stock, indices, commodity or currencies. Selecting an asset involves two questions that a trader needs to answer:
- How much do you know about the market you’re about to enter?
- Is this the right time to trade the asset?
Coming to the first question, it’s important to get track of what influences the asset market. Commodities are largely affected by supply and demand factors. I.e. For a trader to invest in gold, he has to look closely at related markets, for instance – what is happening in the gold market for futures contracts.
Similarly, stock and indices might move together, for example, if a trader predicts that Microsoft Corp. stocks will move in an upward direction he can implicitly also predict that S&P 500 indices might also show a rising trend as IT constitutes about 20% of the index. This binary option trading strategy is called, knock-on effect.
Currencies are usually going hand in hand with economic performances and political events. Investor has to comprehend monetary policies of a country and be aware of political activities.
When you know what’s happening in the markets related to an asset it’s easy to see patterns and know if it’s the right time to invest. For example, if you know that today president is going to have a speech about tightening of monetary policy, it’s most likely also going to lead to anticipated appreciation in the currency market. Based on this, the right time to invest in a call option would be an hour or a half before beginning of the speech.
Thus, hold over closely related financial markets is important. Consuming information smartly can lead to a winning binary option trading strategy.
Step 3 – Placing a profitable bid
Placing your bid – it’s the crucial part, where payoff to all effort lies. After the analysis of the market, it may take a second to decide if it’s better to place a bid on a call option or a put option. Yet it’s not possible to be 100% sure about the outcome. Profit and loss goes hand in hand. If there’s a 60% chance of winning the situation, nevertheless, there is still 40% chance of losing. Thus a good investor looks into the situation and carefully weighs the profits and loss that could occur to him.
There is no game in which there is no losing. Fun lies in the fact that you have to strive to find a way to win. Not as scary as it sounds; there are even more ways to hedge yourself from losing out money in binary option trading.