If there’s one thing that matters most in binary options trade, it is a well devised strategy. With a great strategic approach, you can ace binary trade market in no time. One of the ways to describe a great strategy in binary options is that it’s a signal that consistently generates profit. But what constitutes a “great strategy” …in simple terms it would be the one that brings you more profit as opposed to loss.
In Binary options trade the strategies are used to identify recurrent trends, so a trader can step forward with a great expected profit margin. In this guide we are going to overview different types of strategies, so you can jump-start on working towards developing one of your own.
What Do You Need for a Good Strategy?
In order to come up with a binary strategy for binary options trading, you must merge three sub-strategies…that include, a trading strategy, an analysis strategy (for improvement) and a money management strategy. All three components tend to a specific aspect of binary trade for you. Let’s review some very specific examples.
Strategy # 1: The 60-Second Expiries
This strategy is also known as a one-minute option strategy. To incorporate this strategy, you must find resistance levels and support aspects in the trade market where the short-term bounces occur. For this purpose, Fibonacci retracement levels, as well as, Pivot points would prove to be very useful. Furthermore, you are to take the trade set ups on the very first touch of a level. In situations where you are working with high-noise assets, taking a higher trade volume might actually go to your advantage and the 60-second trade strategy falls into this type.
Now, understandably to maximize gain from this strategy a trader might increase trading frequency in order to counter the underlying noise in this trade strategy. As a word of caution, you must never carelessly trade all instances of resistance and support. In all the instances, keep the price action, direction of trend and overall momentum in your consideration.
Strategy # 2: Momentum Strategy
The speed of movement of an asset’s price is what we term as ‘momentum’ in binary options trade market. Since it’s an inherently technical indicator, Momentum could be a good or bad news for the traders. In order to work with this strategy, you must be well-familiar with the computational methods for momentum (i.e. absolute, relative and process oriented).
As a binary options trader you can utilize the boundary options and momentum indicator to maximize gains. Boundary options primarily define about two target prices, one of the price values would be below the market price while the other one would be above it. The great thing about this strategy is that both the price markers are equidistant, and the moment market touches one of them, you get to win your option! This strategy saves you from market upheaval and makes the direction of market movement quite irrelevant to your ‘winning’.
Strategy # 3: Five-Minute Strategy
With this strategy the binary options trader has an expiry of 5 minutes. Although there could be various options when it comes to this strategy, you can always narrow down your choices by keeping two points in mind; firstly, the market must not be moving randomly (like on short time frames) and secondly you should have the option of doing a lot of trade within a day (this would increase the earning prospects).
The first 5-minute strategy is to trade the MFI (money flow index) extremes with low and high options. When the trends are long-term ones MFI usually stays in the underbought or overbought areas for long and fundamental influences gain a strong hold during these times. While during shorter time frames, fundamental influencers lose their significance. Another 5-minute strategy is to trade the news. When an important news chunk strikes the market, you would often witness a strong market reaction, and this is where you can take advantage.
Strategy # 4: The Rainbow Strategy
This strategy is a combination of simplistic signals and sophisticated predictions and it is best suited for the traders who are looking to maximize the profitability by employing a successful strategy. This strategy is a crossover strategy with 3 moving averages. The idea backing this strategy is that moving averages that make use of several periods take less influence (or the reaction time is long) from the price fluctuations, as compared to the ones that utilize few periods. As a binary options trader you need to act when several moving averages are stacked in the right way. When the averages stack in the right order, you can either invest immediately or wait for a period or wait for more than two periods.
Strategy # 5: The End of the Day Strategy
Well, it does sound very mysterious and certainly is quite interesting binary trade strategy. With this one, you can locate great trading opportunities with a substantially limited time investment. It basically, informs a trader about the signals that can be used and the time frames during which they should be on the look out for a signal. With this strategy, the assumption is that the best trading time is at the end of a day.
Strategy # 6: The Expiry Strategy
For this strategy the very first thing you must do is to identify what is your signal (i.e. stochastic crossover, candlestick pattern, trend line bounce, momentum shift or a combination). After that you get back to the charts and then locate all such signals (time frame is quite irrelevant at this point). You need to identify strong and weak signals. Once you are done with that, you can then count the bars that are needed for a signal to show movement into money; and then you can simply average the bars that are required. With the averages computed you get to have a base line expire for a signal. With this strategy you get to have a safe duration to make trade decisions.
We have shared all the basic strategies of binary options trade; however, the smartest binary traders understand that to really compete and succeed in the binary options trade market, it is important to devise your own strategy that is absolutely customized for your business.
Share with us in the comments below, some of the strategies that have worked for you. Or, any strategic roadblocks that you have encountered on the way.