Best Way to Trade Binary Options - Binary Options Trading Strategy

Best way to trade binary options

July 02, 2021

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How to Analyze Binary Options?

First, you choose an asset and start parsing it, that is, figuring out why the price is going up or down. This is done in order to determine its future fate. But when you invest in a binary option, you are imposing additional conditions on the asset, so it is important to analyze binary options on the terms of the deal.One of the main conditions for a successful investment is to accurately predict the price changes in the future period. Consequently, a thorough analysis must be performed before making an investment.

Fundamental analysis

Fundamental analysis of binary options is based on various events and economic factors, supply and demand analysis. Fundamental analysis is basically a long-term analysis, as important events do not last for 15 minutes and problems of a fundamental nature are not solved quickly either.

Fundamental analysis for binary options can still be useful, especially if it is not about the economy as a whole, but about specific companies.

For a company, fundamental events can include a change in management, a mass layoff of employees, and all sorts of financial statements. Every quarter, all companies on the stock exchange publish financial reports with data on profits and losses, production volume and inventories, debts and companies' plans for the future. With over a hundred companies in assets and at least 4-6 reports each, that's about 400-600 reports a year on which you can make money. If a company's report says profits are up, it increases investor interest and the stock starts to rise, and vice versa, if a company reduces production, it signals a future decline in profits and the stock falls.

Fundamental analysis helps to understand the main trend of the national currency, the general direction of the market.

For example, if you do a fundamental analysis of Apple, you can see that the company is constantly evolving, the company's revenues are growing, as are their shares.

Based on all of this, we can conclude that in the long term, Apple stock will only rise. But from the technical analysis, we can see that sometimes Apple stock falls for a number of reasons. For example, falling sales in anticipation of new products or the impact of the U.S. currency.

You need to understand for how long to buy an option.

  • If the event is general in nature, like long-term growth, invest for longer periods.
  • If the event is of a daily nature, invest for a couple of hours or a day. For example, the start of sales of an expected product, for which there are queues, is always conditioned on an increase in the price of the asset on that day.

In addition, these products do not appear on the same day all over the world, but on different days, for example the start of sales in America on the 12th, in Europe on the 17th, in Russia on the 21st... Thus, you only need to keep track of new products and know the start dates of their sales. Given the large number of binary options assets and news on them, this is not difficult at all.

  • Economic calendar

The economic calendar will be especially useful for investors who conduct technical or fundamental analysis of underlying assets.

A binary options trading strategy can also be based on the economic calendar. The economic calendar is an interactive table containing data on the exact time of publication of significant macroeconomic news. It is updated online, which allows the trader always to keep abreast of the latest events. As a rule, the economic calendar is made for the working week, i.e. from Monday to Friday. The indicators of the coming week are usually published on Fridays. Thanks to this schedule, the trader can think how to trade during the next week, taking into account the received information. The calendar publishes news for different periods: month, year, and quarter.

The longer the period, the more important the news can have on the market. At first, the calendar reflects only previous indicators and macroeconomic forecasts for the future. Then, when the news is officially released, the actual value appears. At that moment, currency quotes change most rapidly. A high level of volatility of quotes can also be observed during speeches of heads of central banks or their meetings. These events are always reflected in the economic calendar. Thus, for traders, trading the news, the economic calendar is the first assistant. It is necessary to say that not only economical news influences the market. The psychological factor also plays an important role. The fact is that millions of traders around the world use the economic calendar. Among them there are market makers - players who have large sums of money. Of course, they are aware of how the market may react to this or that news. As a result, a huge number of orders will be opened in the same direction, even though the news itself is not that significant. Virtually all of the indicators on the economic calendar affect the market in one way or another.

For example, as a country's GDP rises, currency quotations will rise, and as inflation or the unemployment rate rises, currency begins to depreciate. But some news can have different effects on the market. For example, a country's central bank increases its discount rate in order to cope with inflation. In response there may be a strengthening of the national currency, although credit becomes more expensive and the attractiveness of the country for investors decreases. If you only use technical analysis in your work, the economic calendar will still come in handy. When an indicator or economic news is very different from previous/future values, quotes can change in spite of technical laws.

Trading the news is considered not a very risky tactic, so it is successfully used by professional traders. Let's see how the Forex calendar is used in practice. 

To make it easier to work, you can use this sequence of actions:

  1. Studying the calendar for several days ahead and identifying events that can change the market situation. 
  2. A selection of currency pairs that can be linked to upcoming events. 
  3. Monitoring the movement of the selected currency over a period of time. 
  4. Search and study other trading signals. 
  5. Tracking when news is published in the calendar online. 
  6. Opening a deal in the desired direction after the release and analysis of fundam

Technical analysis 

Technical analysis of binary options is based only on the price chart of the asset, on the history of its past price changes. Thus, you can see the history of price changes and trends on the chart. Through years of studying the charts, analysts have begun to find common patterns. Because of this, technical analysis in binary options has become really important and can affect the price of an asset. Technical analysis is most important for the most liquid assets like currencies.

Be careful when analyzing an asset.

  • If you are investing for the short term, you should open a chart for the near term..
  • If you are investing for a couple of days, you should open a chart for the last week, as events earlier in the day may not have a significant impact on the current direction.

1. Charts

Technical analysis can also be performed on price charts.For this purpose, charts and price history of an asset are used. Also, technical analysis is basic and very important, because it clearly shows in which direction the price is going, rising or falling. This type of chart determines the current trend: upward or downward. There are many different tools, such as indicators or special chart figures, to determine the trend and its long term. The most successful deals are always based on trend trading. Finding the trend is what most binary options strategies are based on, so it's hard to overestimate its analysis.

Chart
Chart

2. Trading Indicators

Technical analysis can also be done with the help of indicators.

This method is one of the most popular among traders. It is explained quite simply. Firstly, there are a lot of indicators. Secondly, all of them work in an automatic mode. Third, indicators can be applied to almost any market situation and to any underlying asset.

Depending on their purpose, indicators can be trend indicators, oscillator indicators and volume indicators. Accordingly, if you are trading on a trend, you can apply the first type. If you decide to work on a reversal, you can apply the second type. Volume indicators are suitable for both trend and reversal strategies.

The most famous indicators:

  1. Moving averages
  2. Alligator
  3. Stochastic
  4. MACD
Trading Indicators
Trading Indicators

Timeframes

The time frame is the time interval after which a full candle will be formed. All intervals of the formation of candlesticks on the same timeframe will always be equal. That is, if you have selected the five-minute timeframe, then each candle will be drawn exactly five minutes.

All timeframes are divided into junior and senior. Junior - M1 (one minute), M5 (five minutes), M15 (15 minutes). Higher timeframes: H1 (one hour), H4 (four hours), D1 (one day), W1 (one week), MN1 (one month). In order to analyze the market, it is possible to use timeframes from both categories.

It is also possible to use timeframes that will be different from normal. For example, by 2 minutes, or by 3 hours.

  • Short-term trading

There are binary options that are considered short-term. This is Short-term trading. As a rule, under this classification fall all the contracts with an expiration date before the close of the current day. For example, the expiration can be set in 60 seconds, 5 minutes or a few hours, and in each case, the binary option is still inherently short-term.

  • Long-term trading

There is also an option of Long-term trading. Under the long binary option, we understand the transactions concluded for a significant period of time. Expiration period for such contracts can be a day, a week, a month or even a year.

Trading strategies

There are 2 types of trading strategies for binary options by duration:

  1. Long-term (trades last for one day or more);
  2. Short term (binary options strategies for 60 seconds, 5 or 15 minutes, an hour).

There are a large number of strategies:

60 second strategies

  • Vortex
  • Maverick
  • Thunder and Lightning
  • 60 Second Strategies

Strategies for 5-15 minutes

  • Wells MACD
  • Strategy Le Confort
  • Royal Fish
  • Binary options trading strategy on divergence
  • Everest
  • Go-Go
  • Raccoon
  • Woodcutter
  • Strategy on the news

Strategies for 30-60 minutes

  • Antiq
  • Envelope
  • Navigator
  • Binary options hedging strategy

It is important to choose the strategy that suits you best. Your trading comfort and results will depend on it.

News trading

Political and economic news is a powerful source of fluctuation in global financial markets. Even rumors of events such as falling central bank interest rates, lawsuits by governments and large corporations, soaring inflation and unemployment, or a deteriorating international environment invariably cause stock market outrage.

News can be divided into two categories:

  • Unexpected or "hot". This category includes news about such things as terrorist attacks, natural disasters, dramatic geopolitical outbreaks, the emergence or resolution of military conflicts, etc. News of this kind is most often unfavorable and contributes to a sharp price collapse. Depending on the circumstances such news help to timely discount the asset which will soon depreciate, or, on the contrary, to catch the moment and buy the unfairly depreciated asset, the price of which will soon rise again.
  • Periodical. This news is issued at regular intervals. These include economic data releases, quarterly earnings reports and other similar data.

News can be both asset-specific and global, affecting the entire market.

Martingale trading

The Martingale strategy involves doubling the amount of investment after a losing trade.

The fact is that in these contracts in case of success you do not get 100% of the profit, but only 60-90%. Accordingly, it is necessary to plan the calculation of transactions somewhat differently, the Martingale strategy in binary options has been somewhat modified for the local trading conditions.

To illustrate, let's take the first investment of $10. The yield on the contract is 80%.

  • So, the trader buys an option with a growth forecast and the first trade turns out to be unprofitable. He loses $10.
  • The size of the second investment is $20. This transaction also does not bring profit.
  • The next transaction is $40. It also turns out to be unprofitable.
  • Next - $80. The deal also does not bring profit.

 The total loss is already $150.

  • The volume of the next transaction is $160. It finally turns out to be profitable. 

The profit on this deal will be only $128 (80% of $160). At the same time, our current loss is already $150 (after the last unsuccessful trade). The net loss on the martingale cycle is $22

The essence of working with this technique is to make a profit, but not to strictly follow the classical doctrine of the system. And that means you can design your own odds system that will allow you to overcome the hurdle of reduced returns in binary options.

Scalping 

Scalping is a frequently used type of aggressive trading that allows you to earn a quick income without going deep into the market system. It is successfully used not only on binary options, but also on the international currency market. The main peculiarity of scalping strategies lies in the high speed of making transactions and their rapidity. At the same time, such speculative approaches require the exchange participant to pay special attention and focus on quotations in order to avoid missing successful points of entry into the market.

There are a number of rules that a trader should consider when scalping on binary options:

  • Do not make deals during economic news periods;
  • It is worth reducing activity on the market for these assets on the first and last day of the month;
  • Experts recommend refraining from trading on every Monday and Friday of the week;
  • choose financial instruments for concluding contracts with caution;
  • when using oscillators, it is advised to refrain from trading in a strong moving direction;
  • volatility indicators should be fenced off from flat trades, which take place outside the chosen strategy;
  • Losses on one trade should not exceed 5%;
  • Do not deviate from the plan;
  • Regardless of the strategy used, you must wait until the signal candle closes.

Profit figures vary within 85% of 1 point bought. In addition, it is worth noting that a minute in binary options scalping equals a 1-hour period on assets that are designed for long-term trading.

Trend trading

Most often, traders use trend-following strategies when trading binary options. They are versatile and easy to use, often not even requiring the use of additional indicators or complex rules for trading. Most trades close on the plus side with an average risk to profit ratio. It is possible to work with any assets, on all timeframes.

It is important not to open more than one trade for one asset, as this will increase your risks.

Why is it so crucial to differentiate between retracements and reversals? This is because investors have to contend with challenging judgment calls whenever reversals happen. For example, should they retain their active positions open but risk significant losses? In contrast, they could sell when price initially plunges and then attempt to re-enter the market at a discounted price. However, they subsequently risk the opportunity of losing substantial gains if price should abruptly surged back into its initial direc

1. Trading on trend retracements

Another extremely popular binary options strategy is Trend Retracements, which supports the important benefit that it enables you to operate in the same direction as the prevalent trend.

The primary problem you will have to solve is how to ascertain whether price is executing a prominent reversal or a minor retracement. This distinction is critical because you must know if price is experiencing a long-term slump or merely a short-lived dip. For instance, many investors have encountered serious frustrations when they have exited their active positions too early only to subsequently observe price surge back into their initially preferred direction. To counter this serious downside risk, you must learn how to detect and trade retracements effectively.

So what exactly are retracements? They represent short-term price reversals that are created within significant price channels or trends. Their most vital facet is that they survive for only short time periods before price resumes advancing in its initial direction. You need to how to distinguish price retracements from the more severe and long lasting reversals.

You can differentiate between the two by utilizing the following important distinctions:

  • Retracements are generally caused by smaller investors extracting profits and, consequently, do not generate significant boosts in trading volume. Full reversals are usually powered by substantial institutional selling and create major surges in trading volume.
  • Retracements generate very few serious chart patterns and then just a couple of trivial candlestick structures. In comparison, reversals are very serious events that are capable of producing major chart structures, such as double bottoms and tops, etc.
  • The lifespan of retracements is very limited, as they do not usually last longer than a 1 week or so. Reversals tend to be longer lasting affairs that can extend for weeks, if not even longer.
  • Retracements are typically created after significant price spikes have been produced, while reversals can take place at any time.

2. Trend reversal trading

The principle on which trading with binary options brokers is based is as follows - the price cannot move indefinitely in one direction. At a certain point, it abruptly changes direction and goes back. More often this moment can be expected in advance if the trend reversal occurs at a strong level. 

How to distinguish a pullback from a reversal is the eternal question of many novice traders. In fact, it is not as difficult as it may seem at first sight. We need a simple understanding of the market, namely what a trend looks like:

  • Price is moving up and new local highs and lows are forming above the previous ones - this is an uptrend
  • Price is moving downward and new local highs and lows are forming below the previous ones - it is a downtrend

So as long as the highs and lows are updating each other, the trend continues, and it's a normal counter-trend pullback. But as soon as the highs and lows stop updating, the trend is over. And here we can expect the price reversal or consolidation with the subsequent reversal or continuation of the trend.

Best way to trade binary options in India

1. Register for trading

In order to trade in India, one needs to create an account on the broker's website. After that, the trader gets access to the trading platform, analytics, economic calendar and other services available on the company's website.

One cannot do without filling in the form, as the goal of speculators is to make a profit. The broker has no right to receive money and transfer profit to an anonymous user. The company may be suspected of money laundering, which is punishable by law. After spending 2-3 minutes to create an account, a user opens up great prospects.

Features of opening an account

Newcomers often wonder how to sign up for a binary options account. The process is straightforward, you need to click on the "Register" or "Create account" button on the broker's website. A form will then open in which you need to fill in the following details:

  •      Your first and last name;
  •     Your email address;
  •     Your country of residence;
  •     Your mobile phone number;
  •     Your password;
  •      Account currency.

Subsequently, you will be required to complete an extended form with additional information. After that access to the test terminal, services which will help in forecasting of quotations, training materials is opened. A number of brokers will not allow a trader to access these options, unless they make a minimum deposit.

2. Open demo account

What is a binary options demo account?

The main purpose of a demo account is to enable a user to get acquainted with the market and functions of a trading platform, to apply theoretical knowledge in practice without any risk for capital.

Trader works with a fictitious deposit, but under real conditions, i.e. demo account is a fully adequate emulator of binary options trading. Market conditions and quotations for digital contracts are fully identical with those of the trading platform.

 A demo account for newbies is a training tool. Using this option familiarizes the user with the functionality of the trading platform, the available tools, and the ways to open trades with a set expiration date.

Demo accounts are in most cases available without registration, but on some platforms you will need to verify your details and fill out a special form. It only takes a couple of minutes to open a demo account.

Demo account or real account
Demo account or real account

3. Open real account

Trading binary options on a real account does not differ from trading on a demo account (depends on the broker), except for psychological burden. 

Opening of the account, depending on the broker, occurs according to certain rules.

The classical scheme is the following:

  •     Registration with filling of data.
  •     Replenishment of the account.
  •     Verification.

Important! While filling the data it is always necessary to fill it in accurately. The thing is that if someone tries to access your account, or in case of any problems with the system, the broker may ask you to confirm your identity. If the data is entered incorrectly, there is a possibility to lose the account and the money on the account.

4. Replenish account

After your registration you can make a deposit at your broker. Please note, that when registering you will be asked to choose the currency, in which the trading account will be opened. Be sure to think through and calculate in which currency the account will be opened. After all, you will not be able to change it later. In order to change the currency you will have to re-register. So think about it right away.   Click the "Deposit" button, and the broker will offer you a choice of deposit methods. You can of course make a deposit with a VISA, Maestro, Mastercard or with e-money, the choice is quite big (WebMoney, Neteller, OKpay, Skrill). Please note, that if you choose for example USD as your account currency during registration, everything will be automatically converted to USD when you deposit in any other currency. The money on the balance is displayed almost instantly, in rare cases there may be a delay of up to 30 minutes. I recommend you deposit and withdraw the money with the currency you specified during registration. Thus, you will not lose on conversions.   After making a deposit, you should immediately start the process of verification of your account. 

Verification is a must! It is not a whim of the broker, but a mandatory requirement of the regulator. At every licensed broker the verification procedure is obligatory. When the broker withdraws the earned money, he must be sure that it is yours and not that of a third party.

So do not delay, pass the verification at once. And beware of brokers, where verification is not required. When depositing with a bank card be prepared for the broker to ask you for a photocopy of the card data. To confirm that the card is yours, take a picture of it on both sides. On the front side of the card close 4 digits and on the back side close your CVV code. You do not need to take a picture of your personal account when making a deposit with e-money.