There are only 24 hours in a day, with long job working hours, it is challenging to make time for trading. But there is a way to make a profit on your money in a short period, as short as 30 seconds. Binary options trading is an expeditious way to make a good profit on your money without having to sit and check trading charts the whole day.
We bring forth for you some best binary option trading strategies to shrink loss and jack up profit on your invested money in seconds. However, winning in binary options trading cannot be consistently achieved through guesswork; you need good strategies and practice to master this prediction game.
What you will read in this Post
Fundamentals Of Binary Options Trading Strategy
Before stepping onto the field, you must know two basic parameters of binary option trading strategies – the trade amount and the signal. Let us understand these two parameters in detail:
#1 The Signal
A signal is basically a movement in the market or an indication about whether the prices will rise or fall. It is more like an instinct after observing the trend going on around you. Signal helps you in identifying the next step more. Clearly, it helps you in predicting whether the prices will go high or fall.
There are certain ways by which you can identify a signal. Following are some ways:
- Stay Updated
Trading is related to business and the market. So, to be good at trading, you must have a decent knowledge about the share or stock market, industry news, and information provided to the public by the CEO. All this can help you predict whether the resources’ price will go up or down.
- Technical Survey
This is a method where you keep the market news aside and look closely at the trading graph. It is a more centralized approach. You carefully read the graph and analyze events of the past to predict the future.
It is complicated but more reliable. You don’t have to go all-in; there are many demo trading apps available online where you can practice and enhance your predicting skills. Once your brain gets used to the trading pattern, it will be easy to understand the trend of prices going up or down.
#2 Trading Money Amount
It is crucial to decide the amount of money you will trade. Being impulsive or mismanagement of money will only result in loss. Develop a strategy for managing your money to reduce risks. Here are two most used and reliable money management strategies – approach based on percentage and martingale.
- Percentage Based Approach
In this method, you decide what percentage of your capital you want to trade. For beginners, we recommend starting with 1% or 2%. For example, you have INR 50,000 in your bank account. So, you decide to trade 1% of it, that is INR 500. This is a secure way of managing your money and scaling down potential risks.
- Martingale Approach
This approach is a bit tricky and holds risk if you aren’t experienced. But it is good to be familiar with all possible approaches. Here you double the trading amount after a loss to recover the previous loss and gain profit simultaneously.
5 Best Binary Option Trading Strategies:
- Follow the Trend Strategy
- The Rainbow Strategy
- The Candlestick Strategy
- The Money Flow Index Strategy
- The Turtle Strategy
One wrong prediction can make you lose a handsome amount of money. Therefore, it is essential to establish certain strategies to manage risk and money. Mentioned below are some top trading strategies:
1. Follow the Trend Strategy
This is one of the best trading strategies for beginners. This strategy can be applied everywhere regardless of trading amount or market. First, you must study the trading graph and pattern of lines. You must have observed that they usually go in a zigzag manner. This might seem like an easy job, but it requires practice.
First, it is better to get familiar with trading graphs and their trend on demo trading apps before trading your money in a real-time market.
Once you learn to read the pattern, it will be easy to predict whether the asset’s price will go high or low. However, this strategy isn’t very reliable for short trades. To apply this strategy, you must study the chart and see the movement of lines.
If the line is going up, the prices are increasing and vice-versa. If the line is horizontally straight, then find some other option to trade your money.
It is essential to have practical knowledge, practice on the demo trading sites and get a clear-cut idea.
2. The Rainbow Strategy
The use of this strategy must be done in combination with the news strategy. First, you must know the nature of the market you are trading in. Then, after knowing about the ongoing trend, you can start using this strategy. This is a strong strategy that increases the chances of right predictions and winning.
This strategy uses basic signals to make reliable predictions about the asset’s price.
The rainbow strategy is a pattern that includes the usage of various averages in actions with varied periods. Each of these periods is identified with a different color.
The moving averages are used to recognize the price changes. Moving averages with many periods react slowly to price changes and moving averages with few periods react quickly.
If you observe a strong movement in the asset chart, the moving averages are most likely to move from slow to fast direction in real-time trends.
The average that moves the fastest will be placed closest to the asset price, the second closest will be the second fastest, and the third closest to the price will be the third-fastest moving average, and so on.
When you observe that the numerous moving averages are placed in the pattern as discussed above, you can say a durable movement in price in a determined direction. Therefore, when you encounter such a pattern and trend, trade your money right away as this is a favorable time.
You can choose how many averages you would like to use. Most good traders use three moving averages.
If the moving averages are positioned so that the shortest line is above the medium moving average and the longest is below the medium line or moving average. You must trade on the asset prices falling.
It depends on you to determine the number of moving averages in a period. Therefore, it is recommended to use a duplex of periods you used previously in each moving average.
This change in the numbers of periods used in different moving averages will give you reliable ratios, which will, in turn, provide you precise signals.
For beginners, it is advised to use the ratio of 5, 10, 15, and 20, and so on.
Steps that you can take on achieving the right order:
- Trade right away – once you achieve a desired or familiar pattern after the last moving average gets positioned, it is the right time to invest your money.
- Practice patience – if you want to test the rainbow strategy and avoid going all-in, then wait for a period. This way, you can check if the signal helped you in making the right prediction or not.
- Wait for 2-3 periods – this step gives you a sense of security, especially when you are trading a large amount of money and don’t want to risk relying on just one period. You wait for two to three periods or even more as per your wish.
- Take your time to understand the trend of the asset chart and then make a move. However, wait no more than three periods. After three periods, the market may start to change, and new trends might set in.
3. The Candlestick Strategy
Steve Nison introduced the candlestick formation strategy in one of his books in the year 1991. A good trader must know how to read the asset charts.
Once you understand its patterns and movements, it will be easy for you to predict the next move of the asset in the charts. For example, there is a pattern formation in the asset charts called the candlestick formation. The patterns formed by the lines going up and down appear like a candlestick.
The top line is the highest price called the mountain, and the bottom line is the lowest, called a valley. There is no one specific formation in this strategy, but there are a few that you must learn to identify and read to trade better.
To apply this strategy, you must observe the chart and pattern of prices for a while. You will notice some repeated pattern formation. Then you can use your knowledge and experience to predict whether the line will go up or fall.
4. The Money Flow Index Strategy
This strategy is beneficial if you are planning to play it quickly, let’s say 5 minutes. Yes, this strategy works that quickly. It is fast and effective.
Being a trader of binary options trading, you must be aware that the trading market is not random in the short term. One more benefit of this strategy is that it saves you a good amount of time. If you play in 5 minutes, you can make more trades per day.
However, such short-term binary option trading strategies are required risk management and technical analysis. You must know that the stock prices don’t change in 5 minutes regardless of the company is working well or bad in the market. So, the money flow index strategy is time-saving but also includes lots of risks.
The only thing that changes the asset’s price in a short period is the demand and the supply. These two factors determine whether the asset’s price will go up or fall in a concise period.
To master this strategy and make money every 5 minutes, you must learn technical analysis. This will help you in understanding whether the other traders are selling or buying. Once you understand this, it will be effortless to use the MFI strategy with the money flow index indicator.
MFI index indicator – the indicator tells you the ratio of the asset sold to the number of the asset purchased. The value is generally between 0-100.
Let us now understand how the money flow index indicator works:
- The number 0 – indicates that many active trader’s plan on selling the asset.
- The number 50 – indicates that an equal number of active traders want to purchase and sell the asset.
- The number 100 – indicates that all the traders active on the platform want to purchase the asset.
Now that you understand the relationship between the ratio of the MFI indicator and the traders planning on buying or selling the asset, it will be easy for you to choose one option and secure your money. In addition, you can easily estimate the asset price movement after understanding the demand and the supply.
In simpler words, if the number of traders buying an asset is much greater than the number of traders selling the same asset. There will be fewer traders to force the price of assets upwards. As a result, the demand and price will both go down.
In the same way, if the number of traders selling an asset is greater than the number of traders buying it, the supply will diminish, and prices will increase.
Mentioned below are the ways you can use the MFL index for your next accurate prediction:
- If the money flow index is more than 80. It means that many traders buy the asset, and the prices may fall.
- If the money flow index is less than 20. It means that many traders sell the asset, and the prices are likely to rise.
This strategy works best for a short period. Traders usually use this strategy to play 5 minutes bets. In the long run, it is tough to predict the process through this strategy as it goes to the extremes. So, avoid using this strategy for your long-term trades.
5. The Turtle Strategy
This is a popular strategy among binary options traders. As the name suggests, this strategy uses the movement of asset prices in the last twenty days. Then use this data to predict the next hit; it might be high or a low. This strategy provides you two signals:
- The buy signal – when the current price movement is higher than the bars/lines of the last 20 days.
- The sell signal – when the current price movement is lower than the bars/lines of the past 20 days.
This strategy can be used easily by beginners. However, the outcome of the turtle strategy has been mixed. Trading strategies help a trader in identifying signals; none of them promises to be 100% accurate.
Reasons To Use a Trading Strategy
- Implementing actions without proper planning or strategies are subjected to failure. Therefore, it is crucial to make a strategy before trading your money on any platform.
- It is real money you are dealing with. To be a successful trader, you must know the place you are putting your money into.
- Never treat trade as mere gambling if you strive to be a good trader. Do not rely on guesswork. This way you will only lose your money.
- Using strategies gives you strong signals about the movement of asset prices. However, you can only use the situation to make a huge profit if you understand the trend and predict correctly.
- It saves you from making impulsive, emotional decisions.
- Once you develop a strategy that works best for you. You can master and modify it to make a long-term profit.
- Using money management strategies to decide how much money you are going to invest in trading can save you from irresponsibly losing your money. Since greed and guilt can easily manipulate you into taking spontaneous actions.
Testing If a Binary Options Strategy Works for You
There are a broad number of strategies that you will come across on the internet. Each of them will seem workable until you test it. Different traders perceive signals differently. Identifying which strategy works best for you will help you make money in the long run.
No app or person can tell you which strategy will work best for you. It is the work of a trader to test different trading strategies and mold them in his way to make the most out of them. Binary trading requires accurate predictions. It demands mastery over strategies to win. Wrong use of any strategy or mixed signals will eventually lead you to lose money.
Avoid using real money to test new strategies. In addition to that, make sure to establish limits and have a strategy to manage your money.
Frequently Asked Questions
What Is the Best Binary Options Trading Strategy?
There is no specific strategy that can prove to be the best for all the traders out there. Different strategies work for different traders. Therefore, you must try and test varied strategies to find out what works for you. However, having a good knowledge of the market and learning technical analysis will help you succeed.
What Is the Minimum Amount Required to Trade Binary Options?
The minimum trading amount differs from broker to broker. Some might ask you to start with $10, while for others, it might be as low as $1. For example, the minimum trading amount for the IQ option is $10.
Where Does the Profit Money Come From?
There is no external source of money in the binary trading platforms. The money is being rotated. For example, two traders invested an amount of $100. One trader won while the other loses.
The money lost by that trader will get transferred to the one that won, depending on the profit percentage given by the broker to its traders. Some percentage of the money lost will go to the broker.
What Is the Maximum Amount That Trading Options Can Earn?
The answer to this question depends on the amount of money being traded. For instance, a trader invested $1000, and the profit percentage provided by the broker is 60%. In this case, winning would get you an additional $600.
In total, you will have $1600. However, if you fail, you will lose all your money, i.e., $1000. There is no fixed maximum amount that can be earned through trading options. It depends on the amount of money traded and the number of wins.
Do Binary Option Trading Strategies Work?
The trading strategies cannot promise you 100% success. Since the trading strategies only give you a signal to predict your next move. Trading strategies don’t exactly tell you whether the asset price will go high or fall. However, good practice and knowledge of the asset will increase your chances to win.
Conclusion of the best Binary Options Strategies
To succeed in binary options trading, in the long run, you must practice the strategies repeatedly. Along with using the strategies, you must have patience and avoid taking impulsive actions. Using any strategy for one time will not bring you profits. Testing, trying, and repeating are the only way to master the trading tactics.
Do not quit a strategy and opt for a new one every time you experience a loss. This will only confuse you, and you will never be able to make the best out of one strategy.
Instead, stick to one strategy and learn the right time to use it. It is also important to figure out the time where you must avoid using certain strategies. However, if your strategy is not working, you must reconsider it and make a new one. It is good to take an expert’s advice while making a strategy.
Now that you have read some of the best binary option trading strategies, find the one you have understood well and test it today. Then, get into action and start making money today!