One wrong prediction can make you lose a large sum of money. Therefore, knowing good binary options trading strategies is essential to help you achieve more profits and reduce risk. Check out our ten best favourite trading strategies that work in 2024:
- False Breakout Strategy
- Trend Following Strategy
- Trend Reversal Strategy
- Candlestick Pattern Strategy
- Moving Average Crossover
- Price Action Strategy
- Indicator-based Strategy
- Fibonacci Tool Strategy
- Martingale Strategy
- News Trading Strategy
1. False Breakout Strategy
The False Breakout strategy is considered one of the most accurate ways to trade the markets. Trading breakouts tend to work well. After a breakout, the market usually comes back.
The strategy is simple: Search for a level (high/low or support/resistance) and wait for the asset’s price to break it. If the market returns, you can go short (put) or long (call). For example, if you’ve determined that the price level of $5 is a support level for a chosen asset, and the price increases past this level and decreases back to the same price level shortly, you can choose to short the asset.
False Breakout: The market breaks a high/low or support/resistance, returns to the level, and stays under/above it. Support/resistance is more than one high/low in a row. You can use this method in any timeframe and with any asset/market. It is universal. See the video below!
Check out our video for more on this strategy:
(Risk warning: Your capital can be at risk)
Why Does This Binary Options Strategy Work So Well?
For this question, it is essential to have more context.
Many traders place stop-loss orders at the highs and lows of an asset’s price, creating a concentration of potential buying or selling. When an asset’s price hits these levels, it can cause rapid price movements due to activating these stop-loss orders.
Professional traders often capitalise on these scenarios, knowing that these points offer high liquidity for entering or exiting positions. They may initiate trades anticipating that the price will reverse after triggering these stop-losses, often causing what might appear as a false breakout.
Additionally, many traders look to capitalise on these breakouts. However, some algorithms are designed to trigger these movements, sometimes leading to losses for those trading the breakouts.
Facts:
- Stop-losses are triggered with a breakout
- A lot of stop-losses mean higher liquidity
- This knowledge is used to open or close significant positions.
- The market will turn around in most cases
- Sometimes, it is a short turnaround, and the trend will change completely.
Which levels are the best for trading?
New highs and lows are the best levels for this binary options trading strategy! With several highs in a row, the market is more likely to break through this level. Search for big new highs. For the best results, the level should be created in the current day. See the picture below.
Furthermore, the best levels tend to show a V-Form pattern. Many other traders in the market see the V-Form clearly and use it as an indicator to put their stop-losses on these levels. Also, it is possible to trade the V-Form as support and resistance. We would rather wait for the false breakout of the V-Form. It works with a high hit rate, and you can easily make money by trading binary options.
(Risk warning: Your capital can be at risk)
When Do I Enter a Trade?
Risky traders open a position directly opposite the breakout. In our opinion, there is a better way to get good results. In the picture below, we will show you the exact entries. Select the level in the markets. If the market passes the level back, you can open the trade. It is just as simple as it sounds. Sometimes, you will need 2-3 trades to make a profit. That is why we double the investment amount if we lose a trade.
Additional information: You can wait for a candle close below/upper the breakout level to get a better confirmation
Which timeframe can I use for this binary options strategy?
You can use any timeframe for this best binary options strategy—only the price of the asset matters. Trades on smaller timeframes tend to be more difficult to trade because you have to pay more attention to the market and react much faster than in higher timeframes.
See another video with an exact example of the fake breakout:
2. Trend Following Strategy
The trend-following strategy is built on identifying the market’s direction and making trades that align with this trend. Traders use technical analysis tools such as moving averages and trend lines to pinpoint the market trend.
For example, moving averages smooth out price fluctuations to highlight a clear direction of price movement, while trend lines connect significant highs and lows to illustrate the trend visually.
To apply this strategy, once a trend is identified, traders should enter trades in the direction of this trend. In an uptrend, traders would buy or place ‘call’ options, anticipating the price to rise further. In a downtrend, traders place ‘put’ options, expecting the price to continue falling.
The essence of this strategy is reacting to market movements rather than predicting them. It strongly emphasises disciplined trading and risk management to protect against market volatility and sudden reversals.
| Pros | Cons |
| Easy to understand and apply | Lagging indicators may lead to delayed decisions |
| Profitable during sustained trends | Possible losses from incorrect signals |
| Suitable for different markets | Frequent trading increases costs |
| Significant profits if trends are captured | Sudden reversals can lead to big losses |
| Effective in both rising and falling markets | Over-reliance on technical analysis may ignore fundamental factors |
3. Trend Reversal Strategy
The trend reversal strategy focuses on spotting points where the market’s current trend is likely to reverse and making trades based on this reversal. This strategy benefits traders looking to capitalise on the shifts from bullish to bearish markets or vice versa.
Critical tools for identifying potential reversals include technical indicators like the Relative Strength Index (RSI), which measures the velocity and magnitude of directional price movements. Patterns in candlestick charts can also signal upcoming changes in trends.
To effectively apply this strategy, traders must identify a robust existing trend. Then, traders can pinpoint potential reversal points using reversal indicators and patterns, such as double tops, double bottoms, head and shoulders, or inverse head and shoulders.
A trade is executed in the direction of the anticipated new trend. For instance, if a reversal pattern indicates a shift from an uptrend to a downtrend, a trader should place a ‘put’ option, expecting prices to fall.
| Pros | Cons |
| Reversals can lead to significant price movements | Difficult to time reversals accurately |
| Offers precise entry points for trades | Best suited for more experienced traders |
| Multiple indicators are available for this strategy | Utilizes complex patterns and indicators |
| Can be used in various financial markets | Short-term fluctuations can mislead traders |
| Ideal for capturing short-term gains | Demands constant market observation |
(Risk warning: Your capital can be at risk)
4. Candlestick Pattern Strategy
The candlestick pattern strategy leverages candlestick charts’ visual and informative power to make trading decisions based on patterns formed by the candles. These patterns represent price movements within a specific timeframe and indicate potential market behaviour such as continuations, reversals, or consolidations.
Key patterns traders look for include the Hammer, Doji, Engulfing, and Morning Star patterns, each providing clues on market sentiment and possible price directions.
Applying this strategy involves analysing candlestick patterns in the context of the broader market trend. Traders use these patterns to predict short-term movements and make trades accordingly.
For instance, a Bullish Engulfing pattern occurring in a downtrend might suggest an impending upward reversal, prompting a trader to buy or place a ‘call’ option. Combining candlestick analysis with other indicators and market analysis is crucial to confirm these signals and reduce the risk of false positives.
| Pros | Cons |
| Patterns are easy to recognize and interpret | Interpretation of patterns can be subjective |
| Candlesticks offer quick insights into market sentiment | Incorrect analysis can lead to losses |
| One of the more straightforward strategies to implement | Effectiveness of the strategy requires experience |
| Offers precise entry and exit points | Not all patterns lead to predicted outcomes |
| One of the easier strategies to implement | Short-term fluctuations can distort patterns |
5. Moving Average Crossover
The moving average crossover strategy utilises two moving averages—a shorter-period moving average and a longer-period moving average—to spot buy or sell signals based on their crossover points.
The basic premise is that when the shorter moving average crosses above the longer moving average, it signals an upward trend, suggesting a buying opportunity. Conversely, when the shorter moving average crosses below the longer moving average, it indicates a downward trend, suggesting a selling opportunity.
Traders apply this strategy by selecting the appropriate time frames for the moving averages based on their trading goals. Common pairs include the 50-day and 200-day moving averages for long-term trend analysis or the 15-day and 50-day moving averages for more short-term perspectives.
The strategy’s effectiveness is enhanced when used in markets with clear trends, and it’s often combined with other confirmation indicators, such as volume or RSI, to filter out false signals.
| Pros | Cons |
| Provides clear buy or sell signals | Reflects past price actions, which may not predict future movements accurately |
| Easy for beginners to understand and implement | Prone to generating false signals in sideways or volatile markets |
| Applicable to various asset classes and time frames | Effectiveness heavily depends on the chosen time frames of the moving averages |
| Reduces emotional trading decisions | Often needs additional indicators to confirm signals |
| Helps confirm the strength of market trends | May oversimplify market analysis, overlooking crucial factors |
6. Price Action Strategy
The price action strategy analyses historical prices to make trading decisions without relying on technical indicators. This strategy examines price movements, patterns, and formations on the charts to predict future market behaviour.
The main focus of this strategy is analysing support and resistance levels, trend lines, and examining candlestick formations. Additionally, chart patterns such as triangles, flags, and wedges are essential for analysis.
Traders observe the current market conditions and make decisions based on the price’s behaviour at crucial levels or within specific patterns. For example, a trader might identify a bullish flag pattern during an uptrend and decide to place a buy order, anticipating a continuation of the trend.
This strategy requires a deep understanding of market psychology and the ability to interpret subtle changes in market dynamics.
| Pros | Cons |
| Focuses purely on price movements, offering a direct approach to market analysis | Requires knowledge of interpretation of price data, which can vary significantly between traders |
| Develops a deeper understanding of market psychology and dynamics | Potential to overanalyze price movements without clear trading signals |
| Reduces the need for extensive technical setup, focusing on chart analysis | Demands significant time and effort to master this strategy |
| Effective in both trending and range-bound markets | Without indicators, traders may miss broader market trends or reversals |
| Enables precise risk management through the understanding of price levels | Relies heavily on the quality and accuracy of the broker’s charting software |
7. Indicator-based Strategy
The indicator-based strategy employs various technical indicators to analyse market conditions and predict future price movements. Common indicators include the Relative Strength Index (RSI), Moving Averages (MA), Bollinger Bands, and the Stochastic Oscillator.
Each indicator provides insights into different aspects of the market, such as trend direction, momentum, volatility, and overbought or oversold conditions.
To apply this strategy, multiple indicators must be combined to confirm trading signals and reduce the risk of false positives. Use a Moving Average to determine the market trend, RSI to gauge momentum, and Bollinger Bands to assess market volatility.
A buy signal could be triggered when the price is above a certain Moving Average, the RSI indicates oversold conditions, and the price touches the lower Bollinger Band, suggesting a potential upward reversal.
| Pros | Cons |
| Provides clear trading signals | May lead to reliance on indicators without considering the broader market context |
| Indicators can be customized to fit specific trading styles and goals | Combining too many indicators can result in conflicting signals |
| Enables precise stop-loss and take-profit levels based on indicator readings | Indicators can generate false signals, leading to losses |
| Combining indicators can lead to more informed trading decisions | Some advanced indicators or platforms may come at a cost |
| Strategies can be backtested on historical data to refine approaches | Many indicators are lagging, potentially leading to delayed entries or exits |
8. Fibonacci Tool Strategy
The Fibonacci tool strategy uses the Fibonacci retracement levels as a technical analysis tool to identify potential market reversal levels. These levels are based on the Fibonacci sequence, a series of numbers where each number is the sum of the two preceding ones.
They are expressed as percentages and are used to predict where prices may find support or resistance after a significant movement. Expected Fibonacci retracement levels include 23.6%, 38.2%, 50%, 61.8%, and 78.6%.
Traders apply this strategy by drawing Fibonacci retracement levels on a chart between a high and low point during a noticeable trend. These levels then serve as potential areas where the price might reverse or stall.
After a significant uptrend, if the price retraces to the 61.8% level and starts moving up again, traders might see this as a buying opportunity, interpreting it as a signal that the original uptrend will likely resume.
| Pros | Cons |
| Offers precise entry and exit points based on historical price movements | Solely relying on Fibonacci levels without considering other factors can lead to poor trading decisions |
| It can be complex and intimidating for beginners to understand and apply effectively | Like all technical tools, it’s not foolproof and can produce false reversal signals |
| Works well when used in conjunction with other technical analysis tools | Identifying the correct high and low points for drawing retracement levels can be subjective |
| Helps in setting strategic stop-loss and take-profit levels | Short-term price fluctuations can obscure the effectiveness of Fibonacci levels |
| Effective across different time frames, from short-term to long-term | Can be complex and intimidating for beginners to understand and apply effectively |
(Risk warning: Your capital can be at risk)
9. Martingale Strategy (High Risk)
The martingale strategy is a high-risk trading method that involves doubling down on investment amounts after a loss, expecting to recover previous losses and gain profit with a single win.
Some traders have adapted this strategy from the gambling world to binary options. The premise is simple: double your investment in the following trade after each loss. If you win, you cover your losses and start again with your initial investment amount.
This strategy requires a substantial capital base to sustain the potential losses before achieving a win. A predetermined limit on the number of times you’re willing to double down is crucial to prevent depleting your trading capital. Due to its risky nature, it’s advised to use this strategy with extreme caution and in combination with other risk management techniques.
| Pros | Cons |
| Easy to understand and implement | Very high risk and can lead to huge losses |
| Can recover losses with a single win | Not viable in the long term due to the exponential increase in investment required after consecutive losses |
| Allows for flexible investment amounts | Demands a significant capital reserve to be effective |
| Can produce quick profits in favorable market conditions | The risk taken is often not justified by the potential profit |
| Reduces emotional decision-making | Success is heavily reliant on an eventual win, which is not guaranteed |
10. News Trading Strategy
The news trading strategy revolves around making trades based on the market reaction to news events. Traders employing this strategy aim to capitalise on the volatility by predicting whether the news will result in a price movement up or down and placing trades accordingly.
To implement this strategy, news calendars should be closely monitored for scheduled announcements such as interest rate decisions, unemployment figures, corporate earnings reports, and geopolitical events. Then, analyse the potential impact of these news items on the markets and execute trades just before or right after the announcement, depending on their analysis of the news’s likely effect.
| Pros | Cons |
| Brokers may widen spreads during high volatility, affecting entry and exit points. | Markets can react unpredictably to news, making the strategy risky |
| Many news events are scheduled in advance, allowing traders to plan ahead | Requires sifting through a vast amount of news to identify trade-worthy events |
| This can be applied to all markets | Brokers may widen spreads during high volatility, affecting entry and exit points |
| Based on fundamental analysis of real-world events | Rapid price movements can lead to slippage, impacting trade execution |
| The window for capitalising on news events can be concise | The window for capitalising on news events can be concise |
(Risk warning: Your capital can be at risk)
How to Create a Binary Options Strategy
Creating a successful binary options strategy involves several vital steps that blend analytical insight with disciplined trading practices. Here’s a structured approach to developing your own binary options trading strategy:
1. Select the Market and Asset:
Decide on which markets and assets you want to trade. Binary options offer a variety of underlying markets, including stocks, commodities, currencies, and indices. Each market has nuances, and success often comes from focusing on assets you understand well.
2. Choose Your Trading Style:
Determine the type of binary options trades you will engage in. This could range from high/low options, touch/no touch options, to boundary trades. Your choice should reflect your market analysis, prediction capabilities, and risk tolerance.
3. Develop a Signal Generation Method:
Establish how you will generate your trading signals. This could involve one or more strategies, such as technical analysis using indicators, news trading based on economic calendars, or price action analysis. A robust strategy often combines several analytical tools to improve accuracy.
4. Set Entry and Exit Criteria:
Clearly define the conditions for entering and exiting trades. This includes specifying the indicators or news events that will trigger your trades and setting clear profit targets and stop-loss limits to manage risk.
5. Money Management Plan:
Develop a money management plan to determine how much of your capital you will risk on individual trades. A common approach is to risk a small percentage of your account on each trade to ensure sustainability and protect against significant losses.
6. Backtest Your Strategy:
Before applying your strategy in live markets, backtest it using historical data to see how it would have performed. This step can help refine your plan and adjust your entry, exit, and money management rules to improve performance.
7. Start Small and Evaluate:
Begin trading with small amounts to test your strategy in actual market conditions. Keep a trading journal to record your trades and their outcomes, which will be invaluable for evaluating the effectiveness of your plan and making necessary adjustments.
8. Continuously Review and Refine:
No strategy is set in stone. The market changes, and your plan should evolve, too. Review your trading results regularly, adapt to new market conditions, and refine your strategy to improve performance.
9. Stay Informed and Educated:
The binary options market is dynamic, with new strategies and tools constantly emerging. Stay informed about market trends, economic events, and new trading techniques to keep your plan current and effective.
Reasons to Use a Binary Options Trading Strategy :
- Implementing actions without proper planning or strategies is subject to failure. Therefore, making a strategy before trading your money on any platform is crucial.
- You are dealing with real money. To be a successful trader, you must know where you put your money.
- Never treat trade as 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 the best strategy for the binary option that works for you, you can master and modify it to make a long-term profit.
- Using money management strategies to decide how much money you will invest in trading can save you from irresponsibly losing money. Since greed and guilt can easily manipulate you into taking spontaneous actions.
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Conclusion: Strategies are needed for constant profit
Mastering binary options trading requires consistent practice and patience. The key is repeatedly applying strategies, learning from each trade, and refining your approach. Rather than switching tactics after a setback, focus on perfecting a single plan and recognising the optimal times for its application.
If a strategy consistently fails, consider revising it or seeking expert advice. For immediate guidance on getting started, visit our comprehensive guide at our binary options trading guide. With knowledge of effective strategies, choose and test one that resonates with you. Now is the time to take action and start your journey towards profitable trading.
(Risk warning: Your capital can be at risk)
Frequently Asked Questions
What is the best binary options trading strategy?
No specific strategy will prove to be the best for all traders. From our experience, the false breakout strategy gives the best results. Different methods work for other traders. Therefore, you must test varied strategies to determine what works for you. However, having good market knowledge and learning technical analysis will help you succeed.
Do binary options trading strategies work?
The binary 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 tell you whether the asset price will rise or fall. However, good practice and knowledge of the asset will increase your chances of winning.
How can I try out binary options trading strategies?
You can use a free demo account with virtual funds on a binary options broker to try out binary options trading strategies. We recommend using Pocket Option or Quotex to test these strategies because they offer unlimited virtual accounts.
How can the risk of binary options trading strategies be reduced?
To reduce risk, you should use a proper money management technique. That means you invest only a percentage of your account balance per trade (professionals use 1%—2% to limit risk).