Although binary options strategies are pretty numerous, they can be grouped into several categories.
Binary Options Financial Strategies
Financial strategies are intended for control over risks and volumes of investments. The first stage of any financial strategy is calculation of initial capital. To minimize losses, financial strategies offer to reasonably limit investments.
Following these strategies, you have to invest not all money (remember the rule not to put all your eggs in one basket), just a part and in different assets.
Staged investment means that you divide your capital and invest in different financial assets. This type of investment allows you to considerably reduce risks of heavy losses that can arise from unfavorable circumstances.
Basic Binary Options Strategies
One of the basic binary options strategies is a strategy based on fundamental news including microeconomic reports of the world’s largest countries, political events etc. Since fundamental news covers the events directly influencing assets, the strategy is of great importance.
Quite often, the market reacts immediately after news releases making prices soar or plummet depending on the market reaction. Many investors follow important political and economic events by means of the economic calendar available on this website.
For example, the Ifo institute releases the production index in Germany, the Eurozone powerhouse. If the index exceeds market expectations, then the indices of the European bourses like DAX, FTSE 100 rise.
Or, for instance, the Governing Council of the European Central Bank takes a decision to launch the third round of the LTRO (this is a program similar to the quantitative easing of the Fed). In this case, right after this news, the euro can plummet as it was after the ECB meeting in March.
Another important binary options strategy is the follow-the-trend strategy. Many investors and financiers say “Trend’s your friend!”. No matter how profitable it may seem don’t even try to trade against the trend. Famous investors traded against the trend usually used inside information. This is why I advise you not to risk.
Probably, the most famous and bitter example of bad investment against the trend is Nick Leeson.
He was a broker in Barings Bank founded over two centuries ago. Leeson traded against the trend in the 90s and lost. The 200-year-old bank couldn’t recover from losses and collapsed within a month.
The follow-the-trend strategy is of paramount importance for investors because it doesn’t require in-depth analysis. If the company business does well, and its products are in good demand, then the price of its stock rises and its bond yield fall. The market treats this as a signal to buy the stock. In this case, many of investors make a childish mistake. They expect an immediate reversal of the trend because the stock price is high or because their intuition suggests this. These investors play Russian roulette and lose money. Over 90% of all financial losses are accounted for investment against the trend. So, follow the market trend, and don’t try to trade against it.
Here’s the complete list of all basic binary options strategies
Graphic Binary Options Strategies
Unlike ordinary strategies, graphic binary options strategies are based on patterns. Analyzing price charts, you can see how various figures are formed. Using these patterns, you can make decisions. Once you see a pattern, you can precisely forecast future price movements.
“ANY BINARY OPTIONS STRATEGY AIMS TO MINIMIZE RISKS AND ENSURE THAT A TRADER MAKES A PROFIT REGULARLY, NOT BY CHANCE”.
Common graphic binary options strategies
A simple but also important figure in technical analysis is Head and Shoulders. Graphical strategies have the following peculiarity. The same pattern is formed no matter whether a price rises or falls. But in case of the bearish market, the pattern is reversed. Therefore, the Head and Shoulders pattern like other figures shows a signal of a trend reversal.
Another wide spread graphic strategy is Top/Bottom. The strategy involves the following: before a reversal, the price can reach the highest high several times. The Top/Bottom strategy has several subtypes depending on how many times the price touches the highest mark. For instance, there is “the Triple Top” and “the Double Top”. If the price falls to the lowest mark (bearish trend), the strategy is called as “the Triple Bottom”, “the Double Bottom” etc.
Triangle is a well-known graphic strategy having several subtypes allowing an investor to forecast precisely future price movements.
If you use graphic binary options strategy, you have to wait until a pattern is completed. This is important; otherwise the signal is not reliable. Today, financial analysts use over tens of graphic patterns developed on the basis of many years’ technical analysis.
Here’s the complete list of graphic binary options strategies
Indicator Binary Options Strategies
Investors dealing with stock indices and currencies and supporters of technical analysis can use a special type of binary option strategies, that is, indicator strategies. These binary options strategies are based on finding and using signals received from special indicators. Once you’ve received a signal, you can invest in a binary option.
Each of these indicators is a difficult algorithm developed on the basis of technical analysis.
For instance, the well-known indicator strategy Intersection of Moving Averages was developed in 1901. You can see how indicators work right now on this website on the live chart. To see it, you just have to click on the Indicators in the chart settings and choose what you need.
Today, analysts use over one hundred indicators developed for a single purpose, that is, to determine the point of a change in a trend on the chart.
As with other binary option strategies, I advise you to analyze signals thoroughly and not to rely just on a single indicator. Combine several indicators in your analysis and wait until all the indicators you use give the same signal. This is the moment when you should invest because signals shown by several indicators are the most reliable.
Using indicator binary option strategy, it’s extremely important to set up the chart correctly. The point is that the chart can be set to different periods, for instance, for a day, year, that’s why the indicator will give a signal for the corresponding period. I advise you to use short-term charts if your trading is based on an indicator strategy. The reason is that over 90% of all investments in binary options are accounted for short-term periods, namely, from 20 minutes to an hour. Therefore, if you invest for half an hour, you don’t need a 1-year chart.
Any indicator strategy can have settings both for indicators and charts. To avoid mistakes in the settings, you can use existing indicator strategies based on many years’ analysis.
Here’s the complete list of indicator binary option strategies
In this website, you can find all binary options strategies.
Any binary options strategy is a strict sequence of steps (algorithm) allowing an investor to make a profit and minimize risks.