Having a well crafted binary options trading strategy is an asset for traders. It will help them to overcome any unexpected events on the financial market. The sector of binary options is very volatile hence it is difficult to have a unique strategy that will fit in all situations. However the trader can follow certain rules that will guide him throughout his trading journey and that may help to maximize his returns.
Monitoring the Financial Market
Monitoring the financial market is one of the most important strategies each trader should adopt while speaking of trading online. Besides, keeping a record of the trends the assets are following is a primordial element of a successful trade. The two tools that can be used to keep an eye on the directions the assets are moving in are:
- Technical Analysis – Technical analysis is a tool which analyzes past financial price trends in order to make forecasts about the future trends. It is a very efficient technique since it analyzes the demand and supply pertaining to a specific market. Accordingly, from the data obtained, the Technical analysis is able to determine the direction the market will continue to follow in the future. The information generated by this analysis can literally change the game of the traders.
- Statistical Analysis – Moreover, there is the statistical analysis. It may seem difficult at first glance as not every trader has a notion of statistics. However, the trader does not need to embark on complex calculations as fortunately, some brokerage firms offer a service which is known as the Daily Market Analysis. These are daily reports issued by professionals which carry out a deep analysis of the entire market. The reports usually cover the overall performance of assets such as stocks, indices, currencies, and commodities.
Traders should not neglect the importance of monitoring the market as it is the key to maximizing their profitable trades.
Choose a Trading Tool and Practice
One common strategy that can be used by traders is known as Day Trading. This kind of trading is referred to as a trade which involves the purchase and the sale of stocks within 24 hours. It is highly recommended as traders using this strategy can generate a large volume of returns only by monitoring small price movements. In order to be successful with day trading here are some tips:
- Set an Entry Price – In order to avoid being too emotional during the trade, it is advised that the traders set an entry price. It may happen that gluttony takes over during a trade that is, the trader decides to invest much more than he planned at first. This behavior can be dangerous as the latter’s judgment is influenced by his emotions. This kind of behavior can bring the trader to his loss. This is why it is important to set an entry price to ensure that the psychological frame of the trader will not interfere in his trades.
- Follow the Intra-Day Trend – The trader should follow the intra-day trend. That is, the traders will considerably reduce risk when they trade by following the trend. Although the intra-day trend will reverse at a certain time, it still allows the traders to generate high profit.
- Keep a record of the trades made – All traders should keep a record of their performance. Besides even if it is time-consuming, writing a list of the losing and winning trades will help the traders to know exactly what they did right and what they did wrong. This list will act as a personal guideline of the do’s and don’t of day trading based on their personal experience.
While speaking of Binary Options, it is important to have a good money management strategy, otherwise, the trader will find himself at the wrong end of the market. In fact, it is inevitable to lose some trades sometimes, this is why it is, even more, important to have a good money management strategy which will ensure that the losing trades will not exhaust all the money invested. Instead of aiming at winning all the trades, the traders should aim at ending up with a significant profit that will cover his initial investment. A well-conceived strategy will consist of investing only 5% of the initial capital. That is, if the initial investment of the trader is of $2000, the latter should not invest more than $100 per trade.
Obviously, it requires a lot of patience as trading only 5% of the capital will generate low returns. However, it will considerably reduce the risks of begetting huge losses.
Online trading is becoming increasingly popular nowadays and attracts a tremendous amount of traders yearly. In order to be prepared to face these ruthless industry traders need to have a strategy that will help them face all unexpected contingencies. The most important element that traders should bear in mind is that time and patience are their best ally.