Binary Options Trading Strategies
One distinguishes a huge range of strategies, with the help of which binary options are traded. Accordingly, the opportunity to select trading strategies individually inflicts the variety of investing approaches.
Trading in Binaries without Risks
The following information refers to risk free binary options trading, which is a strategy that implies purchasing two different options with diverse features, in the same time period. Subsequently, one of the options bought with Option+ Mode is sold in order to get profit from the second one. Clarifying the regulations of binary trading, one has to note that the process allows abandoning a deal, provided the option’s functioning expires in a set period. In detail, buying a “call” option follows the “put” one, which allows making a choice of an option as the predictions on market direction are made. In this case, the unprofitable one is sold. The typical losses, in such deals, equal from 10% to 25%. The action of calling off the option’s functioning prior to its expiration is an Early Closure. Among the platforms, which operate such function, is an OptionFair broker. After abandoning one of the options, the traders use the second one as the source of significant profit, which both covers the 10-25% loss and brings additional benefits. Naturally, if a trader waits till the option expires the maximal profit may be derived. Sometimes, the traders may make both options profitable. For instance, in the case of a market fall, an investor disposes of a “put” option. If the prices are rapidly turned high, the “call” option becomes profitable as well.
Trading with a Statistical Strategy: Kelly’s Principle and Martingale
The listed strategy of trading has both advantageous and disadvantageous features. Thus, employing statistical approach spares much time, as well as dwells on high reliability. The basis for this approach is the theory of probability (principle of Kelly) and Martingale methodology. According to the theory, throwing a coin up inflicts its falling on tail, which must be followed by falling on the opposite side as well. If one regards this strategy in trading system, the process works due to the following description.
The efficient example is provided by statistics from 2011, according to which it was predicted that a 30 minutes candle is likely to move in the converse direction if a different one was taken previous 3 times. Statistics claims that the maximal number of candles that can move in the same direction is eleven. It is exceedingly probable that the direction of candle’s movement is changed after the third one. Sometimes, however, it happens also after the fifth or seventh try. In detail, changing the direction on the fourth candle happens in 50% of the cases, on the fifth – in 25% of cases while the probability of movement change on the sixth candle refers to 10-15% of cases. The other cases embrace 10% of likelihood. Nevertheless, it is extremely improbable that eight candles in a row retain an unchanging movement.
The example may be used in trading in the following way: buying an option may be performed only after the observation of several consecutive candles. With the assistance of the principle of Kelly, one can calculate the rate. The strategy embraces the calculation of the deposit value, the candles’ number, as well as the probability of price increase, due to Martingale principle.
One has to consider the limitation of brokers’ rates. It is recommended using OptionFair with the aim of deriving maximal profits.
Strangle and Straddle: Strategies of Binary Options Trading
Binary options are often traded with the assistance of a Strangle strategy. The method implies combining the same expiration time with the same fundament of assets and the employment of “put” and “call” options. It is legally allowed using the mentioned strategy. Thus, if a trader sustains simultaneous purchasing of “put” and “call” options and considers specific market developments, the deal may be financially profitable.
Typically, Strangle trading relies on asset market predictions.
The most favorable period for Strangle purchasing relies to the start of assets’ movement. The only condition is that the movement has to be of considerable start, no matter what the direction of the movement is. When one purchases a Strangle, he/she opens up “call” and “put” options, which have diverse strike values. The strategy underlines deriving profit either from a price decrease or an increase. The efficiency of the given strategy is guaranteed by the release of the price over a certain corridor border. In the conditions of prediction’s failure, the loss of a trader equals only the value of a prepaid option premium.
Pinocchio Trading Methodology
The use of the strategy aims at the derivation of quick profit and may be successfully employed by the newcomers, who possess no knowledge of trading acts. Moreover, the strategy guarantees profitable investing applies both to binaries and currency pairs. The graph behavior, which is imposed by the mentioned strategy, is common and brings quick financial benefits if one takes into attention the features of indexes and commodities.
The following constituents lay a basis for the use of Pinocchio approach:
- In terms of candlestick graph, Pinocchio methodology embraces one or several candles.
- The indication of a strong candle shadow must be granted in order to ensure powerful trade signal.
- The identification of a candle’s shadow inflicts the predictions about the fall or rising of an asset.
It is critical for the traders to be able to identify a Pinocchio bar (Pin-bar) or Pinocchio methodology. We will try to clarify the issue with the help of a candlestick chart that illustrates a reflection of the EURUSD currency binary. The feature of the Pin-bar, which must be detected, is a long thorn or a shadow (the Pin-bar nose that contradicts a trend. We recommend enlarging Pin-bars profitability by adopting the pronounced bars. Furthermore, one must consider ensuring that the Pin-bar body short maximally short is. The direction of the value curve is important as well.
The option may be put in a trade if the third candle takes a specific direction, which blocks a shadow or a body of Pin-bar.