(+) Binary Options Strategies

Introduction to Binary Options

Binary or Digital Options are very risky financial instruments and are classed as an Exotic asset class. Binary Options provide only two possible outcomes Win or Lose (0/1). If your prediction is wrong you lose your initial investment.

Features

(i) Easy-to-use but a very risky financial instrument

(ii) Pre-determined risk and reward

(iii) Making profits from both directions (Bullish/Bearish trends)

(iv) Making profits or losing money based on even tiny fluctuations

(v) Trade 24/5 any financial market (Stocks, Forex, Commodities, Metals, Energy, Indices)

(vi) Trade different time-frames (from 1 minute to several months)

High/Low Binary Options

The most common type of binary option is the High / Low type. High / Low options offer a fixed return/risk and the only thing that is required for a profit is to predict the correct direction of a Financial Asset at the end of a specific period.

■ Expiry Time

The end of this specific period is called an Expiry Time and it may last from 1 minute to several months.

■ Strike Price

The Strike Price indicates the price level at which a trading position closes with a profit or with a loss.

Call / Put Binary Options

This is the same type of Binary Options as the High / Low options. If a binary options trader predicts a bullish market then he buys a Call Option if he predicts an upcoming bearish market then he buys a Put Option.

You can remember the difference as:

1) Put Down –Bearish Markets

2) Call Up –Bullish Markets

In the case of a Call Option:

-If at the end of the Expiry Time, the price of an asset is below the strike price then the position loses money

-If at the end of the Expiry Time, the price is above the strike price then the position earns money

Payout Rate

The Payout Rate indicates the profit that you will earn if your prediction is right. That profit is measured as a percentage (%) of your initial investment.

• Usually, popular assets such as EURUSD, Gold, and Crude Oil offer better Payout Rates than less popular assets such as for example a less liquid Forex Pair such as EURAUD or Sugar or Corn

• The payout rate is one of the most crucial criteria when you choose a Binary Options Broker. Most Binary Options brokers offer today a maximum Payout Rate between 80% and 90%

Refund Rate

The Refund Rate is a percentage (%) of the initial investment that returns to traders if a position is lost. For example, if your prediction is wrong and you have lost a trade then you take back a percentage of the value that was lost.

• Refund Rates are not offered by all Binary Options Brokers

• Refund Rates range between 5-15%

  Read more: Binary Options and Trading Strategies

The ‘Marida’ Type of Traders

Many Binary Options Traders think that they can become rich in a couple of days, this kind of traders are what is called in my country “The Marida” traders. Actually, Marida is a tiny kind of fish that feeds a lot of undersea predators. Either you are trading Binary Options or any other kind of financial instrument (Shares, Forex or CFDs) never join the Merida team.

Shape: The Trading Triangle

What characterizes the above Trading Triangle is velocity. Each time you push one side (Performance, Risk or Time Frame) the other two sides are widening. So, if you want to achieve high profits (Performance) in short periods then your trading risk is expected to climb. From the other hand, if you seek to reduce your portfolio risk then your expected return should be lower and your time frame should get wider.

Based on this simple model is very easy to understand why you need to widen your time frames to trade any market. A wide trading time frame maximizes your profit potential while it minimizes your overall trading risk. Proof comes from statistics, 99% of all day traders are loosing their total capital after some time. Simply because when you are trading on a daily basis, your trading cost (commissions etc) is getting very wide and that means your profit potential is minimized. It is better not to become a day-trader. Take long-term positions and make clear decisions, always avoid time pressure.


□ Strategy -The Trading Triangle

Identifying Chart Patterns

Strategy’s Outlook:

Pattern recognition is a very popular trading strategy based on technical analysis chart patterns. Financial markets tend to move in certain patterns and those traders capable of identifying some of these patterns may increase significantly their likelihood of winning. Identifying patterns as a method can be combined with other trading strategies and be used to confirm the entry/exit signals of other trading methods. Trading patterns recognition as a method is a much more reliable method in mid-term and long-term trading periods than in short-term periods.

What is a Chart Pattern?

A chart pattern means a distinct price formation presented on the chart. There are many different types of chart patterns, in this article, you can find the most important patterns. Patterns can not forecast the future but it can help traders increase their likelihood of winning. In general, we can distinguish two main types of Chart Patterns:

(1) Continuation Chart Patterns

(2) Reversal Chart Patterns 

1. MAJOR CONTINUATION CHART PATTERNS

Definition: Continuation chart patterns signaling that a price trend will continue.

1.1 Cup & Handle Chart Pattern

Cup & handle formation suggest that a price trend has paused for a while but it will not probably be reversed. When this formation is confirmed then a price trend becomes even stronger.

Timeframe: Cup & Handle pattern can be best identified in charts from 1-month chart to 1-year.

Read more: Identifying Chart Patterns

Support and Resistance Binary Options Trading Strategy

Identifying major Support and Resistance levels is one of the most crucial issues of technical analysis.

What is Support and Resistance?

■ Support levels are the historical price levels which an asset or an index has shown difficulty falling below. At those levels a lot of traders tend to buy the market (Enforced Demand).

■ Resistance levels are the historical price levels which an asset or an index has shown difficulty break through. At those levels a lot of traders tend to sell the market (Enforced Supply).

Support & Resistance Timeframes

Traders have to be always aware of the close support and resistance levels of their trades, no matter their timeframe.

■ Short-Term Support & Resistance (one day to one month)

■ Mid-Term Support & Resistance (one month to one year)

■ Long-Term Support & Resistance (one year to several decades)

Support & Resistance levels are not changing as Oscillators, Trend-lines etc. Support & Resistance levels are usually characterized by stability over time.

How Support & Resistance Levels are Formed?

Support & Resistance levels are basically psychological levels of demand and supply. The more times an asset / index has proved unsuccessful in breaking certain price levels the stronger the perception of the existence of certain support / resistance on these levels.

Chart: Support Levels

Read more: Support and Resistance Trading Strategy

News-Trading Strategy for Binary Option Traders

News-Trading is a fundamental-analysis strategy that is based on the upcoming economic calendar.

News-Trading focus on short-term periods and can be used for trading 1 minute, 2 minutes and 5 minutes binary options (Turbo Options). Most of the news releases have a short-term effect but there are also news releases with a long-term effect on global markets. The mission for every News-Trader is to track important news releases and trade the right direction of the news impact.

What is Event-Trading and Market Expectations all about?

Every major economic, social, politic or military event has a particular influence on the global financial markets. Even a weather forecast can highly influence the global markets (especially energy assets). Some events have a tremendous effect on financial markets while some other events have a minor effect. What is important isn’t just the event itself -It is of equal importance what the market really expects about certain events.

Three Factors affecting News Trading

■ The Nature and the Significance of the News Release (For example an important macroeconomic event such is an interest rate cut)

■ Market Expectation about this Event / News Release

■ The difference between the Market Expectations and the Actual Event

What means Market Expectations?

When we are referring to market expectations we are mainly referring to the results of the research of specialized analysts. These analysts who may work for a Financial Company, a Governemnet Body or to be completely Independent have the ability to influence all kind of market participants.

Example of an Important Macroeconomic Event

Let’s suppose that our market is Forex and the market expects that the ECB (European Central Bank) will cut Euro interest rates by 0.25% (hypothetically 0.50% currently).

Suddenly ECB doesn’t cut the Euro rates but in addition it presents a scenario of future interest rate increase based on inflationary concerns.

Can you imagine what happens next?

Euro against the other Majors, for example against USD, will probably gain 2,000 pips in the next few minutes. In the following chart you may observe the effect of important news on EURUSD.

Read more: News-Trading Strategy

Follow-The-Trend Binary Options Trading Strategy & 5 Ways to Identify Trends

Follow-the-Trend is maybe the most popular strategy to trade any financial market using any financial instrument. As they say, the trend is your best friend.

In this article you can find information about how to “Follow-the-Trend” using binary options but also 5 different ways to identify trends using technical analysis.

Follow-the-Trend Strategy Outlook

Financial markets tend to follow certain trends. Actually they constantly follow a certain trend until that trend is temporary disturbed by a short-term price pullback or it is fully reversed and a new trend is emerging at the opposite direction (reversals).

Trend Continuation is the Best Strategy to Trade High / Low Options

When you trade High / Low binary options it is better to seek for trend continuation than for trend reversal. On the contrary when you trade Touch Options or Range Options reversals can prove a successful choice.

Follow-the-Trend strategy is the best strategy to profit from 60-second binaries trading. This strategy has a proven record of success while it is really easy to be implemented by any trader. The power of this strategy relies on statistics.

Statistics have shown that there is always a better likehood that a trend will continue than a trend will be reversed.

In order to apply 'Follow-the-Trend' Strategy with success you certainly need a basic understanding of technical analysis and charting. In this article you will be able to find all the basic information about how to recognize and to use trends.

The ‘Follow-the-Trend’ Trading Strategy Implementation

When the existence of a trend is confirmed the only thing you have to do is to execute a trade in the same direction. Here are some easy steps to apply the strategy.

Read more: Follow-The-Trend Strategy