Your first step in trading binary options is to select a good and reliable broker. Although it is easy to start trading binary options, making money with binary options trading is not that simple. In this article, we list some tips that will help you trade binary options like successful professionals do.
Research Assets – Binary options are traded on a large number of underlying assets, including stocks, indices, currencies, and commodities. The key to successfully making money in binary options trading depends on how accurately you can predict the price movements of the assets. To acquire this skill, you need to do some research on the asset you want to trade. For example, if you want to trade a binary option on the underlying asset of ABC Ltd stock, be very aware of the fundamentals, recent events, results and issues surrounding ABC Ltd. Similarly, it is important to be informed. on the dynamics of supply and demand for the commodity you want to market. If you understand the basics of technical analysis, you can supplement it with fundamental analysis and reduce the chance of a winning trade.
Read well: the movement of asset prices is influenced by the general global economic scenario to some extent. Therefore, in addition to asset-specific factors, it is important to read current global news and events. Also, reading about the mistakes made by binary options traders will ensure that you do not repeat the same ones.
Know the options available to you: There are different types of binary options trades that you can do. Once you are aware of the alternatives available to you, you can use them to increase your earning potential. For example, a Call/Put option is the most traded. In this type, you must predict whether the asset price will trend above or below a predetermined strike price at option expiration. The 60 second option uses the same rule except that the trade expires every 1 minute. In the One Touch binary option, you have to predict whether the asset price will touch the predetermined strike price at least once during the life of the contract. In limit options, you must determine whether the price of the asset will remain within a predetermined range at the expiration of the contract. Check the types of binary options your broker offers on their trading platform. With knowledge of these, you can decide which best suits your risk appetite and your comfort in predicting asset price movement.
Mitigate risk: Trading any asset class is fraught with risk. Fortunately, you can combine two or more contracts to limit your losses. One such strategy is the ‘matching strategy’ where you combine a call option with a put option to mitigate risk and make consistent profits. For example, you enter into a call option contract with an underlying asset such as a share of ‘XYZ Ltd.’ at a strike price of $20. At contract expiration, you are in a favorable position as XYZ is trading at $25. However, he anticipates that the share price could fall due to a recent negative event. In which case, all your earnings through this exchange will be removed. Therefore, you buy a put option on ‘XYZ’ at a strike price of $25. Effectively, you have created a ‘safe’ range between $20-25 by pairing the call option with the put binary option contract. If the asset price is trending in between, this expiry range, you can earn from both contracts. If it falls outside the range, the losses on one contract will offset the gains on the other. You can further explore this strategy by choosing your asset, which could be a stock and an index, or two rival stocks.
Trader Psychology – It is extremely essential that you do not think emotionally while trading. Successful, professional traders know when to cut losses and move on. Most of the time, traders tend to enter into new contracts to make up for the loss of previous trades. This is acceptable as long as you trade within the capital you have allocated for such trades. Once he trades beyond his allotted capital to offset losses, he is taking on a huge risk.
To become a professional trader, you need to spend enough time practicing these guidelines. These will help you succeed in making money through binary options trading consistently and safely.
