First things first: there is no strategy that you can use to win every one of your binary option trades. All strategies aim to achieve a high enough win percentage to earn a long term profit. That is the best you can realistically aim for.
Second, it is important to understand that there is no set strategy that fits for all traders. Different strategies have different pros and cons. Which ones fit best for you will depend on many different factors. Some of these factors will have to do with considerations such as budget, level of experience, how much time you have to trade per week and so on. Others will have to do with your personality.
So when you are looking for the perfect binary option strategy, you should add “for me” at the end. Because what you are really trying to attain is a strategy that fits best for you as a trader.
In this article we point to some important factors you ought to keep in mind when trying to find your perfect binary option strategy.
How to find your perfect binary option strategy
Are you risk averse or a risk taker?
In the search for your perfect binary options strategy, the very first thing to consider is risk. Risk is at the heart of all trading, and understanding how you deal with risk will help define you as a trader.
In binary option trading, the differences between a high risk and low risk strategy can be explained like this:
- High risk = lower percentage of wins
- Low risk = higher percentage of wins
- High risk = bigger wins
- Low risk = smaller wins
So it becomes a choice between frequent, small wins, and less frequent, big wins. On average, over time with a high trading volume (several trades per trading day) the amount of money you can earn with either high risk or low risk will be close to equal. In other words, one is not objectively better than the other. It is just two very different ways of achieving the same thing: long-term success.
So, how do you choose which strategy fits best – low risk or high risk?
Basically, it boils down to a question of personality. What do you feel happiest with? Living through the losing streaks that will inevitably happen if you follow a high risk strategy, or dealing with the fact that your wins will not be greatly rewarded?
What we have here is essentially a question of personality. And it is important to find an answer to the question of whether you are risk averse or a risk taker. The reason for this is that you are unlikely to succeed over time if you try to follow a strategy that is a bad fit for your basic nature.
Regardless of whether you like risk, or would like to minimize it, there is one crucial thing all traders should do, and that is to stick to one approach or the other. Do not switch between risk taking and playing it safe. By doing that you risk incurring the drawbacks of both approaches, whilst enjoying the benefits of neither!
Are you a hands-on trader?
In order to achieve long term success in binary options you will need to learn how to read the markets. You have to know how to make predictions that reliably identify the future price movements of assets. That is what binary trading is all about.
There are two basic ways of doing this:
- Technical analysis
Option 1 involves learning how to read statistics, interpret graphs and draw inferences based on market data. This will enable you to see patterns that will indicate what the market will do next.
There are drawbacks and positives about this approach. The biggest pros of learning technical analysis are:
- You become an independent trader and can make your own decisions
- You understand the process of binary trading, enabling you to make intelligent decisions
On the other hand, the drawbacks are that learning technical analysis can be:
- Extremely time-consuming. It will be very difficult for most people to combine studying this subject with a full-time job, plus trading
- Overkill – unless you plan to make a serious long-term career as a binary broker, this might be an unnecessary challenge
Option 2 involves paying someone to help you make good trading decisions. There are basically two ways of doing this:
- Binary option signals
- Binary option robots
A binary option signal is a recommended binary trade. Companies called signal providers sell such recommendations to traders, usually for a monthly subscription charge. Signals are generated by very advanced trading software that uses specialized algorithms to read market data.
A binary option robot is a software solution that makes signals, and in addition acts on them to complete trades on behalf of its subscribers. By using a binary option robot you essentially put your trust in the experts’ ability to trade more successfully than you would be able to yourself.
In summary, by determining whether you are a risk taker or not, and whether you are a hands-on trader or would like to outsource your trading, you will take important step to defining your perfect binary options strategy..