It essential for you trading, that you know how to double your profit with binary options, and the first step to trading binary options is choosing a trading strategy. This trading strategy will define how you generate trading signals and how you trade these signals when they occur. While the signal creation process can be optimized to generate better results, too, the easiest and quickest way to increase your profits is to change the way you trade your signals.
The first and most important decision on how to trade your signals is which type of binary option to use. In general, there are three possibilities: High / low options, boundary options, and touch options.
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Most traders make the mistake of limiting themselves to one option type. Admittedly, there are some trading strategies that can only be used with a certain type of binary option. Most trading strategies, however, allow you to use more than one type of binary option.
Especially traders of high / low options, the option type most traders use, can profit from this type of strategy. High / low options are popular because they are the safest of all binary option types. You only have to predict whether the market will go up or down over a given period of time. With touch options, on the other hand, you also have to predict how far the market will move.
The downside to high / low options is their low payout. Because of the relatively safe predictions high / low options create, your broker will never give you more than 85 percent payout, with most payouts being somewhere around 75 to 80 percent. Touch options, on the other hand, can generate a payout of up to 500 percent and are usually somewhere around 300 percent.
Choosing the right option type for your strategy is essential for your success as a binary options trader. You should, however, not make this decision once and for all time. You should instead, decide with every trade you make which binary option type is best for the current market environment.
If you are limiting yourself to high / low options you will waste many chances to get a higher payout. If you are limiting yourself to touch options, you will either lose your option or not be able to invest in many situations in which you could have won a high / low option. In both scenarios, you leave a lot of good money on the table.
To know whether the current market environment is right for a touch option or not, you can use a technical indicator. The main question you have to answer is whether the movement you are expecting can reach the target price of a touch option until the touch option expires. Momentum indicators such as the average true range (ATR) can tell you exactly that.
The ATR calculates the average distance the market has moved over the last periods. From that value, you can easily calculate whether a touch option is within reach: Simply divide the distance from the current market price to the target price of the touch option by the ATR’s value. Now you know how long it should take the market to reach to reach the target price.
Compare the result to the expiration time of your touch option. Should your touch option expire before the market had a chance to reach the target price, a touch option is not a good investment and you should stick with a high / low option. Should the market have enough time to reach the target price, however, investing in a touch option can help you make a larger profit than investing in a high / low option.
If you plan on investing $100 on each signal, for example, you could also split the amount if the reading of the ATR is favorable. In that case, simply invest 50 percent in a high / low option and 50 percent in a touch option. Depending on your preference, you can vary the percentage amounts. You could, for example, invest the entire amount into a touch option if the ATR gives you a good reading.
Whichever percentage you choose, when you get into a situation where you know you have a good chance of winning a touch option, it would be foolish not to invest in it. The high payout of touch options will help you make more money than with high / low options even you win a few trades less.