To make money with binary options, you need the right binary options knowledge. With these pointers, you are well-prepared for a successful trading career. Mainly, there are three aspects of knowledge that you need to understand:
- Understand yourself,
- Understand the different price charts,
- Understand the basic elements of the market
In this article, Binary Options Knowledge, you learn what all of these things mean, what they mean for you, and how you can become a successful trader.
What Binary options knowledge do I need to make money?
The most important thing you need to know to become a successful trader is yourself. We are all different. Some of us thrive under pressure, some can’t think clearly; some of us like to take risk, some avoid it. Depending on your type of personality, you should choose a strategy that suits your character well.
In our culture, we appreciate risk takers. Those who are willing to bet everything on themselves are considered to be go-getters and doers, generally desirable attitudes.
With binary options, things are different. Being a risk-taker is neither better nor worse than being risk-averse. The only undesirable characteristic is trading a strategy that fails to suit your character. If you are a risk taker, take risks. But if you are risk-averse, act accordingly and get a safe strategy.
When you trade out of character, you will make mistakes. Forced into a high-risk environment, risk-averse binary options traders will panic, making it impossible for them to execute their strategy. Conversely, risk-takers will get bored in a risk-free environment, also forcing them to abandon their strategy in the search for excitement.
Depending on whether you consider yourself as risk-averse or as a risk-taker, you should adjust your trading strategy accordingly. This table can help you with this task:
|Binary options types||High / low options, maybe occasionally using one touch options or boundary options, when the situation is right.||One touch options, ladder options, 60 seconds options.|
|Expiries||Long expiries, at least 2 hours, to avoid short, unpredictable market environments.||Short expiries to maximize the number of trades, thereby increasing the earning potential, possibly 60 seconds options.|
|Generating signals||Complex candlestick formations, trends, combining multiple technical indicators.||Simple candlestick formations, single indicators, breakouts, gaps.|
|Investment per trade||1-2 percent of your overall capital.||3-5 percent of your overall capital.|
Know the different price charts
Most new binary options traders make the mistake of trading the line charts they know from TV and the newspaper. These charts display price movement in the worst way possible, failing to communicate a large part of the information that is vital to binary options traders.
The issue is simple. The market creates a new price for an asset every few seconds, sometimes even multiple prices per second. No price chart can show every single one of these movements. Therefore, price charts aggregate prices over a certain period of time. The difference between different price charts is how the charts display these aggregated prices.
A line chart only displays one price per period, ignoring all the other prices as if they were completely unimportant. These other prices, however, are crucial to finding a profitable investment. For example, it makes a huge difference whether prices in a period remained in a narrow bandwidth or moved up and down erratically.
To solve this problem, traders have invented candlestick charts. Candlestick charts display each periods opening price, closing price, high, and low, thereby displaying every single price chart of the aggregated period.
Candlesticks display so much more information that even a single candlestick can help you find a trading opportunity. Understand candlesticks and simple candlestick formations, and you have made a big step to learning the knowledge you need to trade successfully.
Understand the basic elements of the market
Market movements can seem confusing at first. With the right knowledge, however, you will soon find that there are some underlying patterns that allow you to understand what is happening and what will happen next.
To achieve this level of knowledge, you need to understand:
- Trends: When the market moves up and down, it never moves in a straight line. It moves in zig-zag lines that are called “trends”. By understanding trends, you will understand much of the market, you will be able to make predictions, and you will be able to make money.
- Resistance and support levels: Sometimes the market has tried to break through a price level multiple times before, but failed. These price levels become resistances and supports and can help you to find profitable trading opportunities.
- Candlestick formations: We already talked about simple candlestick formation, but there are also complex candlestick formations that consist of multiple candlestick formations and can provide you with a long-term understanding of market movements.
- Gaps: Sometimes, the market jumps over some price levels and creates a gap. These gaps provide profitable, easy to find trading opportunities that can be ideal for new traders.
This is all the binary options knowledge you need to get started with trading. Make sure you understand all the aspects mentioned in this article, and you are well-prepared for your trading career.