A trading strategy has to suit the trader to be successful. This post will give you a few examples for strategies you can use depending on your personality.
A binary options trading strategy for risk averse traders
If you are a risk averse trader and prefer to win many of your trades over making high profits with each trade, you should pick a strategy that creates relatively safe predictions. With this kind of strategy, however, you will not get the best return rates when you win a trade. Here are two strategies you should be able to trade with a high winning percentage.
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Trading the point 2
One of the safest strategies out there, trading the price breaking through a point 2 can guarantee you safe returns over a long period of time.
In an uptrend, a point 2 is created with every new peak. Once the price rises over the price level of the previous peak, this will trigger many limit and stop loss orders by other traders, and create a big price movement in an upwards direction. You can trade this movement with a High/Low option with a relatively short expiration time.
In a downtrend, a new point 2 is created with each low, and a new point 3 with each peak. In this situation, you have to trade the High/Low option when the price moves past the price level of the previous low. In any case, with a little experience this strategy should guarantee you to win a high percentage of your trades.
Read more about Trading the point 2 here.
Trading Double Tops and Double Bottoms
In candlesticks, the longer a formation takes to develop and the more candlesticks it contains, the more valid it is. Two of the largest candlestick formations are the Double Top and its exact mirror image, the Double Bottom.
Unfortunately, the longer it takes for a candlestick formation to develop and the more candlesticks it contains, the rarer it is, too. Therefore, finding Double Tops and Double Bottoms takes time and skill. You have to browse through a lot of different assets and time frames. When you find a Double Top or Double Bottom, however, you have a good chance to make a successful trade.
Similarly to the Double Top and Double Bottom, you can trade any large candlestick formation with low risk. When creating a strategy, it is very common to add other patterns indication continuation and reversal. Still, you should always remember to keep your strategy simply.
A binary options trading strategy for risky traders
If you prefer a higher return with each winning trade over winning a high percentage of your trades, you should choose a riskier strategy. Here are two strategies you could try.
The Gap Strategy
A gap is created when a candlestick opens far from the closing the price of the previous candlestick. In theory, the price tends to close this gap. You can invest in this prediction and make some money with trading the gap. Unfortunately, the gap doesn’t always close. The Gap Strategy, therefore, contains a considerable amount of risk. Still, since gaps are short lived and you should trade them with options with relatively short expiration dates, you can make a lot of trades in a short time period, and get instant feedback.
On the other hand, gaps are common. They are created almost hourly with markets opening in different time zones; and every time big news hit the market. Applied successfully, the gap strategy can therefore create high returns in a short period of time.
Simple candlestick formations
Simple candlestick formations consist of only one candlestick. While every single candlestick allows you to draw a conclusion about future price movements and some are especially significant, predicting market movements based on such a small sample of price movements contains a great deal of risk.
Similar to the gap strategy, trading simple candlesticks helps you make a lot of trades in short period of time. Therefore, with a strategy like this, your winning potential is enormous.
Safe signals are rare
In general, this simple rule applies to all binary options strategies: A safe strategy will create fewer, but safer signals. With a more risky strategy, you will be able to make more trades, but win a lower percentage of them. Safe signals are simply rarer than riskier signals.