Stocks are lucrative assets you can use to invest in a binary option. Here are a couple of strategies you can use to make money with stocks and binary options.
Requirements for strategies for stocks
Stocks have a number of unique characteristics that enable you to use special strategies.
In general, there are two unique characteristics:
1) Limited trading time with overnight break
Each stock is traded at its home stock exchange. When a stock’s home stock exchange is closed, a stock cannot be traded. Currencies and commodities, on the other hand, are traded continuously throughout the week. This leads to a number of significant events you can use to build a strategy around.
2) Price exclusively determined by supply and demand on the stock exchange
A stock’s price is exclusively determined by how many traders are willing to buy or sell a stock. With currencies and commodities, on the other hand, supply and demand are also created outside the stock exchange by real life events. This, too, allows for some special strategies to be used with stocks.
Specialized strategies for stocks
To help you trade stocks successfully with binary options, here are a few specialized stock strategies you can use:
Trading overnight gaps
A stock can only be traded when its home stock exchange is open for trading. Traders can, however, still place new orders while the stock exchange is close. These orders will be executed when the stock exchange opens again.
Overnight, most influences (foreign stock exchanges, events, etc.) often point in the same direction. Therefore, many trades place their orders in this direction. When the market opens the next day, this significant surplus in demand or supply makes the market jump significantly: The market created a gap.
Gaps are important events that you can use to trade a binary option. You can either trade closing gaps with the gap strategy, or runaway gaps and breakaway gaps with their according strategies. Of course, this kind of strategy will generate only few signals per day. Depending on how many markets your binary broker is offering you stocks from, the different time zones of each major market might enable you to trade a gap two to three times a day at best.
Since you should be able to win a high percentage of your trades with this kind of strategy and use an option type with a high payout, you will be able to make a good profit nonetheless.
Trading closing gaps
Near the end of each trading day, trading volume will be lower. Most day traders have closed their positions and will not open new positions again. There are fewer traders in the market, which keeps the volume low. This market environment is perfect to find exhaustion gaps. Exhaustion gaps are the only gap type that is likely to close. This allows for very accurate predictions about the length of the expected movement: The movement will be at least long enough to close the gap.
You can use this accurate prediction to trade a touch option with a high payout of up to 500 percent.
Trading complex chart patterns
Complex chart pattern, such as continuation patters or reversal patterns, take a long time to form.
Usually, currencies and commodities experience too many fundamental influences to give these patterns enough time to form. Therefore, complex chart pattern almost exclusively occur in stocks. If you are looking to trader continuation patterns or reversal pattern, for example, you should always do so with stocks.