Binary options trading is simple in concept. You choose an asset, decide whether you think its price is going to be higher or lower at a specified time, stake an amount of money on your prediction and await the outcome. If you’re right, you finish in the money and get a fixed payout. If you’re wrong, you lose some or all of your stake.
In its most basic form, that’s about it. However, as with anything you do, there are right and wrong ways. There are actions you can take that will improve your chances of success. Here are some tips that may help.
1. Make Short Trades
You can undertake trades with long expiry times. However, the further into the future you go, the more difficult it is to predict what will happen. Short trades give you a greater chance of success because there’s less can happen that will change the outcome. And, if you predict correctly, you can re-invest several times and use the same money to make many short trades rather than a single long one.
2. Research and Analyze
This has been said elsewhere but it’s impossible to over-emphasize the importance. The more you know about an asset, how it’s performed and the events that are affecting it currently, the better your chances of predicting correctly the way the price will go. So undertake both fundamental and technical analysis and stay alert to what is happening.
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3. Gain Experience
With binary options trading, the more times you trade, the more experienced you’ll become. However, this can be expensive at the start if you’re losing money on unsuccessful trades, so you’re better off starting without risking your money. If the broker you use has a demonstration account, use that to make some trial trades. Failing that, simply make some predictions and see how they work out. When you get them right more than you get them wrong, then start to make actual trades.
4. Be Familiar
You’ll generally be more successful if you trade an asset you know something about because you won’t have to learn everything from scratch. If you work in the oil industry, for example, trade oil company shares or trade oil on the commodities market. Don’t, however, limit yourself to a single asset as you’ll restrict your opportunities unnecessarily.
5. Learn from your Mistakes
Everybody makes mistakes and, when you’re trading binary options, they can be costly so you don’t want to repeat them. They can also be educational because you can learn from them but only if you know what’s happened and why.
Record all your trades and their outcome, noting everything that may be useful for the future. That way, you’ll learn as you go along and will benefit from the experience. Never think you know everything because there’s always something new to learn.
6. Take Notice
Some traders undertake lots of research and then don’t always follow its findings. They like to follow a hunch, ignoring what analysis tells them. Don’t do it because it’s the road to failure. Hunches come off sometimes but not consistently and the results of analysis will win in the long term.
7. Follow Trends
There’s an old investment saying that you should always trade in the direction of a trend. If you can pick up a trend early and follow it until a reversal is due, you’ll make some solid profits. It proves the value of good technical analysis, which will indicate when the trend is likely to continue and when a reversal is due, at which point you can change the direction of your trades.
8. Time your Trades
Particular events happen at certain times and can affect the value of assets. The US Department of Energy, for example, releases a gas and oil inventory report every Wednesday and natural gas figures each Thursday. These can cause price volatility and profit opportunities. Knowing what figures are coming out and when will mean you’re better prepared while trading global markets, allowing you to profit from information at any time.
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9. Get High Availability
Trading binary options can be a true 24/7 activity because the assets are traded on exchanges around the world. To take full advantage of the profit opportunities this presents, you need to be able to trade when and where you want. This means having access to a trading platform through any suitable device so you’re not restricted in any way.
10. Go with the Flow
Although the proven way to success is to undertake thorough analysis, sometimes you just don’t have the time. In this case, you may rely on the research of others when making your trade. Some brokers show the percentage of call and put options for a particular trade. A predominance of call options will indicate a bullish sentiment while the reverse will indicate prices are expected to fall.
You may therefore follow the majority in the expectation they’ve done their research.
11. Start Small
Don’t try to run before you can walk. If you’re new to binary options trading, start with small stakes or no stakes at all and only risk more money when you’re confident of your ability. But don’t get over-confident because you’ll regret it.