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Effective Binary Options Strategies!
Posted: Nov 03, 2018
Binary options is a trade that involves short-term options on an online platform. Mostly, successful trading depends on luck, and, therefore, no one is an expert in the field. Trading strategies only serve as guidelines for maximizing profits. All the binary option strategies have varied risk factors and the trader should consider both the strong and weak points of every strategy. Therefore, trading strategies do not necessarily guarantee profitability but rather, increase the chances of profitability if applied effectively.
Knock-on Effect/Market Pull Strategy
The first strategy to explore is the Knock-on Effect or Market Pull Strategy. This popular strategy uses the concept of shifting forces that upsets the trade balance. Apparently, movement of a single option in the trading platform causes a knock-on effect on another option. The trader has to understand the relationship of a particular asset in the currencies, stocks, commodities and indices. For instance, a trader can focus on the price movement of gold against the dollar and then place a CALL or PUT, depending on the changes. The strategy has a significant logical accuracy with a high chance of certainty.
Straddle Strategy
The Straddle Strategy entails placing trades in order to shield both sides simultaneously. The straddling strategy requires a trader to purchase both CALL and PUT options. The trader places the contradictory options at the top and bottom of the monitored trend. This strategy capitalizes on the volatile market trends especially in the GBP and USD. It can be a rewarding strategy in the capital markets. In addition, this strategy protects the trader from loses that stem from non-performing trades. However, the straddling strategy is efficient in high volatile markets and is ineffective during low volatile periods. In addition, both trades can expire out of money thereby causing loss of investments. If you want to know more about- Nadex Trading Strategies then you can invest your money over there.
Hedging Strategy
Hedging Strategy incorporates a similar concept of purchasing both CALL and PUT options. This strategy is useful in cases where the traders expect an increase in price action and are not sure of the price direction. Mostly, the uncertainty occurs when traders anticipate a release of significant economic information. Hedging strategy gives the trader an allowance to put two options in the platform irrespective of the economic information outcome. This strategy works when a trader has adequate time for placing the required trades in order to balance the losses incurred by the initial trades. The strategy works well when there is an imminent financial movement but in an unclear direction. Nevertheless, investors perceive hedging strategy counterproductive when investing capital in a dropping position.
Ultimately, every trader needs to consider the benefits and risk factors of every strategy before trading. The above strategies have the capacity to maximize a trader’s profitability if applied on time and if used candidly. After all, binary trading options is a trade of chance, capitalizing on an opportunity before it expires.
About the Author
Signe J. Petersen is an experienced trader of stocks, currencies, commodities and many more. In the wake of rising popularity of binary options trading.
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