The Importance of applying the right binary option strategies

The Importance of applying the right binary option strategies

Binary Options strategies are tested techniques used by different traders to generate profit from binary options. These binary option strategies are devised by professional and experienced traders to help those who have no or little information about binary options. These are not some rules that a trader needs to follow. On the contrary, a person can create his own binary option strategy if he does not find the one that is suitable for his style of trading. Many strategies have been created; some have become quite successful for different traders, while others are just a waste of time. Although the right strategy depends more on the user than the trade itself.

The Importance of applying the right binary option strategy

Although there is a 50 percent chance that the trader might win on an investment, without even using a strategy; there is a 50 percent chance of loss as well. Binary option strategies are used to further improve these odds in the favor of the trader. It increases the chances of making a profit or decreases the level of risk involved in the trade. Using the right binary option strategy allows the user to make the right predictions regarding the trade. This prediction is based upon knowledge and experience allowing a higher return from the investment.

Three Essential Binary Options strategies

There are numerous binary option strategies created for specific users and market conditions. In addition to these specific strategies, there are three basic strategies that the trader can apply and use in combination with any other strategy to get better results. Applying these three strategies can never go wrong, these are:

Money management strategy : this is a basic strategy that can be used to protect a trader from a larger loss. According to this strategy the trader should set a specific investment percentage. Generally there is a 10 percent rule for this. The trader should spend only ten percent of what he has in his trading account, and save the rest. This allows him a safety net from big losses, as well as an opportunity to earn back, what he had lost, from future investments. Although this percentage differs from trader to trader. The type of asset chosen also determines how high the percentage should be. It is better to invest in a variety of assets.

Fundamental analysis strategy : unlike technical analysis, fundamental analysis is the observations and studying of economic factors of a place. These are general factors like the rate of employment or unemployment, GDP of the country etc. these are the factors that affect the general market, affecting the value of the asset connected with it. This is important in determining the bullish or bearish trend of an asset. This included observation of news, any press release, or financial data of the company relating to the asset. It is important that there is a degree flexibility available for this strategy to be effectively used.

Technical analysis strategy : technical analysis is the study of asset prices and how they behaved in the past. If a person observes the trends of the past to a certain degree, they will notice that asset prices show a specific trend which repeats itself after some time. Identifying this trend of the asset provides the trader a sound base to generate an accurate prediction. Charts, graphs other tools can be used to make the analysis.

Specific Binary Options Strategies

It is important to know when to use which strategy, in combination with the above mentioned three. Following are the Binary Options strategies that a trader may use:

  • Bullish and bearish strategy: these are simple strategies that can used by all, new as well as experienced traders. If a price seems to increase, then it is said to show a bullish trend. On the other hand, if the price trends show that it is going to decrease then it is called a bearish trend. Many other, simple or complex strategies have been devised with this strategy as their foundation like long call, short put, synthetic short stock etc.
  • Non-directional strategies:  there are many strategies that come under this like straddles, strangles etc. in this the direction is not of importance, rather the price votality plays a role in the earning of profit. If the price oscillates as was expected from the analysis, the trader will earn a profit; while if it does not fluctuate the way it was expected to be, it results in a loss. This strategy is great for experiences traders when the asset is unpredictable.
  • Knock on strategy: normally a strategy focuses on earning from one of the asset of the pair. This is a complex but unique strategy that allows the trader to earn from both the asset. The principle lies in figuring out the link between the prices of two assets, that is how the change in the value of one affects the other. This is suitable for people with high experience, knowledge and research skills in order to be successful.

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