Best way to trade binary options
How to Analyze Binary Options?
Trading in the financial markets is attracting more and more people. And in order to make money and not just play the stock market, you have to analyse every trade you make. Binary options are no exception. In order to earn on these contracts, you need to analyse the behaviour of the underlying assets and trade using strategies. Binary options analysis is all about predicting quotes using different methods.
Today, there are two approaches to analysis - technical and fundamental analysis of binary options.
This type of market forecasting, such as fundamental analysis, allows you to clarify the main causes that affect the fluctuations in quotations. One of its part, trading on the news, is widely used by many traders, especially by those who trade on different markets.
Fundamental analysis of the market implies working with macroeconomic data. That is its main difficulty. While the technical method of forecasting does not require specific knowledge of the economy, for the method we are considering, this knowledge is a must.
This forecasting method is used to determine long term trends by analysing the economic, political situation of a certain country as well as the global economy in general. It is based on market indicators, which can be found in any economic calendar.
The economic calendar is a kind of summary of all news for all countries, with their release times and forecasts. First, you have to keep in mind which news will be officially released and when. It is important to consider time zone differences. One of the most popular strategies, based on the economic calendar, is trading on the news. When statistics are released or an official speech is made by someone in a high position, the market reacts particularly strongly.
The advantages of the economic calendar:
- Provides information about at what time (day and time), there will be the publication of statistics in different countries around the world;
- Displays data about holidays (national holidays), i.e. when markets are closed;
- Ranks the news by their importance and shows a forecast of the report;
- Allows analysing how the news release affects the quotes of currency pairs.
Technical analysis for binary options helps to analyse the chart correctly and is able to find patterns that allow traders to make profitable deals. It is a large and multi-faceted science, which includes chart patterns, trend levels, indicators, oscillators, Japanese Candlestick analysis and much more.
One of the first postulates of the technical analysis is that the price takes into account everything. The second postulate of technical analysis is that trends, i.e. price movements in a certain direction, are clearly seen on the chart.
There are three main types of trends in the market - upward (the price is moving up), downward (the price is moving down) and sideways (the price is fluctuating within certain boundaries without a clear direction).
Binary options traders use both the first two trends and the third. And often, it is with a sideways trend, they can earn more, as the price is fluctuating within certain limits. In this case, it is easier to buy binary options up / down. When the upper boundary is reached, for example, the trader will most likely buy an option downwards, while when the lower boundary is reached, the trader can buy an option upwards. This is an example, and there are other factors and indicators to consider.
There are three types of charts in technical analysis:
- Candlestick chart. The candlestick chart gets its name from the fact that the many rectangles which make it up resemble candles. They can be red and green (sometimes there are versions of black and white). With their help, we can see the level the price reached in a certain period of time. The maximum (High) and minimum (Low) price levels are determined by the extreme points of the shadows. By the beginning and the end of candlestick bodies, one can determine the level of opening or closing of the price movement up or down.
- Bars. The chart shows almost the same information as the candlesticks. However, it is visually different and less frequently used than candlesticks.
- Line chart. A simple line chart looks like a line from one closing price to the next closing price. If we draw a point between these two points, we can see the general tendency of price movement.
Technical analysis indicators are a must for traders who want to succeed in options trading. The most popular, proven indicators are the following:
- Moving average;
- Bollinger Bands;
Technical analysis, as a whole, does not take into account one important factor. Events happen in the market, which are urgent. If you do not watch the macroeconomic factors at all and refuse the fundamental analysis completely, you can miss the emergencies and incur substantial losses. Therefore, the best way to trade binary options is to combine the two types of analysis described above.
There are different types of trading strategies, some are more popular and easier, some are more complex. Some create their own binary options trading strategy. However, as an investor, you have to be aware of the fact that these strategies are just tactics, and there is always a risk.
There are strategies for trading with different expiry times. They can be short term to 5 minutes, medium term to 1 day and long term to a month or more.
Let's take a look at the basic tactics used by most traders. If any of them seems more appealing to you, you can investigate it further, add necessary indicators and charts and trade successfully.
The advantage of trend trading is simplicity and versatility. The strategy is applicable to almost all financial instruments and, according to most traders, does not require additional indicators. When you find a steady trend, you open a deal strictly in its direction. A trend is a market situation (price movement) when the opening and closing prices of each successive bar are higher or lower than those of the preceding bar. In the first case we speak about a bullish trend, in the second - about a bearish trend.
A trend cannot last forever, and knowing this fact, some people use the strategy of trading on trend reversals. Determining the point when a trend reverses is difficult. To do this, it is worth using support and resistance levels, Parabolic indicators and MACD.
A popular and, for many, the best way to trade binary options is by trading on the news. In fact, news releases are the main catalysts for short-term movements of assets and especially currencies, therefore this binary options trading strategy offers traders a huge amount of trading opportunities.
Any economic calendar will do. The biggest movements occur after the news of medium and high importance. The strength of the news is usually shown as a three-section indicator.
Martingale trading is a way of managing your operating capital based on a simple mathematical formula - it involves doubling the amount of a new trade after taking a loss on the previous one. The purpose of such manipulations with a lot of size is to cover the profit of a new trade and increase the amount of an account. For example, if a $1 trade closes with a loss, the next one will be for $2 with the expectation that the profit from the previous trade will make up the loss from the previous one and add more profit to your balance.
A popular binary options trading strategy among many traders is short-term trading or scalping. It is a strategy based on sharp price movements. The time between opening a trade and closing it is only 5 minutes at the most. Most of the time it is limited to 1-2 minutes or even less.
The main feature is the possibility to gain good profit within very limited time. For example, a trader can devote only 1 hour a day to trading and earn as much as in the whole day, or even more.
But there are also disadvantages. Such trading methods are rather risky and dangerous. It is not always possible to keep track of all movements of the asset and, potentially, the chance to lose money is higher. However, this does not stop experienced traders, because an opportunity to earn big money in a short time is very attractive and compensates for possible risks.
So, there are a lot of strategies, but keep in mind that one and the same system in the hands of different people gives different results.
Everything depends on the trader's level of experience, his perception of the news in general, the speed of working in the terminal, etc. So you should do your own research on different types of trading strategies and find out which ones work for you. The easiest way to do this is with a demo account.
Best way to trade binary options
What should you do if you want to find the best way to trade binary options? First of all, you need to learn the terms and basics of this type of trading. After that, register on the broker platform. It will literally take you a couple of minutes, while opening up a lot of opportunities such as:
- access to hundreds of assets;
- you'll get a handy mobile app;
- the platform offers charts and indicators for analysis;
- everyday up-to-date news;
- live chats with traders;
- professional trading terminal;
- service of technical support etc.
If you have been waiting to trade but are unsure how to handle opening a demo account. It is always safer to practice your trading skills first, using virtual money instead of real money. You can open a demo trading account and try out your tactics on it. You will learn how to interpret signals and data charts. This will make it easier for you to start live trading.
Real trading account
When you open your account, you should ensure that you fully understand the functions offered by your broker. To open a live account, you will need to make a deposit into your account, and you can begin trading. They will advise you not to start with big sums if you are new to trading. It is better to gradually expand your investment portfolio. Follow the rules of risk management, and do not invest more than 5% of your capital in a trade.
Once you have made your trades, you will be able to monitor and analyse them in your account, and change your binary options trading strategy depending on the results. A trading account enables you to buy assets without any hassle. The funds transferred by the client are accumulated on his trading account, accordingly, all the profits he receives from trading operations will also be credited in real money to the same account. Good luck in trading!