Binary options trading may seem to resemble gambling to many unsuspecting individuals. However, traders are aware that the best way to be successful with such a type of trading is to apply specific strategies to each trade. Now, there are no magic formulas to ensure that you end up in the money for every trade.
While you can considerably improve your chances, you still cannot be certain that you will make a profit with every trade that you place. Due to the volatility in the market, there is always a level of uncertainty present.
Also, by the very definition of binary options trading, if you are wrong about a trade, you can end up losing all your money. Here are some tactics that you can utilize, however, to create a winning formula for yourself:
Do Your Research
While you do not need to be an expert in binary options trading, you still need to know about the market that you are placing trades in. Now, according to the strategy that you have chosen to follow, the research is going to differ.
Nonetheless, there are several ways to ensure that you always have a finger on the pulse. One of the things you can do is to look at how certain assets behave during specific periods. For instance, depending on the market conditions, you can expect particular assets to either increase or decrease in value.
If you can identify these conditions, you may be able to better predict the direction in which the price of the asset will move. If this has happened frequently over a long period of time, you can be fairly certain that it will happen once more. By being prepared for this circumstance, you have a better chance of being right and ending up in the money.
Utilize the Basic Options Strategy
With binary options, there are essentially two outcomes – your prediction will be right or it will be wrong. The unfortunate point of this type of trading that being wrong can lose you all of your investment. What you can do instead, however, is to even the playing field for yourself.
This is by utilizing the basic options strategy. Here, you play both sides of the trade. For example, you can place a trade on a certain asset and say that the value of this asset is going to rise.
This is typically the outcome that you are most sure of. If you are right, let’s imagine that you will get a 75 percent payout. If your assumption is false, you may only be able to get back about 10 percent of your money. Half way into the trade, what you can do is to place a Put option on this same asset.
Of course, it is important to ensure that the payout rates of these two balance each other out. This way, when the trade expires, regardless of the outcome, you will have made money.
Use Compound Returns
As mentioned, one of the fears with binary options trading is losing all of your money. To overcome this, you should only use your compound returns. This means that with your initial deposit, only place five percent of it on the first trade.
If you win, take all of this money that you have won and place it on the next viable trade. So on and so forth. This way, you will be able to always keep a considerable amount of money in your account. Of course, depending on how much you actually make on your trades, you may want to limit the amount that you invest in each trade. Nevertheless, this is a good technique.
When you combine these three different tactics, you get as close to a winning formula with binary options trading as possible.