In order to understand how good a trader is and to unveil his/her true potential, it is not necessary to learn dozens of strategies, indicators, and subscribe for binary options signals “just to get more confident”. In the very beginning this extra information can be misleading. The most important in the beginning is patience, discipline, some basic knowledge, and a couple of good strategies. That’s what this section is about: we will discuss some reliable binary options trading strategies. Though they are quite basic, even very experienced traders often use them, and – given certain skills – these strategies can generate huge profits.
Let’s begin with the basic understanding: the prices often change in response to national economic performance measures. These data are being constantly covered in different sources, such as news feeds, TV channels, the official websites of national statistics departments, financial information agencies.
The FUNDAMENTAL ANALYSIS section discusses in more detail how prices are influenced by economic performance measures, while here we will concentrate on the news trading strategies.
If a trader chooses fundamental analysis, his/her main tool is the FINANCIAL CALENDAR. For a start, let’s choose the right news – it is best if the news is marked with 2 or 3 bullheads (which means the news has a powerful impact on the market).
The more news gets published simultaneously, the stronger market changes are to be expected.
Such trends are a good opportunity for entering trades and generating profits.
In order to lower the risks and increase chances of profits, one needs to have more control over the situation. One way of doing so is to open several trades on a single news. For instance, if you are trading currencies and there is some news concerning USD, the movements in all currency pairs with USD will be similar. But it is best to make sure that there is no counter news concerning the other currencies in the pairs you are trading.
Opening positions. For the first way of news trading the trader needs to be in full control of the situation. This is required to be able to close the loosing positions in the right moment; if you managed to do that, just watch the profits show up in your balance. After a suitable news is found, the trader needs to open several positions in different directions with expiration time of 30 minutes, about 15 minutes before the news gets published. It is best if the difference between trades opening is 5 to 10 seconds.
After the news is published and when the market’s reaction is obvious, you need to close the losing trades. To close any trade use the TRADING TOOLS button in the list of open trades. Binary options news trading is very effective and doesn’t require profound knowledge of financial markets!
The next news trading strategy we are going to discuss is trading after the news is published. In this strategy there are no positions opened beforehand – all the trades begin upon the market’s actual reaction on the news.
The preparations are similar to Strategy 1: we set the time and look for news with 2 or 3 bullheads. But there is one difference: here we are patiently waiting for the news to be published. The option trading signals are to be interpreted in the following way:
black – as predicted (the market was ready for such turn of events; the reaction is unpredictable) – DO NOT TRADE;
red – the news is worse than the forecasts (the currency with a red news will get weaker);
green – the news is better than the forecasts (the currency with a green news will get stronger).
All the positions are to be open for exactly 15 minutes within 60 seconds since the news gets published. We should note that getting profits is not the only possible outcome of this model, but if the strategy is applied diligently, its efficiency is usually around 60%-70%.
This strategy is about finding a trend and trading with a trend. Before discussing the strategy itself, let’s take a look at what a trend is, and learn to see it on a chart. Trend is a clearly discernible move of an equity price or indices, where each following peak is higher than the previous one (for an up trend), or each valley is lower than the previous one (for a down trend). Another option is a flat, or a sideways trend. We should also mention that the lines of support and resistance can be built for each trend. These lines’ properties can differ depending on the trend’s direction. A trend line connecting several peaks on a growing trend is called a resistance line. A line connecting valleys on a down trend is called a support line.
And now let’s discuss how a trader can capitalize on this knowledge. One of the key elements of trading with a trend is to know that the chart looks different on different intervals, therefore the trend looks different as well. In order to find a position for trading, you should find a trend on a chart with wider timeframe than the one you’re going to use for trading. This allows to see the market’s general trends and to get a better idea of the chart itself. To find an entry point, you can use any of the existing indicators, e.g. the combination of a slow and a fast moving average, MACD, or Parabolic SAR. You can also use Bollinger bands indicators to define market volatility. If a trader uses several indicators at a time, it’s easier for him/her to discern less obvious moves, thus making better trades and getting higher profits.
When you learn to find trends and trade on news, you have good perspectives for correction trading. When a market trend weakens, the market starts to move in the opposite direction. For the Forex market it means that the market players who consider the current prices too high or too low to continue trading are going to fix their profits. Since the binary option traders play on the results of Forex speculative trading, the price correction is very favorable for a couple of profitable trades. The strategy of trading on bouncing off will work on a Japanese candlestick chart. A live chart for binary options can be easily found on any available trading terminal. We would advise using graphs from the www.netdania.com website. Having chosen a period of 10 minutes, the trader needs to find a trend of 3 candles of the same color. To make sure it is a trend, one needs to make sure there is at least 15 points difference between opening price of the first candle and closing price of the last one. If a candle of another color appears in the chart and doesn’t change its color for at least 2 minutes, this can be seen as a signal to open a position in the direction of the correction for 10 to 15 minutes. We should note that correction is a temporary event, which breaks the trend only for a limited time, after which the market usually moves back to the trend, that’s why it is very important to choose the right time intervals.