The Steps to Profitable Binary Option Investing by Jamie Hanson
Binary options trading is very lucrative. With returns at over 80% in an hour, you can make money very quickly. But, that opportunity for gain is a double-edged sword. You may also lose money very quickly if you don’t pay attention to some basic principles.
If you follow these three keys, you will greatly improve your likelihood of taking profits. “Don’t over-trade”, Warren Buffett once said. “There are no called strikes in the market.” What the Berkshire Chairman meant was it’s fine to pass on as many trades as you like. You don’t get hurt by skipping over buying opportunities. This particularly hits the mark with binary options, since new options with new strike prices and new expirations are being regularly issued. Trading too much or moving too fast will cost you when trading binaries. Relax and do your analysis. Do not trade on instincts or hunches. If you don’t get in on a winning trade, don’t worry about it because there are constantly fresh trades opening up. Don’t feel rushed to jump into something simply because you see it begin to move higher. If you ever think you’re being too active, relax and step away from the computer. There will be many new opportunities later, and you’ll have a much clearer head to view them with.
Regulate your Position Sizing
The great thing about binary options trading is that you can create very high percentage returns quite quickly. But, this quick movement in money is a double-edged sword. You can also suffer big losses before you know it. Due to this, it’s critically important that you don’t enter too large of a position in any particular issue; despite how confident you are in the trade’s likelihood of going your way. Don’t fall into the trap of, “betting the ranch on a sure thing”. You may have many of those trades go your way, but it’s just a matter of time before one of them hurts you. Trade size is important because regardless of how correct or how extensive your analysis is; even the most successful traders will inevitably end up in a bad stretch of losses. If you’ve managed your trade sizes appropriately, you will live to trade though it until trades are going in your favor. We recommend that you never put more than 5% of your binary trading account into any one option. If you get started funding your account with less than $600, you won’t be able to abide by this rule, because the $30 trade minimum will be more than 5% of your funds. If you simply don’t have $600 to get started with, that’s alright, but just remember that you are putting yourself at a higher risk of clearing out your account if you have a few bad trades in a short period of time.
Use Technical Analysis Correctly
There are several different techniques and theories behind technical analysis. We have found that for the majority of successful traders, it’s not the technique that used, but how it’s used that determines the ultimate success or failure of the trader. If you use a technical analysis game plan that has been tested for accuracy, it’s important that you apply it consistently, and don’t second-guess the data. If you can’t completely trust your strategy in this fashion, you’re better off finding a new method. The next critical point regarding your charts is to use a time interval that is appropriate to the short-term nature of binary options. We generally recommend 3-minute charts for all options that will expire that same day, and hourly charts for any options that expire at the end of the week. As always, back test for accuracy within your strategy, but there’s no reason for using a daily or weekly chart when trading binary options.
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ABOUT THE AUTHOR
Charles Clark has been trading options for nearly 20 years and is now bringing his wealth of experience to the binary options market. To learn more about binary options, or to get started trading, visit: Binary Options Trading