Follow The Trend Binary Options Trading Strategy

March 3, 2014 8:05 am

forex_vs_binary_optionsFollow-the-trend is one of the most popular and widely used strategies you can use in 60-second binaries trading. It’s a strategy with a relatively high success rate and it’s really easy to execute. Of course, the mandatory prerequisite knowledge has to be there if you hope to realize this strategy to its full potential. You will need to read charts and spot trends, so if you don’t know how to do that, we recommend you learn. We have a very comprehensive guide that can be of great help to you if you’re new to the area of technical analysis. We recommend reading it.

Follow-the-trend

What is this strategy and how do you use it? In short, the strategy requires you to look at charts and recognize trends. Whether they are uptrend or downtrend doesn’t matter, but you need to be able to spot them. Once you’ve established that there is a trend, you make a trade in the same direction as the trend. If it’s an uptrend, you go for a call option, and for a downtrend – you go for a put option. Statistically speaking there is a great chance that the trend will continue and you will make a profit. This is how the strategy works in general, but there are several very important aspects you need to be familiar with. For example, no matter how strong a trend is, there is always the possibility of pullbacks.

A pullback is a temporary change in the direction of the price. It doesn’t signal a new trend, since the price continues the trend after the pullback, but this phenomenon can cause you to lose some of the trades. You need to be responsible enough with your money and not allow yourself to fall into lose a significant sum of money because you were so sure in the trend. Establish a base investment you make every time and don’t increase it. This way even if you lose a few trades while following the trend, you won’t fall into a financial trap – your profit will more than compensate for the losses if you follow this rule.
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How do you enter the trade?

Open a chart of the market you’re interested in. It’s important not to trade when there are big market fluctuations. If there are, then spotting a trend will be difficult, and even if you do, it’s not going to be safe to trade. However, if the market seems stable, you can enter a trade with no problem. Look at the chart and when you see that the price has moved in the same direction two or three times, then this may signal the emergence of a trend. This is where you will have to risk. If the market conditions are good for you, then enter the trade. For an uptrend, buy a call option. For a downtrend, buy a put option. Wait and see what happens.
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If you win, just keep investing in the same price movement until a loss occurs. In case you lose, wait for a bit and check if it’s a temporary pullback or a trend reversal. If it’s a trend reversal, simply follow it. If it’s just a pullback, then continue with the first trend. If you lose a few times in a row, stop trading. This means that the market is not stable enough to employ this strategy. Keep in mind that trends rarely go for more than 5-10 minutes. This means that you will need to adapt to the changing conditions quickly.

A few things you need to keep in mind

Since you’re trading so quickly, and in most cases for rather small sums, it may seem like you’re not losing much in a few unsuccessful trades, but you may very well be. For example, losing three consecutive trades for USD 50 each is a loss of USD 150. It may not sound like much, but this is a loss in less than three minutes. In fact, it may be on just a minute if you’re using multiple brokers at the same time. Responsible money management is needed if you don’t want to risk substantial losses. Always apply caution – there is no strategy that is 100% safe (no matter what the Internet tells you). We wish you good luck!

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