Using a Strategy for Trading Binary Options

February 7, 2014 4:55 pm

strategyThe main idea behind binary options trading is for you to consistently make money. Otherwise there is no point in entertaining the illusion that you’re doing something productive with your finances. Using reliable systems and complicated methods in trading binary options can help you in your quest of accumulating capital. Note that we are using the verb “help” and we are steering clear of making any promises. We don’t feel comfortable making impossible claims and we don’t want to get your hopes too high – even the best strategies fail sometimes. Adaptation is the name of the game in many types of trading but especially with binary options.

Unless you have a set of viable strategies, impeccable analytical skills and quick mental reflexes, you might as well gamble your money away. We are here to prevent that and to the way to do it is by explaining why strategies are so important. If you don’t use a tactic and if you don’t work with data, then you are counting on your, essentially betting your money and waiting for a return purely based on possibly favorable circumstances. This is wrong and will only get you losses.

If you follow trends, work with information and follow the money, you are more or less prepared and know what to expect. At any given moment you need to know what to do, whether to trade or not and even what to trade because in some cases one trade would be more beneficial than another. You need to keep many factors under consideration when you’re making decisions and this is where strategies and careful planning come in handy.

You will know what to do

WonderOne of the problems with the Information Age is that we are bombarded with all sorts of content and data, making it insanely difficult to filter out the bad info from the good one. However, having a strategy and following trends will allow you to be at the cutting edge of what’s going on and you will always know if something is a good piece of information or not. For example, the dollar is up against the yen in the beginning of the day but is this a trend the currencies are following or is it a random fluctuation? You need to know this is if you’re to buy call options for the USD/JPY. If you’ve been following the trends and know that this is a random fluctuation, then you would know that it’s a bad idea to buy a call option. Or maybe you know the reason behind the change – the more you know and the better prepared you are, the better.

Another example. Apple are releasing a new product in the end of the week. Will their stocks go up? Should you buy call options expecting the price of the stocks to be higher at the end of the week than it is now? You have a look at the history of the last few releases and you see that at every release their stocks were higher than the values they held a few days before the release. You deduce that there is a pretty big possibility that the same phenomenon will occur this time, as well, and you’re prepared to take the risk because you’re armed with data. Even though it’s not 100% sure, you can almost taste the sweet jolt of profit. You are confident because you have data backing you up and you have a good strategy that will almost surely help you make some money. Having a good strategy at any time and knowing what to do is invaluable at any point.

You will avoid over trading

up-down_.arrowsYou mustn’t be too quick in your decision making, though. You almost always need a contingency because there is no such thing as a sure deal – anything can happen and it’s of utmost importance for you to be prepared. Patience is one of the most precious, yet uncommon virtues in trading binary options. Some people lose a lot of money with small investments just because of the sheer volume of trades they make There are folks out there who bet every minute (we use the verb “bet” quite deliberately in this context because this is exactly what they’re doing) and don’t have a strategy whatsoever. We don’t really get that logic – betting one’s own money based on luck and nothing more. Even gamblers have strategies in some games.

Back the point. It’s very important to be patient. A good trader chooses his trades very carefully. You want to be involved in trades with a high success rate and a generous payout for you. If you think you’re a good trader just because you’re “on fire” and making several bets at a time without thinking about what you’re doing, then we’re sorry to disappoint, but you’re not. This is not a game. You don’t simply gamble away your winnings. You plan, you theorize, you research and then maybe, just maybe, when the time is right and certain conditions are met – you invest. This is how good traders do it. The discipline and self-control you get from a trade are simply invaluable and trust us when say this – will save you a lot of money.

You will keep your emotions out of trading

scaredFear and greed are among your worst enemies when it comes to trading. We strongly disagree with Gordon Gekko that greed is good. When you get greedy, you start making lots of mistakes. You start investing too much in questionable trades, open several trades at a time, don’t prepare well, don’t do your research – basically, you start gambling. If you manage to win somehow, it gets even worse, because the moment you make USD 500 from an unsound deal (something that almost never happens unless you get really lucky), this is when you start taking even bigger risks without thinking about the consequences. This is how significant financial losses are sustained.

Fear, on the other hand, is also your enemy. It might cause you invest too little in a good trade, or even let a good trade pass altogether. In other words, both conditions will stop you from making money. Having a good strategy is invaluable in this case, however, because it helps you keep your emotions intact. You will have enough confidence to make good bets and you won’t overestimate your chances of making a profit due to some misguided belief that today is your lucky day. Even when things are going all that well, you can still count on having a sound strategy to take you out of a tough spot – after all, there are ups and downs, and you are prepared for both.

You will be able to measure your performance

money_manThere are a few things you should definitely consider about yourself. One, you’re biased. Don’t be ashamed, we are. It’s a part of the human condition. We may not want to be biased, but we are. Our biases cause us to misinterpret some situations, miss errors we might have made and stun our overall improvement. Two, as a human being, you are held back by lots of defense mechanisms in your psyche. One again, it’s normal and it’s what keeps you functioning through the day. However, it can sometimes hurt you, as well. Now, how do these two things transition into the binary options field. Being biased isn’t necessarily a bad thing – it helps you go through the day without thinking about every little thing. However, when you’re trading, when you’re making investments, you need to think about every little thing, so being biased doesn’t help. Combine that with your defenses and you can easily see why the combination is devastating to your finances. If you blame your failed trades on circumstances, while maintaining the belief that when you win it’s because of your infallible instincts, you are never going to improve. You will never see your mistakes and you will be destined to repeat them.

Having a strategy changes all that. It will allow you to monitor your progress more objectively. You won’t be working with biases anymore. Your defenses will become irrelevant. You will be working with numbers and tendencies. If you end up losing, you can’t just dismiss your mistakes, and do you know what? You shouldn’t dismiss them because that’s the only way you can improve. If you don’t learn from your mistakes, you will end up losing a lot and we can’t allow that. We also can’t allow you to count on blind luck because this is obviously irresponsible from a financial standpoint. The good news is that once you get the negatives out of the equation, learning from your mistakes becomes much easier and a lot more beneficial.

You will be able to learn from experience

Teacher-iconLearning from experience directly correlates to the previous point we made. You can see how beneficial strategies are all around the spectrum, right? By monitoring your performance and seeing what works and what doesn’t, identifying mistakes and correcting them, as well as devising different methods to adapt to tough situations, you will drastically improve. You will know which strategy works in what scenario, you will know what to look for in a trade and you will learn from experience. You will have a good foundation to build up on and you won’t be disappointed in the results. You will pass through many highs and lows before you get to your destination, but no journey worth having is easy.

You will focus on making money

money reservesOne of the biggest problems of people who don’t use strategies is the fact that everything they do is somewhat random. It starts to feel like gambling and at one point they, themselves start treating their trades as wagers instead of investments. They go for the 60 second trades so they can see quick results, like playing Slots in casino. They lose focus and they soon start losing money.

When you employ a strategy, you start seeing yourself as a professional, or at least as someone who is in it for the money. It’s not about being fun or about being quick – you will take your time in order to gain maximum profits because that’s what you want and that’s why you started trading binary options. You will be focused and you will keep your eye on the target. The idea is to increase your balance and that’s exactly what you’re going to do. Trading is a business and that’s exactly how you’re going to treat it. Anything else is unacceptable.

Trading systematically versus trading the news

Trading systematically can’t guarantee you success in every trade. However, nothing really can so you should take what you can get. The difference between trading systematically and trading the news is that in one case we are talking about a long line of tendencies you’ve studies, statistics you’ve looked at, strategies you’ve tried and more, and it’s a gradual process with a some level of predictability; while the other is caused by some unforeseen or surprising news at the moment that will probably cause market fluctuations of a large (in most cases), but frequently unpredictable scale. So which one is better?

In our opinion, even though it’s possible to win from a news-based trade (the news can vary – it can be about company mergers, changes implemented by the central bank, release of new statistics, release of corporate earnings and more), unless you are rather familiar with the market niche you want to trade at, with the underlying asset, or simply have inside information, then in most cases trading based on the news is no more than a gamble. Trading systematically gives you a much better chance at profiting in most cases because it’s based a more steady data stream and you (supposedly) know what you’re doing. Thus, the chance of winning is much greater simply because you’re more well prepared. Finally, systematic trading allows you a level of comfort and knowledge you can rarely achieve when it comes to the news.

As you can see, systematic trading gives you many benefits and solves some of the most common problems with trading binary options. If you’re still not sure if you should utilize it, then we will spell it out for you – yes, yes you should.

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