Different Binary Options Trading Strategies

In a previous article, Trading Center presented readers with the basics of binary options trading. The article touched on the technical and general rules for trading binary options. Now, let's delve a bit deeper into binary options by studying different trading strategies that you can use for your sessions.

The Basic Options Strategy

This style is one of the most utilized strategies by binary options traders and for good reason. With basic options strategy, traders are protecting themselves from incurring a lot of losses. This strategy is about picking an underlying asset or a Forex pair and then waiting for any market movements of the strike price. If the prices are heading up, investors place a call option.

Let's use the USD/EUR currency pair for this example. Say that this pair is predicted to hit 1:3000, and you get $100 if you're right. You place the call option, which will expire in an hour. The payout is 70% if you win and 30% if you lose. Say in the first 30 minutes, the price of the USD/EUR pairing hits 1:3016. This is good so you buy a put option for the same pairing at 1:3016 expiring in the next 30 minutes. In this case, there are two possible outcomes when your binary options contract expires.

First outcome: your one hour call option wins, and the 15 minutes put option will lose. If this happens, you'll earn $170 from your 70% call earnings, and a 15% refund from the put option that lost. Of course, the reverse can always happen, meaning you only win 30% of your capital and a 15% rebate from your call option.

Second outcome: this is the best scenario because both your call and put options were predicted correctly. You will get $340 in total ($170 x 2).

It's impossible to lose in both scenarios so you're only risking the loss of $15 during your sessions.

The Martingale Strategy

The Martingale strategy is based on the idea that for each losing session, a trader must increase the stake in the next trade in order to offset the losses from the previous trade, and gain some profit. This is simply doubling up your capital with each losing stake until a binary option session has been won. For some traders, this is considered a profitable and effective way of eliminating losses because binary options are considered as an "all or nothing." type of trading.

As you may have figured out already, the Martingale strategy is extremely risky. Nadex states that this trading strategy may look appealing, but cost averaging can be extremely dangerous as traders are exposing themselves to enormous losses by adding too much to a losing trade. Take extra heed when using this strategy as it can wipe out your savings for a week in just a couple of hours.

Conservative Long-term Strategy

This strategy is for those who would like to build up their capital slowly and steadily. The point of a Conservative Long-Term Strategy is to wait for the perfect Fibonacci setup. Let's take a look at the chart below and use it as an example.

On the chart, you will see that the price of the currency pair has been on a zigzag for a while. Using the Fibonacci method, draw a line from Points 1 to 2 for a downtrend and also for an uptrend. In this case, the target projection level is at 161.8

The key here is to be patient until 2 requirements line up:

- The price hits the Fibonacci level of prediction at 161.8.
- The price is inside or outside the red levels.

There are plenty of other strategies that you can use for binary options but these three should point you in the right direction for your sessions.

■ TradingCenter Blog (2018)

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