Here I am again with the second part of the tips for successful Binary Option Trading…
If you haven’t read the first part of the tips for Binary Option Trading, then you can access it in the link below…
Ok, without wasting more time let’s get started with the tip number 2…
Tip # 2 – Follow your own system
As noted in Part 1, there are two main elements to a successful binary option trader’s methodology:
Defining a buy signal (buy a call option) or sell signal (buy a put option) and deciding how much to spend on the given option.
Following these two elements will prove to be of great significance for both your account and your trading confidence, so watch out for the following:
Follow your entry and exit signals
Even the best trading system is useless if you don’t stick with it.
If the way you analyze a price chart or evaluate a potential trade setup differs from how you did it a week or month ago, then you have either not fully built your methodology or you neglect to apply it consistently.
If you aren’t completely confident in your system, don’t be afraid of experimenting with a different one.
Do this methodically and patiently, changing just one indicator at a time while noting the results.
Follow your money management rules
A given percent loss requires a bigger percent gain just to recover the loss.
Losses hurt you more than gains help you.
For example, let’s say you started the year with $10,000 and lost 20% ($2,000) throughout the year.
You now have $8,000 left.
To recoup the $2,000 that you lost using your remaining $8,000, you have to make 25% profit on that $8,000.
However, if you had gained 10% over the course of the first year ($1,000), in order to earn $2,000 you only need a 9.1% return on your now $11,000 to add another $1,000 to your account.
Now, which of the two possibilities is more likely?
A trader who earns 10% a year and then earns 9%, or a trader that lost 20% a year and suddenly earns 25% a year?
Tip #3 – Don’t pick tops & bottoms
One of the most common mistakes that can occur in binary options trading is that traders buy put options during an up-trend because they believe price can’t go any higher, or buy call options even when a downtrend is still in effect because price “can’t” go any lower.
The smartest traders always let the market price action prove a top or bottom has been formed before taking an active position.
They do so by waiting until their chosen indicators confirm a trend reversal before acting on that move.
For example, they don’t buy call options just because a downtrend has stalled at a strong support.
They wait for a decisive bounce higher and confirmation from their other indicators first.
Trying to pinpoint tops and bottoms is too risky and the possibility of taking a loss far outweighs the potential gain.
By patiently waiting for a definite high or low to appear, even at a cost of missing some of the move, you’ll increase your odds of being profitable over the long haul while reducing your risk and stress.
Tip #4 – Do your homework
Binary option trading is all about forecasting the trend correctly for the expiration period that you’re trading.
However, reliably forecasting the trend for a given time frame is far from simple.
Given the overwhelming influence of unpredictable short term money flows on intraday trends, traders of hourly and daily expirations need excellent technical analyzing skills.
These skills are necessary so that they can identify support and resistance levels and only enter trades very close to support and far from likely resistance in their chosen expiration period.
Weekly and monthly trends are considered to be easier to predict because they’re more influenced by publicly available technical and fundamental data.
But, forecasting these trends correctly is still challenging.
Moreover, these longer term trends are more influenced by fundamental data like trends in interest rates, jobs, consumer spending, speculation on government intervention via stimulus programs, etc.
The point is, you need to have solid technical analysis skills to trade intraday trends, and both technical and fundamental analysis skills to forecast trends for the weekly and monthly expirations.
True, given the complexity of fundamental analysis, most traders will choose to find and follow a few top analysts rather than doing their own analysis of primary sources like central bank data and monthly employment reports, but that too takes considerable time and effort to do well.
Tip #5 – Avoid trading too many markets at once
If you spread yourself too thin by trying to trade too many kinds of asses at once, you might not get the information and instincts that you need in order to make good decisions.
Most experts would advise limiting your trading to one or two markets.
If you do choose to trade numerous markets at once, it’s best to trade groups that move in relation to one another.
For example, US stock indices tend to move in the same direction and the same can be said for European stock indices.
However, not all Asian indices move together.
Well this sums up the tips about binary options trading, hope this can help you improve your skills and most important…
Your Profits in your binary trades!
That’s all for now, I hope to get some inside goodies soon about binary options trading.
Happy Trading and enjoy….