Trading tips and strategies binary options
Binary Options Trading is very simple to understand because there are only two possible outcomes that an investor needs to watch out for. Also it is an ‘all or nothing’ kind of proposition where an investor will earn a fixed return or lose the entire investment amount. The basic plot of binary options trading is the ability to predict the price movement of an underlying asset. Based on whether the price is going to go up or come down an investor chooses to place a call or put option. Since placing a trade on binary options is so simple these tips from Forexins would be very handy while placing actual trades on different assets.
However even though binary options is simple to understand the risk prospects are high and if proper strategies are not applied an investor might end up losing more than what has been earned. At Forexins we aim to educate the investor and help him earn good returns with minimum risks.
The main aim for any investor is to earn desired returns with minimum risks. So the first step for new as well as experienced investors is to minimize the risk which can easily be done with a basic understanding of the market and some easy tips & strategies. Also certain basic principles that apply to other forms of investment apply for binary options as well. Forexins recommends the below listed best practices to develop a disciplined approach towards binary options trading
Never put all your eggs in one basket, which in this context means never invest the entire capital on a particular asset or a particular type of option. Instead diversify the investments to help hedge the trades and make up for any losses.
Always research about the market and asset on which an investment needs to be made before actually placing a trade.
The optimal bet amount as per Kelly’s criterion should not be more than 5%-6% of the total bankroll capital.
Forexins provides the best trading strategies which will be of help to both new and experienced investors. These strategies help investors take informed decisions while placing a trade.
Technical Analysis
Fundamental Analysis
Straddle or Hedging Strategy
Technical Analysis
Technical analysis is a very popular form of analyzing and predicting the price movements of assets in a market. Technical analysis is basically the study of charts and historical trading activity to analyze the market and place predictions. This analysis works on the principle that past market trends repeat itself after fixed time periods and can be used to accurately forecast future market trends.
Technical Analysis is guided by 3 main principles which form the basis of future predictions
Trends in market price movements
The market behavior is an accurate reflection of the available information
All past patterns indicating bearish or bullish market patterns are accurate indicators for predicting future market values
Forexins gives a very simple definition for technical analysis as a set of graphical tools and mathematical models to help forecast the future asset value in an existing market.
Technical analysis is an ideal starting point for new investors as it does not require complex data and market knowledge, but only historical data/charts of the asset price movement. Apart from this basic advantage it also has an advantage of being applicable to any asset class and any time frame. It also helps an investor limit the focus on trends on markets rather than several other parameters which are difficult to be followed on a regular basis.
This overview of technical analysis provided by Forexins can be the ideal starting point to analyze trends and participate in binary options trading.
Fundamental Analysis
Fundamental analysis works on a slightly different plot as compared to technical analysis. Technical analysis is done with an assumption that the asset prices are accurately defined by the market and previous trends in the market can accurately be used to forecast future price movements. However in fundamental analysis it is believed that apart from the market, several macroeconomic and microeconomic factors contribute in deciding the asset pricing. The main parameters that would affect future asset pricing are demand and supply. Forexins recommends a combination of technical and fundamental analysis as one of the best binary options trading strategy.
Based on the underlying assets in binary options trading certain factors which are relevant to the respective asset classes are company earnings, P/E ratio for stocks & market indices, interest rates & interbank exchange rates for currencies and geopolitical market developments for commodities.
As such fundamental analysis involves working with a lot of data and information and hence is a more accurate way of predicting future market movements than technical analysis. For an investor who wants to do an accurate fundamental analysis, the first step is to be updated with all the latest market happenings and also have access to certain important news in advance. This helps investors place trades even before the news is released and allows them take advantage of the market reaction once the news is out.
The most common parameters to be considered during fundamental analysis are listed below. This list provided by Forexins is not necessarily exhaustive but is definitely a good starting point to understand the nuances of fundamental analysis in binary options trading.
Economic performance - The economy of a particular country is a very useful factor for fundamental analysis to evaluate and place trades. If a country is economically strong and doing well, then naturally it will have increased exports, better tax revenues and low inflation rates. This will automatically transfer to good performance of companies & industries in that particular country and also a strong currency. Thus with all this information an investor can definitely place a trade predicting upward asset price movement. On the other hand for a country which is facing economic problems the situation would be opposite of what is mentioned above. However even in a certain economic condition the effect on different asset classes can be different. For eg in an economy with high inflation, the most common step is to increase interest rates. This increase in turn can impact the currency market in a positive manner as the particular currency becomes attractive in the global scenario.At Forexins we would recommend investors to be constantly updated with all the information on the latest economic developments across the globe to help them make informed decisions while placing trades.
Industry insights - Along with the economic factors it is very important to know the industries affecting the underlying assets pricing directly or indirectly. For eg if there is a performance dip in the manufacturing industry then this would directly influence the share prices of all companies in this industry. Thus having such insights is a useful tool to predict the price movements and place trades. Forexins advises investors to be sure about the sources of information and only rely on authentic industry news from reliable sources.
Other Macroeconomic indicators - On a frequent basis the governments of various countries publish certain statistics which can again be a useful guide to predict its impact on the price movement and then place a trade. Certain important macroeconomic factors are Unemployment rate in a country, Gross Domestic Product (GDP), the average stock market returns over a period of time etc. There are several other factors that can impact the price movements of assets in volatile markets. Forexins advises investors to consider assets on a case to case basis and then choose which factor might have maximum impact on the price movement.
Straddle or Hedging Strategy
This is a strategy which works best for investors in highly volatile markets or markets which are expecting a major change leading to an impact on the asset price movement. It works on the classic defensive strategy of placing both a call & put trade on a particular asset. This ensures that whatever is the final outcome at expiry an investor is always ‘in the money’ for at least one of the trading options. An investor who wants to use this strategy would observe the price movement of an asset. If an asset price is increasing, but is expected to go down then an investor can place a ‘PUT’ trade to take advantage once the price starts falling. As soon as the price starts declining, the investor can place a ‘CALL’ trade anticipating the price to go up. This can also be practiced in the reverse scenario by placing a ‘CALL’ trade on low priced assets, expected to go up and a ‘PUT’ trade on rising asset prices. This strategy is highly regarded by investors and Forexins recommends this as an easy way of ensuring that investors do not lose their complete investment in dynamic and volatile markets.