Best Way to Trade Binary Options - Binary Options Trading Strategy

How to Analyze Binary Options?

Many traders coming into binary options dealing ask the same question: how do I analyse the market? There is no definite answer to this question, as every professional has his own way. But nevertheless, there are some recommendations that can help newbies to get the hang of the market. The case in point is the way of analysis and the choice of instruments that a trader will use.

Binary options information
Binary options information

The choice of the expiry time

The expiry time defines when a binary option expires. Essentially, this means how long after an order is placed you will wait for the outcome of the bet. Depending on the type of binary option you have or your broker, and most commonly offered by most platforms are: 60 seconds, 2 minutes, 5 minutes, 15 minutes, 30 minutes, 1,2,3,4 hours, one day, one week, one month. Although there is a much wider variety.

  1. Short term (turbo options) - from 30 seconds to 5 minutes. Dealers who participate in such options and make the maximum number of deals during the trading session are called scalpers, while the trading operation is called scalping.

  2. Options from half an hour to 24 hours (medium term options). This tactic is suitable for positions where you want to reduce the risk of losing. There's a news feed under the option participant's fingertips, which allows you to understand the mood of the market.

  3. Long term options from one day to one year. Participation in such operations requires experience and detailed knowledge of market analysis methodology. You should choose long expiry times if you have a significant deposit, because you need to wait a long time for the forecast results.

So before you analyse any financial instrument, you have to determine for which time period the option will be made. For long term options, fundamental analysis becomes paramount and for short term options technical analysis is more important.

Fundamental analysis

This refers to the methodology of forecasting asset price movements and future trends based on external factors, such as central bank decisions and comments, political and geopolitical events, force majeure situations, etc.

All this information is crucial when building a binary options trading strategy, because it influences the mood of market participants, and the mood of participants is what moves the markets.

One of the main sources of fundamental information used on a daily basis is the economic calendar. It contains all the economic news from various countries and categorises them into low, medium and high importance (or volatility). In this way, the economic calendar provides you with comprehensive and automatically up-to-date information about the state of the world economy. You should be especially attentive to news of high importance, especially for the world's leading economies. This includes unemployment, GDP growth, inflation, interest rate changes, retail sales, consumer sentiment, industrial production growth, etc.

Technical Analysis

Technical analysis is the second most important type of analysis to evaluate an asset's price movement. Technical analysis is based on three postulates:

  1. The price takes into account everything.

  2. If a trend is established, it is likely to continue.

  3. Events repeat themselves and market members react in a similar way under certain economic conditions.

Technical analysis is based solely on historical market data. This is why traders who practice it spend most of their time looking for the formation of various price patterns on a chart and their possible recurrence in the future.

Popular indicators for chart analysis
Popular indicators for chart analysis

The popular type of trading in technical analysis is trading based on technical indicators (Moving Averages (MA), Relative Strength Index (RSI), MACD, Stochastic Oscillator, etc.). In addition, traders always use data charts. A special place is occupied by the candlestick chart, on which a lot of strategies are built.

The advantage of technical analysis is a wide range of tools which allows all traders to make their own tactics for trading. 

Although there are strong differences between the two main methods of analysis, many speculators use a mixed style of trading. They usually base their decisions on basic analysis and determine the best entries based on indicator and chart analysis. They look at major support and resistance lines as well as moving averages and other technical indicators to predict where price is likely to be during an impulse or bounce, or potentially accelerate further if it penetrates the appropriate level.

Trading strategies

A trading strategy is a set of rules that you use to increase the chances of making a profit on your investment. The term is basically a set of rules that you use to trade in the stock market. A binary options trading strategy is generally characterized by the rules it follows, or their advice as to when to initiate a position, how you plan to exit a position and how much money you're willing to put into that position. If you have rules, it is easier for you to stick to them as you go along.

Traders have a choice between trading strategies which are based on technical analysis and tactics which are based on fundamental analysis.

Popular binary options trading methods
Popular binary options trading methods

News trading

To be successful in trading, as well as to gain profits from binary options, it is necessary to have a sufficiently deep understanding of the main economic news. News based trading strategy has a high level of popularity, as most of the time it gives positive results.

Traders must be aware of the main economic indicators which affect the price of the assets. The main indicators are news regarding the inflation and interest rates, market conditions, profitability, losses and so on. To apply this trading method with maximum efficiency, it is necessary to have a special economic calendar, which will display not only the news, but also its predicted value and the current one.

Martingale trading

Martingale trading strategies have also become quite popular in recent years. The classic Martingale method involves doubling your bet in case you make a loss on a trade. However, in the case of binary options, the trade size should be increased not by 2, but by 2.5 times. This is due to the fact that in case of a successful prediction, the profit will not be 100%, but 70-80% of the initial bet. Just this approach will allow not only covering losses of losing trades, but also getting profits.

To use this trading system, many people use 2 indicators:

  • MACD with standard settings:
  • SMA or Moving Average Line.

Scalping

Scalping is one of the most popular trading strategies used by day traders today. Traders follow the price movements of assets in the hope of making a profit in a short period of time. Price fluctuations can lead to extreme volatility and make the market highly unpredictable. On the other hand, if you are a day trader with a proven winning system, you are less likely to make a mistake.

For many, scalping is the best way to trade binary options. This is mainly because of the quicker rate of profit taking and the sheer volume of payoff.

Above all, the profitability of scalping trading strategies depends not only on the level of accuracy of their generated trading signals, but also on the proper risk management. It is very important to calculate the risk for each deal you make: make sure you have the right amount of equity in order to avoid losing your deposit and large losses.

Trend trading

A trend in the trading world (and not just in binary options) is a steady direction of an asset's value moving in one direction (up or down). Depending on the orientation, there are three types of trend: upward, downward and sideways.

The easiest way to identify a trend is to draw a trend line using a line or candlestick chart and use technical indicators.

A trader with little experience will be able to diagnose the trend visually. Many other strategies require a serious theoretical and practical background, while here you will only need to be able to analyse charts a little. And the use of indicators makes it much easier for a trader.

If you do not have time to identify the beginning of a trend, you can do something else, to make a deal after the pullback.

Choose your binary options strategy
Choose your binary options strategy

Every trader has his own style and the best way to trade binary options, and the strategies listed above are just a few ways to develop your unique trading style. It is important for traders to determine their binary options trading strategy as early as possible. To do so, use a demo account and practice different approaches without the risk of losing money.

Best way to trade binary options in Pakistan

It is very important to have the support of a reputable brokerage company in Pakistan so that you understand how binary options are traded. This will allow you to practise and learn, and to get the information you need to trade.

On the platform, you can take advantage of the latest real-time quotes, news, video tutorials, a variety of technical analysis indicators and charts, etc.

Registering on the investing platform
Registering on the investing platform

We also advise you to use a functional mobile application that allows you to trade from anywhere in the world, track your trades and place orders.

Registration takes a few minutes and does not bind you to anything. After registering, you will be able to open an account. The type of account you choose depends on your level of experience and trading objectives.

Demo Account

You can open a Demo account in a brokerage company. If you sign up for a demo account, you will not have to pay any fees, the money you trade with will be virtual. The system will place it on your account. So you can learn how to trade binary options without any risk.

You will be able to familiarize yourself with the platform, learn the trading platform and gain experience and knowledge.  Here you can decide which product you want, see how it works and if it's suitable for you. Once you are comfortable enough, you can then open a live account and start trading.

Real trading account

Select the type of account for work
Select the type of account for work

Once you have registered a brokerage account, you will need to make a deposit and you can start trading, now you are a fully fledged trader. Trading can be done online with a laptop, mobile phone connected to the internet. You will have a personal account available at any time of the day or night. There you'll be able to track the history of your trades, control your profits and change your strategy when analysing.

As you can see, trading can be very profitable, as long as you follow important trends in time and know how to find your entry points. You may choose the simplest strategies, later on most of the traders usually switch to more sophisticated tools or invent their own, but many of them do not forget which strategy was the beginning of their success and they keep on trading with it.

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