Binary Options Strategies


Binary options strategies are routinely used to increase profits while decreasing risks. Basic strategies can be used by all traders. Additionally, over time, traders may start to take advantage of advanced strategies. A solid strategy can easily be applied to binary options trading activity. The following strategies have been proven to be effective when used correctly.

Money Management

The money management strategy does not apply to the actual asset price prediction process, but instead focuses on managing the money within the broker account. This binary options strategy is most often used with a 10% investment limit. This means that no investment will ever be larger than 10% of the total amount of funds within the broker account.

The main goal here is to ensure that losses are kept to a minimum and do not completely deplete the funds within the trading account. Alternately, as profits grow so do the investment amounts, but not percentage. By continuing to execute trades that end in the money, a snowball effect of sorts is realized, meaning that profits continue to grow steadily over time.

Fundamental Analysis Strategy

The fundamental analysis binary options strategy relies heavily on the traders ability to gauge market sentiment. For example, economic conditions within each country could easily create bullish or bearish market conditions. Either of these conditions can be used to trade binary options for profit.

The fundamental analysis strategy does not require any special tools, but will require having a solid source of world and market news. By watching for certain events, such as a natural disaster, the trader can quickly pinpoint which assets will be impacted and then use this information to execute a trade. This information will also point to pivots in the asset price, which can allow for quick profits.

When using this strategy, the trader does need to consider the financial numbers related to past asset price performance. However, the greater focus will be placed on market conditions as they relate to current events. The fundamental analysis strategy is not only simple, but also can be used with any underlying asset. There are no limits, as each asset price will be linked to external factors in some form.

Technical Analysis Strategy 

Technical analysis involves the studying of past asset performance in order to determine how the asset may perform in the future. There will be plenty of tools to use when implementing the technical analysis strategy. Live financial data, charts and graphs are almost always provided from the binary options broker. In most cases, they are built directly into the trading platform.

Those who are using these tools for the first time may find that reading into the information provided presents a bit of a challenge. However, the learning curve when using these tools is actually quite minimal. Asset price trends, which are often used to trade successfully, are easy to locate within charts and graphs. These tools are often customizable, which will allow the binary options trader to go as far back in time as necessary.

Past asset performance is a strong indicator and can quickly tell the trader which trade type, asset, and expiry time period to select. The technical analysis strategy make require more time to master than the fundamental analysis strategy. However, these are skills that need to be mastered regardless. Additionally, this strategy tends to have a high success rate.

Boundary Strategy

The boundary binary options strategy is a favorite of many traders. This strategy really only requires minimal analysis, with the goal being to determine the highest and lowest historical realized asset prices. These high and low price points then become a solid “boundary” guide, as the asset price is likely to remain between these two numbers.

Boundary trades will begin with both a high and low price point that the selected asset price must remain between during the time the trade is live. Should the prediction price exceed these limits at any point while the trade is live, the trade will end out of the money. Since there are different gaps offered between the boundaries, risks can either be reduced or increased. A reduction in risk will come if the price gap is wide. However, lower profit percentages will also be associated with less risk.

Technical analysis is key when using a boundary binary options strategy. This does not mean that fundamental analysis should be completely ignored. Once the numbers have been studied, traders are highly advised to check recent market news to ensure that no minor or major events have taken place in relation to the selected underlying asset. If they have, the impact that these will have on future asset price must be considered.

Knock-On Strategy

The knock-on strategy was created with a consideration of how the price of one underlying asset can impact the price of an entirely different asset. This binary options strategy can take some time to master, but is valuable in that it can be used to earn substantial profits. The first step will be to learn which assets have a close enough relation that the action of one will have a direct effect on the other.

Connections are not hard to establish. For example, should an oil shortage take place, both the oil commodity price and the stock price of BP could move in conjunction. In order to quickly establish these connections, spend some time examining the asset index provided by your binary options broker. Certain pairings should quickly stand out and once this happens the pair can be monitored to see how the prices move when one or the other is impacted by certain events.

The knock-on strategy requires both fundamental and technical analysis. Since both of these should always be used in predicting asset prices anyway, this should be no problem. Dual analysis is needed, since each asset should be studied. The greatest benefit of this binary options strategy is that it can produce the information needed to execute not just one, but two in the money trades at the same time.

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