As binary options trading becomes more and more popular, it’s no wonder that people are looking for winning binary trading strategies. Let me show you some basic binary options strategies for beginners:
What Are Binary Options Strategies?
The dictionary meaning of strategy is “a plan of action or policy designed to achieve a major or overall aim.” That is as succinct as it gets.
As you know, binary options follow a simple set of actions. Choose an asset, make a prediction, choose your expiry time, and voila you can place a trade.
However, how do you know which asset to choose, since assets behave differently, some being more volatile than others are? How do you know what prediction to make, CALL, or PUT? How are you fairly certain that your prediction will play out exactly in 5 minutes and not 30 minutes?
This is where a binary option strategy comes in. It takes the random, roll-a-die, luck-centric aspect out of your trading. To replace that, it offers you with a definite set of assets, signals, thought process, rules, and ways to trade binary options.
Why Are Binary Options Strategies Important?
The major reason why strategies are important in binary options is ‘consistent profits.’ If you want to stay in the game for a long time and make tangible bucks from trading, then consistency is very important.
Trading binary options without a strategy gives you a 50:50 chance of success every time. In reality, eventually you are going to lose all of your money. With a strategy, you tilt that scale to anywhere between 70:30 and 90:10.
Thus, even though you make losses (everyone does make a loss at some point), you would still be able to make a killing because you will consistently make more profits than losses.
The Best Binary Options Strategies for Beginners
The accepted fact across the industry is that the best strategy for Trader A is not the best strategy for Trader B. A number of factors that come into play: The premise, the number of indicators to necessary for increased reliability, the complexity, assets supported, average duration et cetera.
The more experienced traders get to be more picky and more resilient about what makes the best binary options strategies, mainly because of their experience and exposure.
For beginners still learning the rope, emphasis is on strategies that are uncomplicated and make sustainable profits. Two factors determine the success of a strategy—percentage of profitable trades and ROI (return on investment).
To explain it clearly, let us use examples. When you use no strategy, trading is akin to a coin flip. Your chances of winning is 50%. In addition, when you win, you get twice the amount you invested. Therefore, the success for a coin flip strategy is 50% (winning percentage) x 2 (ROI) =100%. That is, applying this strategy for 100 trades will yield exactly the same money you started with.
Now, if you found a strategy that had increased chances of winning at 60% for the same coin flip with ROI of 2. The success rate is 120%. Meaning that in spite of your losses, you would still make 20% on top of your capital, assuming you trade with the same amount on every trade.
The best strategies have a success rate of above 70%. The best binary options brokers offer an average payout or ROI of 80% (1.8). Which means that if you invest the same amount of money on each trade, you will make 26% (70% x 1.8 = 126%) on top of your capital.
Therefore, the best binary option strategies coupled with smart money management skills will make you profitable in the long run even when you factor the fallibility of your predictions.
List of the Best Beginners Binary Options Strategies
- Long Term Binary Options Strategy
This strategy is as simple as it gets in binary trading. You have zero need for technical analysis (aka the use of indicators or having to read funny-looking charts).
All you have to use is fundamental analysis, which is the fancy term for news and information available to the public to predict the future value of an asset.
The ‘Long Term’ in the name of the strategy stems from the relatively longer expiry time that is a must for profitability using this strategy.
The typical expiry times for binary options extend from only a few tens of seconds to around two hours. Expiry times necessary for this strategy extend from a few hours to a few weeks.
How It Works: The main idea behind the strategy is to source for major events that would influence the movement of an asset. These can vary from a product launch to a new discovery of deposits to a terrific annual revenue report to a shift in interest rate policy by a central bank.
The possibilities are endless but the effect is the same. For example, the iPhone is the highest selling smartphone in history. Every new launch virtually signifies an accompanying rise in stock value.
To apply this strategy, you can wait for around two weeks before the event, then buy a binary options contract that will expire on the day of the iPhone launch. It is a sure way to make a profit.
To prove that this strategy rocks, here is another application. Google has been on an upward march over the years with eye-popping numbers gracing their revenue reports year after year.
Now, you have to find out the date on which Google will publish their annual revenue report. Then, do a quick search to find out what analysts and industry predictions are.
With this information, you make your prediction. If analysts expect better performance, you predict an increase of stock value on the date when Google publish their annual revenue report and vice versa.
Understandably, these events happen only a few times per year for each company. However, there are plenty other companies. Microsoft, Amazon, HP, Samsung. You do not also have to restrict yourself to the tech industry, or to stocks for that matter.
Currencies also fluctuate with respect to certain high-profile news and announcements like GDP figures for the USD et cetera.
- Beginner Technical Binary Options Winning Strategy
Like the majority of binary strategies, this strategy uses technical analysis. Therefore, a fully featured chart and indicators are necessary.
- 13 Exponential Moving Average (EMA)
- 20 Simple Moving Average (SMA)
- 26 Exponential Moving Average (EMA)
- Bollinger Band
A single line represents each the first three indicators. However, two lines represent the Bollinger band. Typically, all three lines of the first three indicators are between the two lines (upper boundary and lower boundary) of the Bollinger band.
How It Works
By using this strategy, you have to wait for a signal. The relative movement and position of these four indicators generate the signal. These are the movements/positions to watch out for:
- The 13 EMA crosses the 20 SMA
- The 26 EMA crosses the 20 SMA, AFTER WHICH it crosses the 13 EMA
If these conditions are met, then the value of asset will have an 80% to 90% chance of going outside one of the Bollinger band boundaries.
To tell which of the Bollinger boundaries the asset value will cross, look at the movement of the first three indicators (13 EMA, 20 SMA, and 26 EMA). If they move up, the asset will break the upper boundary and vice versa.
Applying the Binary Options Strategy for Beginners
- Exchange rate of EUR/USD pair is at 1.35 now
- The Bollinger band upper boundary is at 1.37
- The Bollinger band lower boundary is at 1.33
You then notice that:
- 13 EMA has crossed the 20 SMA
- 26 EMA crossed the 20 SMA and is becoming apparent that it will cross the 13 EMA soon
- All of these three indicators are moving downwards
Going by how the strategy works, you expect the value of EUR/USD to fall below the lower boundary of the Bollinger band (below 1.33).
A fact to hold in high regards is that all three lines will eventually return to between the two boundaries of the Bollinger band. All crosses are temporal.
With this information, what will your prediction be?
Buy a one-touch option or boundary option based on a prediction that the value of EUR/USD will hit the lower boundary of the Bollinger band—1.33 within 15 to 30 minutes.
This prediction is a high paying one, but it carries an extra element of risk, because you do not know the exact time when the touch will occur. The safer prediction is…
To buy a basic high/low option with the prediction that in 15 to 30 minutes time, the value of the EUR/USD will be BELOW the current exchange rate—1.35.
This option is safer because the drop in value will most likely occur. And by the nature of the basic option type, it is irrelevant if the value of the asset will reach a specific value. The only requirement is that the value decreases.