Best way to trade binary options
How to Analyze Binary Options?
Binary options as such - aka all-or-nothing options - appeared in 2008. Binary options are linked to a wide variety of prices, aka assets. They are currency pairs in forex, stocks on stock exchanges, various stock indices and many more. All a binary option does is allow you to make money from price predictions on these assets. That is, you place a bet on where the price of the asset will be in 10 minutes. Above or below the current price. If you have made the right choice, you get your stake and profit, usually from 60% to 85%. The best binary options trading strategy will certainly include a good and quality analysis.
Binary option analysis is the analysis of the underlying asset under the terms of a binary option.
First of all, to do an analysis, you need to understand for how long you want to bet. The expiry time of a binary option is the time from when you buy the contract until the trade is automatically completed.
All binary options can be divided into groups according to time to expiry:
- Short term options (they are often called turbo options, they usually have 30 sec, 60 sec, 120 sec, 180 sec, 300 sec).
- Intra Day Binary Options (Typically ranging in length from 5 minutes to 1 day).
- Long term contracts (they are options, with duration from 1 day and more).
Each kind of binary option requires a different trading method, as a lot depends on the duration of the trade. Trading strategies, designed for short term trades for example, will be helpless when dealing with longer term contracts.
You may go by the following scheme, which shows how the strategy is dependent on the expiry time. Martingale, binary scalping - used in turbo options trading. Trading by news, trading by trend - used when working with intraday contracts. Trend-following trading, trading based on fundamental analysis - when dealing with long term options.
Fundamental analysis in binary options is based on different events and economic factors, supply and demand analysis, politics and news. It is mainly a long-term analysis, as important events do not last for 15 minutes and fundamental problems are not solved quickly either.
Mainly short- and medium-term speculators are interested in important news events, which are published in the so-called economic calendar. They are published almost daily and affect the price of currency pairs and even stocks.
Thanks to the fundamental analysis, traders prevent loss-making trades and minimize risks.
Technical analysis of binary options is based only on the price chart of the asset, on the history of its past price movements. Thus, it is possible to see the history of prices and trends on the chart. Through years of studying the charts, analysts have begun to find common patterns. Because of this, technical analysis has become really important and can affect the price of an asset.
When dealing with binary options, technical analysis plays a key role, as a trader needs to determine the trend direction in the short term, in order to make a profit.
Using this type of analysis, a trader determines the future direction of the asset thanks to a chart (line, bar or candlestick chart), support and resistance levels, indicators, etc.
The most informative bar chart is the candlestick chart, which not only contains the curve with closing prices of the previous periods, like the line chart, but also shows the price extremum for the selected timeframe and the opening price. The bar chart is similar to a Japanese candlestick chart, differing only visually.
Indicators are very popular tools for options, they help traders to analyse the charts correctly and are an essential element of almost any trading system. Today there are a huge number of signals. All of them have different purposes and are also used in different ways. The number of indicators used by binary options market participants is in the tens and even hundreds. There are four main groups:
- Volume indicators show the overall activity of the market in a particular period of time.
- Trend signals allow determining the incipient trend and direction in time.
- Oscillators are used to identify trend reversal points in order to open trades in the opposite direction.
- Moving Averages based indicators are tools used for determining price changes over a certain period.
Basic indicators are the most well-known and efficient, which are a good starting point for studying technical analysis:
- Moving Average (MA)
- Bollinger Bands
- Stochastic Oscillator
- Relative Strength Index (RSI)
So, it is believed that the best way to trade binary options is to combine technical and fundamental analysis. This way you will eliminate market noise indicators and your tactics will be more effective.
Many traders use their own trading systems. Each binary options trading strategy has its own advantages and disadvantages. Although these trading strategies can be effective over a period of time, they do not always and not everyone brings in a consistent income.
It is important to understand that there are no 100% profitable options in trading, and each tactic has a percentage of loss. Besides, one and the same tactics will have different results in different hands due to the trader's character and perception of signals. Trading on the exchange market should be treated with great responsibility.
There are hundreds of trading strategies on the options market today.
Let us give an example of some of them, which may be used as a base.
News releases of financial and general statistical nature, as well as political statements of important statesmen are known to be the main drivers, determining the current market sentiment and, accordingly, the movement of price charts of most underlying assets.
In order to use the news releases effectively as a profitable trading signal, you need to find a highly professional service, which should offer the announcement of necessary news publications with a wide range of information provided. Among all information for options trading news, we will be particularly interested in: the release time of the news data, preliminary values of the statistics, forecasts from leading experts, actual news data and, of course, the level of importance of the data itself.
Usually, to make a profit on "signals" from news publications, you just need to remember a simple pattern in the behaviour of quotes in trading - bad news "push" the market downwards and good news "push" the asset market upwards.
The Martingale method started to be used in gambling when playing roulette. Its essence is quite simple, double your bet in case the previous trade was unprofitable.
If a trader decides to trade in binary options using the Martingale method, then he must strictly adhere to the trading strategy, where the basis will be to determine the market trend and trade in its direction (trade by trend).
Scalping strategies for options attract the opportunity to make a quick profit with minimal initial deposit. Scalping is usually defined as trading on short time frames, which is quick, complex but very addictive.
Scalping is very dynamic and allows you to fix potential mistakes literally instantly, without waiting for weeks to change the trend.
A trader can be in the market as long as possible, benefiting from the tiniest price fluctuations. During a trading day, as a rule, a tool makes not more than 2-3 strong price movements in the direction of the main trend, but there are many small pulsations in different directions whose total course is many times larger. This explains the high profitability of scalping.
Trending strategies are applicable when the market has a clear trend (i.e., the chart is trending up or down for a long time). Bets placed in the direction of the market trend are most profitable and least risky.
The trend is traders' friend and best helper. Therefore, when analysing the market situation, you should first determine its direction. The direction of the trend is influenced by a combination of external news and economic factors. They influence the price of the asset, which is displayed on the chart. Often an uptrend is influenced by events which increase demand. A downtrend occurs when external factors contribute to an increased supply of a commodity.
Charts, and for example the directional movement indicator (ADX), will help you analyse the market situation. This tool works ahead and allows you to determine the strength of the trend.
A solid strategy for options should not consist solely of indicators. To start earning steadily, any of the above strategies should be supplemented:
- Risk management (proper budget management).
- Fundamental Analysis (analysis and analysis of news, reports, fundamental factors of the economy).
- Analysis of Japanese candlestick patterns and graphical patterns.
- Analysis of volumes.
You also need to correctly calculate the money management (percentage of loss or drawdown of the deposit) when using different trading methods. It is recommended to have a max 5% drawdown per trading day. Before you start using the strategy in practice, you should test it on a demo (demo) account.
Best way to trade binary options in South Africa
If you are looking for the best way to trade binary options in South Africa, then the option of an online brokerage platform will be the easiest and most effective for you. The platform is an intermediary between the trader and the exchange. It is the brokerage platform that provides you with reliable and secure trading on the terminal, the necessary analysis tools, training, news, quotes, etc. Registration is free and takes only a couple of minutes, so just try it out and start exploring the platform.
You also get benefits as the broker allows you to trade with leverage, and you can make money as you trade with more money than you have available.
That is, leverage is a brokerage service, which is a loan of money or securities given to a trader to make a trade.
Open a Demo Account
The demo account option would be the best thing you can do for your business in the beginning. This is because you will not be required to pay your own money for the assets. You will be working with virtual capital. By work, in this case, you mean your learning to trade. You will learn how to interpret charts and indicators, learn the terminal, try different strategies, etc.
Opening a demo account is a great way to understand the best way to trade binary options. It allows you to practice before you take the next step. You can get a better understanding of how these options are traded through live platforms. This is a great way to get an overview of how options trading works and what the risks involved are.
Use a trading account
As soon as you have finished experimenting with your demo account and chosen a binary options trading strategy, you can open a live trading account. This will help you improve and hone your own trading abilities. All the profit that you will be making will be accumulated in your account. From this account, you will be able to withdraw your money. Remember, we do not recommend investing all of your capital in the exchange, start small, you will succeed!
Once you open an account, you can start trading straight away. Good Luck!