Day trading binary options
What is Day Trading?
A binary option is often called an all-or-nothing contract, and for good reason. You either win the entire investment plus a premium if you are right, or you have lost it all if you are wrong. It is also a rapidly growing financial equity sector.
A binary option is an electronic contract on a specific asset with a known expiration date in advance. The trader must correctly predict the direction of market price movement of the asset by the time the option is exercised.
Typically, the return is between 60 and 90% of the bet, which varies according to the broker and the terms of the contract. In addition, the terms of the contract are transparent and clear even for a newcomer, so this type of commerce is gaining more and more fans.
Let us have a look at some of the most well-known types of binary options:
- High/Low. The trader's task is to predict where the quote will be at the moment of expiration (if it will be under the current price, they should select "put", if higher - "call").
- One Touch. A trader should indicate whether the price will touch one of the pre-marked levels, moving in the direction they expect.
- The opposite of the name and the meaning of the binary option "One Touch" is "No Touch". The only difference is the forecast by the trader, whether the price reaches the level specified in the contract.
- Frontier. The second existing name for this type of binary options is the range. The broker company defines the definite price corridor or range. The dealer must make a forecast as to whether the asset quotations will stay within or go out of the set limits.
- Binary options 'Ladder'. The trader has to predict if the price will reach several levels. The amount of money a trader gets as a result of a successful transaction depends on how many levels the price has passed at the time of expiry.
When trading binary options, it is important to remember that you can lose a lot of money fast. Before you start commerce, it is important to understand the terms and process of trading. Start with the simplest option type.
By the length of time, you can distinguish the following types:
- Short-term or scalping is done by investors who have the time and experience to profit from small price movements over a few minutes or hours. A good example of this is the 60 second turbo options. The main advantage of 60 second options is the ability to earn very quickly for a correct prediction, or to lose if the prediction was not correct.
- Medium-term. It lasts from several hours to several days. A popular method is day trading in binary options, when the trade is not carried over to the next day. It is a happy medium which is not as risky as the previous option, and you do not have to worry about how the trade will end.
- Long term. It counts from 1 day to 1 month. Suitable for investors who do not want or do not have the opportunity to spend much time near the monitors. They will have to identify long trends.
Beginners often make mistakes by over-trading with options they do not understand or by choosing a style which contradicts their overall commerce strategy. Many experienced traders recommend beginners to start with intraday trading, as it allows them to open and close positions within one trading day. It makes it easier to follow the price movement and will help the novice trader learn to make the right decisions and restrain his emotions.
The fact that intraday strategies are considered to be the most profitable is also important.
The use of technical analysis in binary options day trading should be combined with tracking the news. This is called fundamental analysis. An ideal strategy, combining 2 types of analysis, will bring you the most accurate results and as a result, more profits.
Like any other commerce algorithm, a daily strategy for binary options must meet the requirements of capital management. For example, before each opening of a position, it is necessary to correctly determine the exact amount a trader can lose on a trade. As a rule, this amount should not exceed 2% of the total amount of the deposit, this will allow the trader to continue trading even after opening several losing positions in a row.
Technical analysis for binary options day trading
There are many advantages to using technical indicators. They can be very useful for predicting market direction under certain conditions. This is not easy to do in the day trading binary options market, as the price fluctuates rapidly. However, you can analyse the patterns in the price and make an educated guess as to where it will move.
This is a large and multi-faceted science, which includes chart patterns, trend levels, indicators, oscillators, Japanese candlestick analysis and more.
Main types of technical analysis, binary options and forex:
- Indicator analysis. This is probably the most popular type of market research today. Indicators have proven their popularity and market participants trust them more and more. Indeed, they are a powerful analytical tool, but these tools also come in a variety of properties and price chart parameters.
- Chart shapes. It was one of the first to be used by speculators, who noted the patterns of market behaviour after a certain figure was formed on the price chart. This is how triangles, flags, trend lines and so on, which are formed by different charts, started to be analysed.
One trader may use 2 or 3 such indicators in his own commerce strategy simultaneously. At the same time, there are many examples of high-quality strategies built on just 1 such tool.
The most popular indicators for technical analysis are.
- A moving average will help to determine the trend. To do this, a single moving average is plotted on a price chart. The moment the price line crosses the curve from bottom to top and lingers above it, an uptrend is generated. When the MA breaks through from the top downwards, a downtrend is generated.
- Bollinger bands. Graphically, Bollinger Bands represent two lines, limiting the price dynamics from above and below respectively. They are peculiar support and resistance lines, and most of the time they are at levels away from the price.
- The Stochastic displays the % ratio of the closing price to the maximum extremums over a certain period of time. Thanks to its algorithm, Stochastic is able to calculate the following key points for successful opening of transactions:
• Local highs and lows in price;
• Divergence and convergence;
• The beginning and end of a trend or correction against a trend.
- MACD is a combination of three moving averages, whereby only two of them will be visualized. One, the faster one (reflecting the short-term trend) is called the "MACD line", the slower one (reflecting the long term trend) is called the "MACD signal line".
- RSI. It works best when it reaches areas of extremes. The criteria is based on two levels drawn at 30 and 70. A line above 70 is said to be an overbought area and a line below 30 is thought to be an oversold area. Therefore, when the Relative Strength Index reaches and rises above 70, prices are in danger of falling; a move below 30 is seen as a warning of an impending rise.
We have cited 5 popular signals for trading. However, there are many more and each one can give you something useful if you learn how to read them, start with simple ones and learn gradually. You can use a demo account to learn and practice.
There are three types of charts, which are used by most traders to identify pivot points and trends.
- The line chart, as shown in figure 2, shows the dynamics of closing prices for each period. The price changes can be clearly seen on it, and all trends can be singled out. It is easy to find maxima and minima, which allows you to graphically analyze, construct levels and lines.
- Each bar represents one day, hour, minute and so on. The vertical line shows the minimum and maximum prices, the bar to the left of the vertical line is the opening price, and the bar to the right is the closing price.
- Japanese candlesticks are based on four values: the open price, the minimum, the maximum and the close price. The colour of the body is determined by the position of the closing price in relation to the opening price. If the close price is higher than the first quote, the candlestick will be green (white), and if it is lower, it will be red. By the colour of the candlestick, you can easily tell if prices have risen or fallen.
You can use different indicator packages to see the trends and track them. There are many available on the market, and you will be able to find one that suits your needs. It is important to take the time to consider the options and decide which one will best suit your trading strategy.
How to start day trading binary options in South Africa?
You may be looking for information on how to start day trading binary options in South Africa. The first thing you should do is to open a demo account with a brokerage firm. We advise you to get experience in the field of investing by relying on the platform. Specifically, you can open an account here and try your hand as a trader.
Registering is easy and will only take a couple of minutes. After that, you can get valuable tools like video tutorials on various topics, an easy-to-use and functional mobile app, expert service support, up-to-date news, charts and indicators, and much more.
You can trade on the platform with virtual money by opening a Demo account. It will not require you to invest your own money, you will be operating with play money. All the functions will be just like a normal cheat. Learn to read the charts and understand how to use them. Understanding how to start trading options in South Africa can help you start a personally profitable business. It is also very important to know what to look out for when making your trades. When you open a demo account, you will know how to do this. This will help you determine the best time to trade and help you get used to the terminal. You will learn how to trade safely and efficiently and make more profit for yourself.
You need to succeed so that you can improve your chances of making a profit through future trades. You can make trades, place orders and track your results using your demo account.
Once you learn how to start commerce binary options day trading, you can open a real account. To do so, make a deposit into a live account and start betting today. Start with small amounts and gradually increase your portfolio. Be sure to analyze your trades in your personal cabinet, change your tactics depending on the result. Only through experience will you be successful! Try it, you will succeed!
Also, traders often use leverage to increase the profitability of their deals. In such cases, the broker lends additional funds. It is worth noting that a lot of intraday transactions are made on margin, allowing traders with limited capital to open big positions, which may exceed several times the trading capital of a trader.