Trading binary options offers not only simplicity but also the ability to trade tried-and-tested setups in order to generate profits. Offering one of the fasted ways to make money in the markets, with typical profits of around 85% of the initial investment, it is fairly simple why traders are applying their old methods of trading in order to exploit this opportunity. In addition, binary options can suit all trading styles, including those who prefer t trade on the daily or hours time-frames to those day trading and wanting to hold positions for a little as sixty seconds.
Using tried-and-tested methods to trade binary options
Using established methods of trading as a basis for purchasing binary options can be successful if the strategy is correctly adapted for the binary options market. Remembering that binary options, in their regular form, simply rely on price moving higher or lower than a strike price is key to this and one reason why strategies no longer will need to rely on price moving far away from the strike price which, in itself, can open up a number of additional trading opportunities. Since other forms of trading need to take in to account the spread, number of points/pips and the amount of risk, binary options can be a refreshing way to trade. Risk and reward are both predetermined, spreads are non-existent and the only pips or points that are important is the one above and below the strike price.
Adapting the crossover method to binary options trading
Using the crossover method to trade has been a favourite of many traditional traders for a long time. The strategy is based on two indicators, often these are two moving averages (MA’s), with one representing a lower value than the other. A low value MA will appear to move with the price at a faster rate than a higher MA such as 20. This causes the MA’s to occasionally cross over, typically when price is moving higher or lower and can be a strong signal for an excellent short term trade. For binary options traders, the only consideration with the high-probability that price will rise or fall is when to expire the options. With a wide choice of expiry times and the high likelihood that the correct expiry will be profitable, this is a good example of adapting a traditional trading method in to one designed for binary options trading. A comprehensive study of previous setups and, depending on the time-frame that you will be trading, a thorough back-test should allow binary options to be adapted well to a strategy such as this.
Keep risk in mind
Adapting a binary options strategy will also require adapting the risk management of the trade. Since binary options are known as all-or-nothing options, the initial investment and losses, although predetermined, are risked on each trade. Some brokers provide a protection rate of up to 15% on each trade but it is certainly something to bear in mind when applying a previous strategy to binary options. Similarly to any other strategy employed in forex, spread betting or any other trading; risking a maximum of 2% of available trading capital is recommended and applicable to binary options.