Ever since they were first introduced in the public market in 2008, binary options have grown to become one of the most popular ways of trading financial assets online. The binary options market allows traders to trade virtually any tradable financial asset and offers incredibly high returns, yet the major reason for their popularity is their simplicity. When trading any contract in binary options, traders only have to pick one of only two available trading choices, and if they are right, they earn profits. While this is clear and unambiguous, most traders have found out that churning out consistent profits out of the binary options market is not as straightforward.
Here is how to trade binary options successfully:
Use a Tested and Proven Trading Strategy
The binary options market is not a casino and trading is not a game. Binary options are legitimate financial trading vehicles and to achieve success trading them, traders must utilize a defined strategy that has been tested and proven. Trading is like weather forecasting – there are different methods for different weather conditions and while no one knows what will happen tomorrow, a good strategy will always be right, much more often than it is wrong. Moreover, a good strategy in binary options will be even more profitable because the market is based on a two-way proposition. There are mainly two types of strategies: fundamental strategies and technical strategies. Fundamental strategies attempt to predict the future price movement direction of an asset by analyzing the underlying economic forces that impact a particular financial asset. Fundamental traders believe that sentiment drives the market and they will keenly follow economic news announcements and data releases. On the other hand, technical strategies attempt to forecast future price behavior by analyzing historical price movements. Technical traders focus solely on asset price charts and will use mathematical indicators and tools to aid in their market analysis.
Different assets usually have different characteristics and traders should ensure that they apply the right strategy on their favorite assets. A trading strategy should also be consistent with the personality of the trader. That is, take into account if you are a risk taker or if you have a more cautious approach to trading. Developing a trading strategy is more like developing a business plan because a strategy seeks to organize the activities of the trader as well as reduce the impact of external factors. And like a business, success is achieved by implementing the plan with the utmost discipline.
Utilize Trading Tools
Success in binary options trading can be linked to many factors: discipline, strategy and even luck. However, traders can possess all these but if they do not have the right tools or apply them effectively, success will remain a farfetched dream. One of the most important tools any trader should use is the Economic Calendar. This tool outlines all the major economic news that may impact the various financial assets in the binary options market. No matter the type of strategy, the economic calendar ensures that traders are always aware of any major news releases, scheduled for any particular day or time, so they can efficiently plan their trades.
Educational tools are also very important for traders. These tools include e-books, videos and live webinars, and they contain information ranging from trading basics to advanced strategies. Educational tools are important for both newbies and experienced traders. The binary options market is very dynamic and these tools not only help traders to remain relevant but also to increase their odds of success. They help traders build their knowledge of the markets, increase their trading skills and techniques, understand and acquire the right trading mindset and psychology as well as develop their own customized strategies that fit their individual personalities.
Another important tool for traders is market commentary. This is expert analysis of market news, data and information. While most traders use technical strategies to trade, combining both technical and fundamental analysis can help them enhance their trading success. Piecing and deciphering every single fundamental macroeconomic data can be very daunting for the average trader, and this is where expert market commentary comes in handy. Reputable websites and even brokers usually provide traders with daily, weekly and monthly market reports that analyze and discuss the underlying macroeconomic conditions and the potential impact they will have on different financial assets. This can help traders plan their trading activity to be in tandem with the fundamental reality, thus enhancing their profitability.
Make Use of a Demo Account
A demo account is an important instrument for both new and experienced traders. For new traders, a demo account provides a risk-free environment to gain practical binary options trading experience. It also helps them learn about all the intricate features of a broker’s trading platform including, trade types, payout offers and other features. New traders can also test out the strategies they learn on a demo account without putting any money on the line. Nevertheless, before transitioning to a live account, new traders should not only ensure that they have posted consistent profitability but also that they can effectively manage their trading risks and contain their emotions.
Contrary to popular belief, demo accounts are also very important to experienced traders. The binary options market is very dynamic and even experienced traders need to continue learning, developing new strategies, or tweaking old ones. Plus, a demo account gives them the unique opportunity to forward test these strategies in the market without incurring any trading risks.
Utilize Trading Signals
No doubt, one of the hardest tasks in binary options trading is identifying high probability set ups in the market. This is why trading signals have proven to be extremely useful for all types of traders. A binary options signal is a trade idea or alert containing all the relevant information regarding a potentially profitable trading opportunity, with the trader only required to execute the alert and wait for the outcome at the expiry of the trade. Trading signals can be generated by seasoned expert traders or computer programs developed using complex algorithms. All types of traders can benefit from subscribing to a reputable signals service. New traders get the rare opportunity of making money while still learning their trade, while experienced traders have the unique chance of widening the scope of their profitability.
Nonetheless, these benefits can only be enjoyed when traders subscribe to a good trading signals provider. To ensure this, traders must perform due diligence and thorough research so as to select providers that are run by professional traders and have a proven success rate of over 70%. A good provider will also have a reasonable price as well as offer a free or subsidized trial offer.
Have Long Term Trading Plans
The simplicity of trading binary options can lend the belief that traders can make so much money in a short time. While there are numerous stories of many traders making thousands of dollars on a daily basis, those are just that – stories. Indeed, skilled traders can and do make tons of money, but success did not just happen overnight. Like any other endeavor, it takes lots of hard work, deliberate practice and sacrifice to master the art of trading.
Traders need to set realistic expectations and stay committed to the course. The opportunity of returning profits within a quick turnaround time is what makes many people believe that somehow, the binary options market can make them overnight millionaires. But the truth is that short term trading is not for amateurs or the inexperienced. It is impossible to make big profits without taking big risks, and a strategy that involves taking big risks is akin to gambling. Binary options trading is a business, and not some savior; and success can only be realized if traders have a long term plan and put in the effort and time required to actualize the plan.
Manage Risks and Rewards Efficiently
Any decision a trader makes in the market will involve these two key aspects – risk and reward. In order to achieve long term trading success, traders need to be masters at reducing their risks, while at the same time enhancing their profit opportunity. From choosing which asset to trade and at what time to trade, to what amount to stake and what contract to trade, traders need to strike the delicate balance between risk and reward so as to realize their trading ambitions.
In binary options trading, managing risks and rewards does not end when a trader opens a contract. There are plenty of in-trade management tools that ensure traders are always in control of their trading activity. Features, such as early exit, double up and rollover, available on some of the trading platforms, will give traders the chance to actively reduce their overall loss liability as well as enhance their profitability, regardless of their initial trading decisions.
Binary options are an exciting way of trading financial assets online. Even though they are simple to understand and trade, long term consistent success can only be achieved if traders plan ahead, work hard, practice even harder and manage their trading risks and rewards efficiently.