On the surface binary trading seems like a high-risk way to potentially generate huge returns, and if you refuse to dig a little deeper this statement would be correct. However, for those that choose to look a little deeper, one would find that by using a disciplined binary trading system you could swing the odds of profitability in your favor. Those that are serious about dedicating the time and energy into creating and implementing a steady binary options trading system should place these 5 items at the core.
Step 1: Focus on a Limited Set of Assets
Instead of jumping from equities to currencies to indices and back again based on what’s hot, concentrate on a handful of names and get to know them better. I’ve been trading options for over 10 years now and one of the early lessons I learned was to not worry about all that may be happening in the world, in other sectors, in other names, it can be an time-consuming task. However, if you select a few assets to follow you’ll more than likely gain a better grasp on how they move on a day-in day-out basis. This should be extremely helpful when trading binary options. Fortunately (or unfortunately depending on how you look at it) the binary options broker platforms currently available have a limited number of assets to trade, thus picking a few to concentrate your trading efforts on should not be that difficult.
Step 2: Pick A Binary Option Broker
There are several binary option broker platforms currently available, all with unique defining characteristics. The most well-known binary option broker is EZ Trader. EZ Trader is an excellent platform for binary traders interested in trading options on US based stocks. EZ Trader has the broadest selection of US based stocks amongst all binary option platforms. OptionBit can easily be described as the low cost binary option broker, with initial deposits of $50 and minimum trade size of $10. StartOptions is another alternative, best known for its practice account allowing traders to paper trade binary options. With many platforms available make sure you check out these highlighted brokers and pick the ones that best suit your investment style.
Step 3: Apply Your Binary Option Strategy
One of the more common mistakes we see traders make when starting to trade binary options is they get attached to a couple of ideas and live or die with their outcomes. This is a bad strategy. This kind of strategy will most likely leave you with an empty trading account in short order. The goal should be to give yourself a chance to win by trading multiple times a day, sometimes trading multiple times on the same option within the same expiration. If you only trade a few times during the day there is a very good chance that you’ll finish the day down or possibly flat. However, if you trade multiple times during the day you theoretically increase your chance for success. With no fees for trading, there really is no obstacle to placing as many trades as you like. Most successful binary option traders make at least 10 trades a day.
Step 4: Risk Management
No doubt about it binary trading is inherently risky. Most brokers will offer average returns of 70% for winners and a return of capital of 5-15% for your losers. The odds are not in your favor. The risk profile of placing one trade and hoping that it ends up “in the money” is not a profile we recommend. That is why we rarely place one binary options trade on a given asset without following it up with a 2nd complementary trade prior to expiration. This 2nd complementary trade can be a purchase of another option in the same direction, a purchase of another option in the opposite direction, or a purchase of another asset completely, playing the correlation between the two names. There is a multitude of ways to structure trades that can decrease the risk inherent in purchasing one binary option. We review these various strategies we use to profitably trade binary options in our weekly report, the Binary Options Weekly.
Step 5: Subscribe to the Binary Options Weekly Report
As mentioned previously, we publish a weekly report covering all aspects of binary trading. The Binary Options Weekly is a FREE weekly report consisting of advanced strategies, hedging tips, binary option broker reviews, trading recaps, and a calendar of stock specific and macro catalysts on the near-term horizon. You can signup for the Binary Options Weekly Report by visiting DerivStrategies.com and providing your name and email address in the signup box in the upper right corner.
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