3 Keys to Consider in Binary Options Trading

3 Keys to Consider in Binary Options Trading

Submitted by adil on Thu, 01/01/2015 - 19:26

Binary options trading has become increasingly popular among traders, because of the probability of earning high profits in a very short period of time. Unlike stock trading or forex trading, where a trader must have sufficient experience and knowledge to trade successfully in the market, binary options trading does not require years of experience or detailed knowledge. Even a new entrant in the market can start trading in the binary options market with a basic knowledge. However, there are certain factors that a trader must take into account before he starts trading these derivatives. For example, a trader must choose a broker wisely, devise a reasonable trading strategy and select the asset in accordance with the risk tolerance level.

Choosing a Broker Wisely

A trader should never invest a huge amount initially, if he doesn’t have any experience of the binary options market, because forex and binary are highly volatile markets, and it is likely that a trader might suffer losses at initial stage. If you are new to binary options trading, it is wise to practice on demo accounts for a while in order to understand how to enter a trade position, the types of assets used, and other aspects of this binary options platform.

Therefore, it is important to find a reasonable broker that offers the minimum deposit amount, charge minimum withdrawal fee, allows frequent withdrawals, and a user friendly platform to trade on. You can find a broker with the help of reviews about different brokers provided by experienced traders, or you can also consult the expert traders to help you find a reasonable broker. Make sure the broker you select has efficient customer service, and you receive the answer to the queries on time via email, chat, or phone.

Selecting the Asset

The first rule of trading is to always know your risk appetite, as it defines the boundaries for traders and enable them to trade in a disciplined way. Once the broker is selected, a trader must select an asset he wants to trade. For example, he can choose to trade in currency pairs, stocks, commodities, or stock indexes.

However, when you are selecting the asset for binary options trading, you should take into account some critical factors, such as, current market news or economic indicators, which defines the movement of the asset price. Let’s say, you plan to trade the stocks of a particular organization. It is important for you to gather relevant information about that organization, including its management structure, earnings, new product launch, losses, etc.

Devising a Reasonable Trading Strategy

Trading strategy is used by the majority of binary options traders in order to identify whether the price of an asset will move above or below the strike price, so that they can speculate on the basis of expiry period of the contract. For example, if the price of an asset is higher than a strike price, a trader can choose to trade call option, and if the price goes lower than the strike price, he may select put option.

The implementation of right strategy is important in successful execution of a trading plan. There are a large number of strategies used by the binary traders, including touch option, risk reversal strategy, martingale strategy, price-channel trading strategy, etc. Traders use these strategies in accordance with their financial goals and trading plan. If these binary options trading strategies are executed properly after taking into account their associated risk, it can generate high profits.