How Binary Options Fence Strategy Works

How Binary Options Fence Strategy Works

Submitted by adil on Tue, 01/06/2015 - 13:37

In order to help the traders to mitigate risks of investment, binary options fence strategy is designed. Investors are of the view that Fence strategy is considered as a collar option which is basically employed when definitive market trends are not adequately predicted. In such a scenario the charts can move in both directions. In this article we will discuss how this fencing strategy is used and what the recommended ways of using this strategy are.

What is Fence Strategy?
The fence strategy is employed when definitive trends of the market are not predicted correctly and due to this strategy it is observed that the value in the charts can either go up or down. It seems unimaginable to anticipate the next trend which may be constituted once in a while. In order to make gains under these hard conditions, fence trading strategy can be employed by binary options traders. One of the key aspect of fence strategy is the fact that through this trading a rate range is formed within a defined time frame. Through this approach you can form a virtual range or bi-fence for making your trades.

How the Fence Strategy works?
In order to adopt the fence strategy in binary options trading, it is essential that you purchase two option contracts on the same asset. This is essential as traders must cover both the sides of the market. The trader should be in possession of both ‘above’ and ‘below’ contracts. By doing this the trader will be able to fence in the prices of the asset in between the strike prices of these two contracts. By adopting this strategy, the trader is able to reduce the risks in investment and also profit from the market even without really having to choose which direction the market will go.

Recommended Usage of Fence Trading
Most of the experienced traders of Binary options recommend that the you should create a range according to your prediction in both shorter and longer period of time responding to the expiry time. For example, if you have made a decision to place a PUT option as a decrease in the trend is observed. Later on you may predict that there is a chance that the price may go up following the PUT trend. In such a scenario the best way is to set a CALL option, through which you can close the range. Your predictions will be ensured by two of the entries with a range, then, if the price goes to right directions you are going to win both PUT and CALL entries, doubling your profits. Obviously, there is always a risk of losing both of the trading as there is a chance that each falls in opposite directions as well.

Statistics prove that if any trader is able to do research about the reliable strategies and has fully equipped himself about the pros and cons of fencing the binary options he can earn reasonable amount of profits. Fence trading proves to be an excellent strategy if any trader wants to secure the virtual range that he wishes to invest during times of uncertainty.