In Binary Option trading the understating of the concepts and terminologies will help make profits. The next prerequisite in binary trading is to understand trading strategies – an integral part of the overall trading process. Any professional will tell you how important having an investment strategy is. Binary trading is much more profitable than Forex trading but it is riskier as well. Don’t make the mistake of thinking that because you are making profits in Forex that you will also make profits in binary options. You will need the proper knowledge and experience.
With binary trading although the rules are the same as for any other trading option, the learning graph is exponential. You can learn very fast and you will need to have all the tools in order to analyse the markets and make the most profit. With proper knowledge of the techniques you can predict future moves and make profit. An interesting thing about these techniques is that most of them make use of a combination of fundamental and technical analysis. You will also need to learn the pairing strategy to become a professional binary option trader.
To start with, you need to familiarize yourself with some terminologies like fundamental analysis, market trends, and concept of support, resistance and early closure strategy. This will help you to understand binary option trading and to maximize your profits. Support and resistance analysis are very important when you are working on a pairing strategy.
We will help you to better understand this strategy. It is simple to use and profits will be high if you know how to implement it.
Using Pairing Strategy
One of the safest trading strategies for binary trading is the pairing strategy. This strategy can help minimize the risks involved in trading in case your anticipated market outcome is not what you hoped. Also if you are looking for a method that is significant and reliable to hedge purchased options and minimize volatile issues associated with the nature of the market, then pairing strategy is what you need.
In this strategy a trader buys a call option followed by the purchase of a put option when the market reaches a critical point.
For instance – you have bought call options on crude oil with a strike price of $1000. The price follows your anticipated movement and after some time reaches a mark of $1050. You find that there is no more progress in the price and it appears that the market reaches its peak. In such a situation to protect your funds, you buy a put option for the current rate of $1050.
If the option expires between $1010 and $1050 you will win on both options doubling your profits. You have safeguarded your investment from the loss as if any of the option expires out-of-the-money the profit on the other option will compensate for that loss.
The basis of this strategy is the theory that states that the price of an option will go down after it meets with strong resistance – as it rises beyond a certain point.
A simple way to use this strategy is as follows.
Clearly decide on the direction that you believe the market will go. Now choose CALL or PUT based on your prediction of market movement. Now once the price has moved far enough from the strike point you need to open a position in the opposite direction. Whatever direction the price takes, there is a good chance that it will meet the point from where it will change its direction. This is the point at which you open a new position in the opposite direction. In this way you can maximize profits on both options and minimize the risk of losing both positions.
For binary traders it is very important to understand the concepts of market trends, price movement and pairing strategy and use this information along with economical calendar indicators to maximize profits.