Tips for the optimal utilisation of binary option trading signals
Binary option trading is booming and more and more investors are joining in. The minimum trade totals of brokers are low – many providers already offer trade with just a few euros, so that the entry levels are low. Some of the very short option maturities allow a variety of trades with a short period of time.
To successfully trade it is particularly important to use binary options trading signals and trading strategies that are as reliable as possible. Therefore let us summarise some of the basic trading approaches which can be used as binary option signals for entry into trade.
The binary options that can provide trading signals:
Higher profits through better buying and selling actions or reactions
Combining trading signals can bring about better pay lines
With trading experience the chance of the safe application of trading signals increase
The correct assessment of a trading signal can prevent miss-buying and selling
Trading signals may be used as a catalyst
Approach 1: Support and Resistance
Support and resistance make up important clues in trading and should be reflects in compliance with any trading strategy.
Support and resistance areas are easy to identify and have reference functions in every chart.
The chart below of anyoption shows a classic resistance area in EUR/USD with multiple tests of the important Type 1.2900. Supports and resistances form around psychologically relevant values such as rounds or integers. In this case, the bullish market participants tried to break through this price without success. Here the purchase of a Put option is on offer.
The binary options trading signals are among the simplest and most important trading signals. They can be combined with additional trading signals.
Approach 2: Break outs (Momentum Trade)
The momentum approach focuses on quick, explosive movements at high volume in the market. To implement this approach, even short-dated options are useful. Traders can trade break outs from extended sideways phases (trading ranges) or market reactions to important news releases. In the 24option chart below, the break out of a sideways phase in EUR/USE is displayed. Additionally it has been observed in a long-term chart that EUR/USD is in an overarching uptrend. This break out could be exchanged with a call option on rising prices. Timing and speed is paramount. This approach can prove to be extremely profitable with manageable and calculable risk.
Break outs are recommended as a binary trading strategy, if the trader’s risk is calculable. Speed and time play a special role here. These three aspects suggest that break outs are mainly used by experienced traders in binary options.
Approach 3: Trend reversal
In contrast to the trend-following strategy is trading against the overarching trend in the market. The trader pays attention to possible trend reversal formations, such as the popular Head and Shoulders formation shown in the chart below by anyoption. Initially, a new intermediate high is formed (Shoulder), followed by a higher high (Head), finally followed by a deeper intermediate high, the so-called right Shoulder. Approaching the course as the ‘neckline’ after the downward movement of the right shoulder, represents a golden opportunity to put on a Put option with falling prices. Often the Head and Shoulers formation initiates a larger price movement contrary to the pre-existing trend. Identifying chart patterns requires some experience and knowledge of the market, since the formations do not always occur perfectly uniform.
Both in trend reversal as well as other trading signals based on recognising chart patterns, experience and routine are essential companions. So this trading signal should likely be used by the savvier of traders.
The presented approaches can serve as a serving point for the development of trading strategies. One should be aware that these binary options trading signals must be appropriately used in the prevailing market situation and do not always guarantee success. Successful binary options’ trading also requires disciplined risk management and choosing a reliable binary options broker.
- Additional Strategies
More binary option trading strategies for different market situations are described in detail in the following contributions:
Trend following strategies
Trading in volatile and unstable markets
Hedging with binary options
4.2 Applying a trading signal: in combination with the trend following strategy
When using a trade signal it is important to choose the correct one. If the trend following strategy is chosen, then the decision of an entry point in the chart and the analysis of neighbouring points should be carried out next. As a rule, the focus is on higher highs and lows or even lower, especially with the success of the trend following strategy lying in its simplicity and clarity. Therefore the combination of these strategies with others should be made by experts. Beginners should concentrate on the sideways movement and implement, for example, a call option on the continuing rise. With sufficient experience Strategy Pivot Points can be used as entry points to binary options.
If you want to predict the falling price, this will be made clear with the purchase of a put option. At the third stage we have to waist and keep an eye on the price development. As can be seen from the 60-Second traders, the trade may be already over after seconds or minutes and the decision has been made. Even in these brief trading transactions multi digit figures can be lost, here the Take Profit and Stop Loss functions further help. As well as trading signals it is possible to get to know other strategies in the field of binary options.
The trend-following strategy can be recommended to every beginner in the field of binary options. Experience states, that the possibility is markedly higher that a trend will continue. A lower possibility states that there will be a turnaround. Newcomers in binary options online trading should initially use the trend following strategy.
- The risk when binary options’ trading is always there
Profit and risk are closely interrelated despite the choice and decision to use trading signals. Consequently, everyone should be aware of binary options trading. In trading signals it is important to call upon the assistance of impulses and your own chances or follow the chances provided by other traders experienced through their own trading decisions. Binary option trading signals thusly serve as a guide that will misinterpreted for years even after years despite frequent gains or running contrary to the market situation. In any case trading signals are universally applicable.
It is all the more important to not permanently set on a trading signal but rather vary according to the market trends and the trading decision of other traders. Successful binary option traders rely on historically determined trends and reactions of the market and can use their economic knowledge for themselves. Others copy trading decisions of “Old Timers”, learn from them and they receive ‘teacher money’ as a professional level.
Beginners can learn more about the section ‘What are binary options’ and what is behind these trading products so that their first trading decisions are made with a clear awareness of the subject matter. Despite the extensive knowledge bases, binary options are useful especially for those people who have no experience with online trading so far.
- Conclusion: Trading strategies support binary option profits
The described approaches can act as a starting point for the development of trading strategies. One should be aware that these binary option trading signals must be used appropriately in the prevailing market situation and not do not guarantee success. Successful binary option trading also requires disciplined risk management and choosing a reliable binary options broker.