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Successful Strategies in Binary Options Trading
Successful strategies in binary options tradingLet's start by saying something counterintuitive: There are no successful strategies in binary options trading. A binary option is a trading instrument with two possible outcomes. A trader in binary is essentially placing a bet that the option will move in his favored direction. Every binary option is its own entity, not connected to any other trading instrument; so, like a pair of honest dice, no two binary trades will affect each other. Every trade in binary is truly independent.
What this means, as a practical matter, is that there can be no overarching strategy to succeed in every binary options trade. However, there are two important steps a good trader can take to improve his odds on each individual trade, and make sure that he is always in profitable territory.
To start with, a trader should always – always – learn as much as possible about the underlying trading asset of his chosen binary option before putting any money on a trade. That sounds like a mouthful, but it's really quite simple.
A binary option trading instrument offers traders a simple up/down choice on an underlying trading asset. That asset can be anything: a stock, a market index, a commodity like gold or coffee, or a currency pair like the EUR/USD. Before placing any trade, a trader should educate himself on that underlying trading asset. Learn why it moves up or down in the markets, what patterns to look for to predict its moves, and why investors put their money in.
To give an example: If a binary trader wants to take out options on gold, he should learn some of the arcana of gold trading. Why gold is treated as a "safe haven" investment? Why does it frequently move in the opposite direction as the US dollar (dollar up, gold down)? What is the average cost, for a mining company, of producing one ounce of gold? Knowing how to answer questions like these will allow a trader to make more accurate predictions about the movement of a binary option trading instrument.
The second step a trader can take to improve his chances of profiting is also simple: never, never chase a loss. If trade goes bad, let it go. There is no way to lose money faster in financial trading that to double down on a bad deal in the hope that it will reverse and break the other way.
When a trade does go bad, the best thing to do is simply close it early. It may be possible to open a second, opposite, trade to mitigate the losses, but in most cases the best solution is simply to end the unprofitable trade, look again at the instrument's fundamentals, and start over from the beginning.
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