The binary options strategy for beginners

If you want to trade binary options, you should follow a specific binary options strategy. If the investor does not observe this when trading binary options, he could be guided by his emotions and the whole thing would end up as a game of chance. Bear in mind that binary options are not always easy to understand for beginners, even if the financial product is very simple. It is therefore important to familiarise yourself with some strategies that can be used as a basis.

There are various main strategies that many traders use, such as the following three:

1. Trend following strategy with recommendation
2. Volatility strategy with recommendation
3. Hedging strategy with recommendation.

It should be emphasised that the trend-following strategy is easy for beginners to execute. Investors therefore often choose it as a basis.

What is the trend following strategy?

The trend-following strategy is a well-known binary option strategy. Many experts therefore advise that newcomers in particular should carry out their first trades on this basis. This strategy is based on the well-known stock market wisdom "The trend is your friend". This wisdom means that it is not advisable to adapt your trading behaviour to the masses.

It is better to follow the general trend here. One should adapt to the behaviour of influential market participants. This trend is based on the assumption that an existing trend will continue in the future. It is more likely than not that the trend will reverse, which is known as a trend reversal. The advantage of the trend-following strategy is that it allows you to pick an existing trend that has just formed.

The start of a trend is the ideal entry point for a trader. The difficulty here is that trends are easier to recognise when they have been in place for a long time. Both upward and downward trends are easy to recognise in the chart. An upward trend will show several higher highs but also higher lows in succession. Tips and tricks for binary options, the trader draws certain trend lines, which is usually easy if the individual low points (uptrend) and high points (downtrend) are connected together. This allows trends to be recognised quickly and easily.

Summary in the trend following strategy you should know:

1. This strategy is well suited for beginners
2. The prospect of positive trading is very good
3. The basis of the strategy is to follow a trend
4. Trends can be recognised quickly
5. Trend lines can be used as an aid.

The volatility strategy!

Anyone who uses binary options should be aware that there are not always clear trends. In the stock, currency and commodities markets, prices and rates are often subject to fluctuations and there is no clear direction. In such situations, another strategy clearly pays off better and that is the volatility strategy. This is based on profiting from major price fluctuations, regardless of how prices develop.

But even with this strategy, it is important to know when a major price movement can be expected. If a share is taken as the underlying, a major price movement can take place, for example, after the company's balance sheet figures are released to the public (usually on a quarterly basis). The advantage of this is that the trader does not have to think in advance whether the news will lead to rising or falling prices. It is only important that there will be a major price movement.

In real terms, the volatility strategy can be implemented so that the trader buys both a call and a put option on the same underlying asset. However, this strategy only works in the one-touch option area (high-yield area), as the potential profit should be more than 100 %. It is important to ensure that both options are a whole at maturity. If the share price rises as a result of positive company data, a total loss is realised with the put option on falling prices. However, as the call option is positive and more than 300 % were gained, the loss is well compensated.

The most important facts about the volatility strategy:

1. The strategy should be utilised in more volatile markets
2. As a customer, you benefit from the strong price fluctuations
3. The direction of the price movement is not relevant
4. This strategy can only be applied in the high-yield segment

The hedging strategy

The hedging strategy will only be mentioned briefly here, as it is not really a binary option that can be used to make profits with binary options. This strategy can be seen as a short-term hedge for other trading positions, such as a forex position. However, stock positions can also be hedged using binary options, which is known as hedging.

Alternatively, share positions can be hedged against falling prices with the help of CFDs. Hedging involves protecting a longer-term share position against short-term price risks. For this purpose, put options or short CFDs can be placed on falling prices, which make profits in their downward movement and can fully or at least partially offset the losses in the share positions.

Summary:

Anyone starting out in binary options trading should familiarise themselves in detail with the processes and trading. Some brokers offer so-called free demo accounts, which traders can use to familiarise themselves with trading. Users can also familiarise themselves with the respective functions of a trading platform.

If you have little or no experience, you should only trade with small amounts at the beginning. Beginners are recommended not to bet more than two to five per cent of their total balance. There are brokers who allow trading with as little as 5 euros. A trader should also take care to keep their emotions under control. This includes emotions such as greed, fear or impatience, which have no place in trading and ultimately lead to unfavourable decisions.

Comprehensive chart analysis is also recommended, because the greater the knowledge of market analyses, the more advantages the trader gains and the better he can interpret the signals. Of course, experience plays a major role; no master has ever fallen from the sky. A trader should therefore not immediately despair if interpreting the signals is difficult.

In addition, the functions and possibilities of a trading platform should be studied. Furthermore, trading should only take place via strictly regulated brokers. To summarise, experience is the most important thing when trading binary options.

Simone Aescher

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Simone Aescher is the founder and operator of the successful crypto blog aescher-ai.ch.

After studying business administration at the Frankfurt School of Finance, she gained over 5 years of professional experience in the financial sector. However, her passion has always been the financial markets and investments.

In 2019, Simone Aescher finally turned her hobby into a career and founded her blog. She shares her in-depth knowledge of shares, ETFs, cryptocurrencies and much more.

As an active trader, Simone is constantly testing new brokers, robo advisors and trading apps. With her honest product reviews, she helps her readers to separate the wheat from the chaff.

With her academic background, many years of experience and practical expertise as an investor, Simone Aescher combines the ideal prerequisites for competently analysing and evaluating the financial markets.

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