subject: The Way To Profitable Binary Option Trading [print this page] Binary options trading is extremely profitable. With returns as much as 75% in an hour, you can make money very quickly. But, that fast movement of money is a double-edged sword. You can also lose money very quickly if you don't pay attention to a few basic concepts. If you follow these three keys, you will greatly improve your likelihood of making money.
Do Not Trade to Often
Warren Buffett once said, "There are no called strikes in the market." What the Berkshire Chairman meant by that was it's okay to pass on as many opportunities as you want. You don't lose money by skipping over buying opportunities. This particularly holds true with binary options, because new options with new strike prices and new expirations are being continually issued.
Becoming too active or acting too quickly will cost you when trading binaries. Relax and do your analysis. Don't trade on gut feelings or hunches. If you miss out on a money making trade, don't sweat it because there are constantly fresh opportunities opening up. Don't be hurried to jump into something simply because think it will begin to move. If you ever feel like you're over trading, relax and step away from the computer. There will be many new opportunities down the road, and you'll have a significantly clearer head to view them with.
Regulate Your Position Sizing
The awesome part about binary options trading is that you can create extremely large profits quite quickly. But, this fast movement in money is a double-edged sword. You can also suffer devastating losses before you know it. Due to this, it's extremely important that you don't enter too large of a position in any particular contract; regardless of how confident you are in the trade's odds of success. Don't get into the trap of, "betting the ranch on a sure thing". You may have a few of those trades go your way, but it's just a matter of time before one of them hurts you.
Trade size is critical because no matter how correct or how extensive your analysis is; even the most experienced traders will eventually end up in a tough stretch of losing trades. If you've regulated your trade sizes appropriately, you will be around to trade though it until trades are going in your favor.
We recommend that you don't ever put more than 5% of your binary trading account into any one option. If you get started funding your account with less than $600, you won't be able to live by this rule, because the $30 trade minimum will be over 5% of your money. If you simply don't have $600 to get started with, that's fine, but just remember that you are putting yourself at a higher risk of depleating your funds if you have a few losers in a short period of time.
Use Technical Analysis Appropriately
There are many varied techniques and theories behind technical analysis. We have found that for most profitable traders, it's not the technique that used, but how it's used that determines the ultimate success or failure of the trader. If you use a technical analysis game plan that has been back tested for accuracy, it's important that you apply it consistently, and don't second-guess the data. If you can't completely trust your strategy in this way, you're better off finding a new method.
The other critical item regarding your technical analysis is to use a time interval that is appropriate to the short-term nature of binaries. We typically recommend 3-minute charts for all options that will expire that same day, and hourly charts for any contracts that expire at the end of the week. As always, back test for accuracy within your strategy, but there's no point in using a daily or weekly chart when trading binary options.
