by Girvan Lambert
Over the last few months I have covered a mind-boggling number of trading strategies/systems for binary options. Most of these systems were based on quite advanced technical analysis though, and as such, it is safe to say that the vast majority of them were simply not suitable to be used by beginners. The problem is though that even as a beginner, you need to have a system capable of bending the binary option equation into your favor, because otherwise the mathematical odds will be too adverse and you will never stand a chance to reach profit-land. Trading binary options blindly is a dead-end: you will not get better over time and you will lose your bankroll: it's as simple as that. In this piece I'll take a look at some of the strategies that are simple enough to be extremely appealing for beginners, yet they are efficient too if properly applied and used.
The first such strategy would be the one based on a the pin-bar known as the Shooting Star. The Shooting star features a small body and a long wick and it's usually a pin-bar which signals a trend-reversal. If we really want to delve deep into this strategy: there are a number of such pin-bars which signal bullish or bearish reversals and they're all exploitable. Now, as far as the shooting star is concerned, the position of the wick is the trading clue: if it's up one goes short, if it's down, one goes long. The trading signal can be confirmed through the use of the stochastic oscillator. The good news regarding this strategy is that if properly used, it can yield a 70% win-rate, which is indeed enough to land one well within profit-territory in the long-run.
Trend-following isn't just one of the simplest and easiest-to-understand strategies aimed at the trading of binary options, it's also a very efficient approach. Trends are relatively simple to define: an uptrend is characterized by progressively higher highs as well as higher lows. In the case of a down-trend, we have progressively lower lows and lower highs. The trend-lines are what essentially define these up- and down-trends. To get a trend-line associated with an up-trend, we connect the lows. To do the same for a downtrend, we connect the highs. How do we use these trend-lines for trading? After we connect the first two lows in the case of an uptrend, we watch as the price approaches the trend-line again. Because the trend-line should act as a firm support in this instance, we watch for the development of specific bullish pin-bars which do indeed signal the reversal of the price-action and its bouncing off of the trend-line again. As always, we can use the stochastic oscillator to gain further confirmation of the upcoming trend reversal. The rest is child's play. The trend line strategy can also be combined with divergence and with the Fibonacci levels, so the possibilities here are quite abundant indeed.
While the above said strategies are indeed efficient and they do indeed work (at the end of the day, they are rooted in old-fashioned technical analysis after all), there are pitfalls out there for beginners as well. Hedging for instance is such a "problematic" approach. Advocated and recommended to beginner traders by many a binary option affiliate, hedging is something that in most cases makes no mathematical or otherwise sense. I have seen articles out there recommending a $100+$50 hedged trade on a Call/Put configuration and detailing the math behind the reasoning, when the same math clearly showed the trader would be much better off from just about every angle, just placing a $40 Call trade.
The bottom line: before you adopt a strategy/trading system as a beginner binary option trader, make sure you understand the reasoning behind it. Don't just go with the flow because a supposed experts tells you to, or because you think the strategy sounds cool. Make the effort to understand how it works and why it is profitable. Bear in mind that in order to land you in profit territory, a system has to be able to deliver a winning rate of ~60%. As a beginner, you should also look into auto trading options. That's the best way to stay out of harm's way while you're extremely prone to committing mistakes.
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