As the popularity of binary option trading has increased exponentially over the past few years, it is somewhat normal for various strategies to be developed as well. The reason for this is quite simple, as the trader speculations increase, so do the risks in binary option trading. As a result, investors need to make use of strategies in order to ensure they make a correct estimation. Following is a quick look at the common strategies that are currently being employed in binary option trading.
Call or Put option
Call or put option is perhaps one of the simplest and easiest binary option trading strategies. Let’s imagine that you want to invest $500 in a Put option in USD/EUR with the specification end-of-hour. In the event that the pair finishes trading lower at the expiry point, then you will earn a few extra hundred dollars. In the event that it finishes trading out-of-the-money, then some platforms offer a smaller compensation, typically expressed in up to 15% of the initial investment.
Using both Put and Call options
This strategy involves the possibility of purchasing a reverse of the initial investment option when the investor notices that the trade is finishing out-of-the-money. For instance, if you purchase a Call option and you feel that all odds are against you, the simplest thing to do is acquire a Put option of the same money value. The purpose of the strategy is to minimize losses but it is not very useful to earn cash.
Doubling the trades
Doubling the trades is one of the binary option trading strategies mostly employed by advanced traders. In fact, it is highly recommended that unless you have expert knowledge of the market, you should steer clear of this strategy. The obvious advantage of the strategy is that investors can earn quite a lot of profit on the initial investments. Here is how the strategy works: if you acquire a Put option, for instance, and the trade is favorable, then the best thing you can do is purchase another Put option.
The market pull
Even though the market pull strategy seems rather simple and straight to the point at first, it is important to note that its waters are also very tricky. The strategy involves purchasing a Put or a Call option whenever the market experiences dramatic and major changes. For instance, if there are some rumors about the fact that the Euro will plummet, then the trader can invest in a Put option on the EUR/JPY for instance. Given that the trader knows the pair will decline, he will, therefore, make the correct investment and huge profits from it.
It is worth pointing out that there is a minimum binary option trading experience needed for successfully applying the strategies. In general, the most experience and knowledge you have about this type of online trading the better, meaning that a highly skilled binary option trader will know to use simultaneous strategies at the right times. The most important piece of advice to remember when deciding to use a strategy is that you are in charge. Therefore, always use the strategy that benefits you as an investor or trader and your personal trading style.