All binary traders need a strategy. You cannot simply make it up as you go along. Your trading decisions need to follow a set pattern. If not, you severely reduce your chances of making a steady, long-term profit.
A strategy should determine what sort of binary options you trade in, what sort of assets your binary options cover, and how big investments you make. Overall, your strategy should determine whether you opt for high risk investments, or low risk investments. It is not advisable to switch haphazardly between the two.
If you trade on the background of signals, you will get professional advice to help you make winning trades. This does not mean that you do not need a strategy. A signal provider does not give you a strategy. That, you have to do yourself.
Binary Strategies and binary signals
A binary strategy is an overall plan you follow when making investments. Basically, you need to determine what sort of investments you prefer, and then stick to them. The choice is essentially between high risk and low risk investments.
A high risk investment when we are talking about binary options, is any binary option that offers a smaller chance of winning. An example would be a touch option. A touch option requires you to predict how far the market will move over a set period. This, obviously, is harder to do than simply predicting whether the market will move up or down, which is all you have to do in order to win a high/low option.
The benefit of a touch option is that you will earn a much higher return if you get it right. The drawback of a touch option is that you will lose more trades than you will win. Conversely, the benefit of a high/low option is that you will win more trades. The drawback is that each win will net you a modest return.
This means that the two strategies you can choose from – high risk and low risk – each offer different pros and cons. It becomes a question of what you prefer: winning smaller returns more often, or bigger returns more rarely. It is essentially a question of what sort of a person you are – somebody who would be happy to endure a long losing streak in order to wait for a big pay-out; or somebody who would prefer a steady stream of small winners to the occasional big score.
The important part here is that you need to stick to one strategy or the other. If you do not you will experience the drawbacks of both, and the benefits of neither. If you invest consistently in high risk options, you will, statistically, win big some of the time. If you, on the other hand, invest consistently in low risk options you will on average over time make enough winning trades to earn a reasonable profit.
If you were to switch on random between high risk and low risk you might never get that big win on a high risk option, and not make enough low risk wins for the smaller returns to add up to a handsome profit.
So, regardless of whether you rely on signals to guide your trading or not, you will still need to formulate a strategy – and stick to it!
Which strategies work best with binary signals?
It makes very little difference what sort of a strategy – high risk or low risk – you trade with when it comes to binary signals. They will both work equally well. There are, though, some things to consider. Here are some of them:
- Number of signals – if your signal provider sends you a high number of signals you can trade on per day, this can suit a low risk strategy because a low risk strategy needs a high number of trades to be successful.
- Assets covered – different signals providers offer signals pertaining to different assets. Some assets are better suited to high risk strategies than others.
- Money management – it is very important that you only invest a relatively small percentage of your total funds in each trade. An investment of around 2-5 % of your bankroll per trade is usually advisable. Make sure you never go over this limit regardless of how much you trust your signal provider.
Strategy is something that most traders will come to naturally. It will quite simply feel more comfortable to trade one way or the other. Trust your instincts, and trade in accordance with the strategy that feels right for you.