Thursday, 2 March 2017
5 Most Important Tools for Binary Options Traders
Binary options trading is one of the most technically advanced types
of financial trading. From the very beginning, binary options were based
on internet technology and dependable on technological advance. This
type of trading was developed in the internet age and there was no need
to adjust it to new technologies like some other types of trading, but
some old techniques and tools are still used for market analysis.
Many traders neglect the importance of all possibilities the modern trading platforms provide. Platforms are nowadays equipped with trading instruments, tools and features that can help traders increase their profit, but only if they know how to use them. Following the chart available in platform doesn’t provide enough information for successful trading, as traders must know how to analyze it. That’s when tools come into scene.
More about charts read in Academy.
Some tools should be used directly on the chart, before even making a trade, during the process of analysis, while others are meant to be used during trading, in case something goes wrong, or trader simply recognizes there is the possibility to make most out of the good opportunity.
Here is the list of 5 most important tools that can help traders maximize their opportunities in binary options trading.
Candlesticks charts
There are many charts that are used for financial trading, and candlesticks
are among most popular and most useful ones. Candlesticks were
developed by Homma Munehisa, rice trader from Japan. Besides creating
candlesticks technique, he was also among the first to recognize the
importance of psychology in trading in his book “The Fountain of Gold –
The Three Monkey Record of Money”
Every candlestick represents certain time frame (like one day), and their color represents the direction. White or green candlesticks are a sign that the price goes up while black or red color stands for downward direction.
Every candlestick has two parts – body and wick. The longer the wick, the bigger the chances that market will move in the opposite direction. This information can be used as a signal, but is better to confirm the information by using other tools as well. Candlesticks should be used as part of the analysis prior to the trade execution.
More about candlesticks (also known as bricks or columns) can be found here.
Resistance level or line is a line that is placed on the top of the chart. It shows the highest values over the selected time frame. This line basically resists the urge of the trend to break it. The support line is on the bottom of the chart and is calculated based on lowest price values. It supports the uptrend.
Here is an example. Trader wants to trade binary options on certain asset whose price maximum, in certain period of time never crossed $50. This means that $50 can be considered resistance level. After the price of the asset is getting closer to $50, there are bigger chances it will change the direction, and trader should invest in put options.
More on various tools provided by different platforms find here.
In cases when things are going differently from the plan, there is still a chance to make a profit. Rollover allows a trader to extend the expiry time. This can be useful when a trader knows he made the right decision and that it takes just a bit more time to achieve profit.
DoubleUp is another useful tool that can be used to increase profit. It can be used in case when trader believes the adverse price is not here to stay, he chooses to double the investment, but also double the profit in case of success.
Brokers
are really doing their best to provide full service to their traders.
As the competition in the binary industry is getting bigger and bigger,
brokers are forced to provide more and more useful tools. Such tools are
sell and buy, but traders are sometimes intimidated by their strong
names.
The logic behind these tools is easy and simple. A trader buys an option for $10, but the price movement takes an unexpected turn. The trader can use sell tool in order to gain part of the investment back. In the case the trade really ends the wrong way, the trader didn’t lose entire sum, but only part of it, and still has, let’s say $6 from the investment.
On the other side of the planet, there is a trader that believes that this is a valuable trade that will end up in profit. He buys it and continues to trade with it
Demo accounts are equipped with same tools, assets and options types as a real trading platform. They help inexperienced traders to learn how to use various tools but experienced traders can profit from it as well. For example, they can test their strategies and analysis, and that way, optimize their trading results and achieve better profits. All this can be done by using virtual funds provided with the account. Those funds are not real profit but act as the real money on the demo account. Traders can multiply the funds, or lose them, depending on their skills, but the real money will stay intact. Such accounts are usually limited to a certain period of time, usually seven days. It is still a great opportunity for all binary options traders to become more successful in the trading process. After the demo trading has been experienced, trading on real money platform should be more successful and pleasant experience.
Many traders neglect the importance of all possibilities the modern trading platforms provide. Platforms are nowadays equipped with trading instruments, tools and features that can help traders increase their profit, but only if they know how to use them. Following the chart available in platform doesn’t provide enough information for successful trading, as traders must know how to analyze it. That’s when tools come into scene.
More about charts read in Academy.
Some tools should be used directly on the chart, before even making a trade, during the process of analysis, while others are meant to be used during trading, in case something goes wrong, or trader simply recognizes there is the possibility to make most out of the good opportunity.
Here is the list of 5 most important tools that can help traders maximize their opportunities in binary options trading.
Candlesticks charts
There are many charts that are used for financial trading, and candlesticks
are among most popular and most useful ones. Candlesticks were
developed by Homma Munehisa, rice trader from Japan. Besides creating
candlesticks technique, he was also among the first to recognize the
importance of psychology in trading in his book “The Fountain of Gold –
The Three Monkey Record of Money”
Every candlestick represents certain time frame (like one day), and their color represents the direction. White or green candlesticks are a sign that the price goes up while black or red color stands for downward direction.
Every candlestick has two parts – body and wick. The longer the wick, the bigger the chances that market will move in the opposite direction. This information can be used as a signal, but is better to confirm the information by using other tools as well. Candlesticks should be used as part of the analysis prior to the trade execution.
More about candlesticks (also known as bricks or columns) can be found here.
Support and resistance levels
No matter what type of chart trader is using, support and resistance levels are of crucial importance. Chart can be in shape of candlestick, lines etc., but there are two lines that can change the direction of entire process. Resistance and support lines should be seen as possible limits in market movements.Resistance level or line is a line that is placed on the top of the chart. It shows the highest values over the selected time frame. This line basically resists the urge of the trend to break it. The support line is on the bottom of the chart and is calculated based on lowest price values. It supports the uptrend.
Here is an example. Trader wants to trade binary options on certain asset whose price maximum, in certain period of time never crossed $50. This means that $50 can be considered resistance level. After the price of the asset is getting closer to $50, there are bigger chances it will change the direction, and trader should invest in put options.
Rollover and DoubleUp
These two tools should be used after the purchase is made. Sometimes traders place reckless trades, but sometimes market takes an unexpected turn. Even though binary options are considered to be one of the safest types of financial trading, there is no 100% guarantee of success. Reason for this is that it can happen that events outside financial sector influence the market (war, natural disasters etc.).More on various tools provided by different platforms find here.
In cases when things are going differently from the plan, there is still a chance to make a profit. Rollover allows a trader to extend the expiry time. This can be useful when a trader knows he made the right decision and that it takes just a bit more time to achieve profit.
DoubleUp is another useful tool that can be used to increase profit. It can be used in case when trader believes the adverse price is not here to stay, he chooses to double the investment, but also double the profit in case of success.
Sell and Buy
Brokers
are really doing their best to provide full service to their traders.
As the competition in the binary industry is getting bigger and bigger,
brokers are forced to provide more and more useful tools. Such tools are
sell and buy, but traders are sometimes intimidated by their strong
names.The logic behind these tools is easy and simple. A trader buys an option for $10, but the price movement takes an unexpected turn. The trader can use sell tool in order to gain part of the investment back. In the case the trade really ends the wrong way, the trader didn’t lose entire sum, but only part of it, and still has, let’s say $6 from the investment.
On the other side of the planet, there is a trader that believes that this is a valuable trade that will end up in profit. He buys it and continues to trade with it
Demo Account
Many lines of text are written about demo accounts. And while the demo account is not a tool per se, it can be considered one as nothing helps traders improve their trading as it does. Demo account is the best tool for learning binary options trading.Demo accounts are equipped with same tools, assets and options types as a real trading platform. They help inexperienced traders to learn how to use various tools but experienced traders can profit from it as well. For example, they can test their strategies and analysis, and that way, optimize their trading results and achieve better profits. All this can be done by using virtual funds provided with the account. Those funds are not real profit but act as the real money on the demo account. Traders can multiply the funds, or lose them, depending on their skills, but the real money will stay intact. Such accounts are usually limited to a certain period of time, usually seven days. It is still a great opportunity for all binary options traders to become more successful in the trading process. After the demo trading has been experienced, trading on real money platform should be more successful and pleasant experience.
10 Rules for Smart Binary Options Trader
1. Watch out for trading psychology
Humans are all but rational. While our analysis might be guided by clear rules how to predict binary options outcomes, it is dangerous to succumb to one’s own emotions when trading. Free and fear can both cause suboptimal trading results. Make sure to follow strategies, hunches do not help!More on psychology in trading:
- How to control fear in binary trading
- Market psychology
- Rober Schiller on How Psychology Drives Markets (YT Video)
2. Plan your risk exposure
Following the first rule, try to think rationally an make sure to avoid risks that can affect your existence. Be aware that risk is part of the game and never underestimate it! Make sure only portion of the portfolio is in high risk trades.
More info on risky assets and crises.
3. Trend is your friend
There are various trends that can be seen in the market. Fundamental trends are usually longer lasting an require clear thinking when volatility ensues. Technical trends are more short term and require a more active approach. Riding a trend makes sense if there are no signs that signal possible reversions (like high RSI, late arrivals etc…)
More resources on trends:
- What is a trend?
- Simple trendlines in binary options
- Trend indicators
4. Binary options trading is an art
While many strategies and technical analysis rules may look as if they can promise secure binary options trading outcomes – one thing is sure, trading is not a science that has fixed rules (at least not the ones that are easy enough for us to grasp). Binary options, as all financial markets are places where humans (and many computers) exchange. They are rules by their own logic which no individual investor can see since no one holds all the information. In binary options this means that experience is needed as well as good education provided by the broker.
5. Recognize point of entry – exit on time
See fundamental indicators as a strength that will be a signal for price move in the future. Use technical reasoning to know when the movement is done and reversion can happen. Fundamental movements result form macro factors and firm-specific news. Technicals are seen in charts of the binary options platform.
6. Patience is a virtue
As already noted in rule no. 3, while riding a trend there will come volatile times when it might look good to exit the binary options position through the early close. But even if this risk management tool is helpful, it is only useful as much as we follow rule no.1. Patience always wins over irrational thinking in binary options trading.
7. Use Stop-Loss and be Humble
It is good to overcome greed by limiting daily winning trades. Also, it makes sense to go in the opposite direction and limit losses. This system of checks and balances, together with the rule no. 2 will help long term trading success even if it looks limiting in the short term.
Learn about early close option.
8. Master the Money Management
It is crucial not to make too big trades relative to the overall amount of funds on the binary options trading account. Most binary brokers will enable 8 or more minimum trades with the lowest minimum deposit. Trade size of 5% is usually the rule of thumb.
More info on money management:
- Trading Plan – Money Management
- Money Management – Portfolio Management
- Money Management – Avoid Overtrading
9. Do not Overexpose to One Trend
It is fine to ride the trend but it should be wise in terms of the overall portfolio risk management never to invest more than 15% of existing capital in a single trend because this creates imbalance in portfolio. If risks materialize, the portfolio and capital are preserved.10. Smart trading knows limits of financial exposure
Investments are simple when it comes to risks. The higher the risk, the higher the reward. This rule is a combination of several rules, the most notable rule being that traders never put all their money into trading. Trading is fun, but the error of trading funds one cannot afford can be very costly in terms of physical and mental wellbeing. This is a mistake desperate people often make, creating a vicious circle. Never rely on binary options trading to solve your life’s problems!
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