The binary options trade is like a bird’s eye view of the economy. It’s a form of trade where people predict the direction of a particular asset or the overall market. What makes binary options very appealing is that aside from their straightforward reward-risk variables, investors get to choose when the trading begins and ends. Binary Options can go as short as 60 seconds.
Despite having straightforward reward-risk variables, the binary options trade requires people to have good strategies in order to trade efficiently. There are several types of trading strategies and this article will tap on the most common three.
Using technical analysis
Technical analysis involves the use of charts in order to predict the price movements of assets. It is, in theory, the basis of all price predictions. Without charts, it’s impossible to keep track of price movements. Technical analysis basically means that whatever happened in the past will repeat itself again in the future since “the market remembers.” Because of this, it’s extremely important to look back and analyze candlestick chart patterns or any other technical indicator that happened in the past. There’s no shortcut to being good in technical analysis; only experience and mastery of application matters when looking at charts.
Using fundamental analysis
If technical analysis involves the use of charts, fundamental analysis involves reading business news. Fundamental analysis is about studying the overall economic situation to predict whether prices will shift or not. Let’s take a look at gold for example. Gold’s prices are declining now for a number of reasons. The U.S. Fed has just stopped its quantitative easing and is predicted to increase interest rates in the U.S. by next year – two major factors that drive the precious yellow metal’s prices down today. In addition, the tensions in Ukraine are easing now and gold’s purpose as hedge against political turmoil isn’t currently needed. Last year, when Germany decided to return home some of its gold reserves from the U.S., investors scrambled to have gold investments. They’ve deducted Germany’s repatriation program as the country’s way of preparing for an economic crisis. Physical gold is used as hedge against economic uncertainty and Germany is well aware of that. Things like these that you hear in the news are important to know whether or not gold prices will go up or down within a given timeframe. Real-time monitoring of news can help investors make sound decision in binary options.
The Martingale type of betting
The Martingale technique used in binary options demand investors to double the amount of their initial investment at each loss until a gain is achieved. It’s as simple as that. This form of strategy has higher risks than gains, since it requires investors to double their bets until their winning position of closing. The principle of the Martingale strategy is to offset losses of previous bets until an investor gains his or her target. If an investor predicts the price movements incorrectly for several times in a row, his or her losses will be extremely huge. Beginners should definitely stay away from this binary options technique.