The cautious trader’s most used strategies are a great tool to reduce your risk when trading binary options. These are the top three strategies:
- Trading high / low options on long time frames,
- Trading important news with boundary options,
With these strategies, every trader can trade binary options with low-risk and still turn a big profit.
The cautious trader’s most used strategies: The 2 best strategies
Both of the strategies in this article work for a specific type of trader. Please do not mistake the fact that we talk about one strategy before the other as a ranking. Pick the strategy you feel most comfortable with.
Trading high / low options on long time frames
This strategy combines two elements that are basic elements of cautious trading: high / low options and long time frames.
High / low options allow you to win a trade with the smallest market movement possible, which provides more safety than other binary options types that require stronger movements. Long time frames are less erratic and more predictable than shorter time frames, maximizing your chances to win your option.
In the case of binary options, long time frames start with an expiry of at least 4 hours. Longer expiries reduce your risk, and if your broker offers long-term options with end of day expiries or expiries of days and weeks, these tools will help you to create an even more cautious strategy.
To find trading opportunities for this strategy, use technical analysis. Understanding long term trends, technical indicators such as moving averages, and momentum indicators should provide you with plenty of options to create your own winning strategy.
While these tools take time to learn, they have one big advantage: they allow you to find trading opportunities in any market environment. If you monitor a few assets simultaneously, you will easily be able to find a few trading opportunities every day.
Trading important news with boundary options
Trading the news is a double-edged sword. Every trader can quickly grasp the concept, but the market is unpredictable and often reacts in ways that are impossible to anticipate.
If unemployment has dropped one percent, for example, this is good news. But can you predict how many traders have expected more and will be disappointed anyway? Maybe the majority of traders expected a drop of two percent and is now disappointed, causing the market to fall.
It is generally difficult to predict how the market will react to specific news. There are simply too many factors involved.
Traders of conventional assets have therefore mostly stopped to trade the news. With binary options, however, you have a tool that allows you to make money with news anyway – one of the great advantages of binary options.
To understand this concept think of the news in a dual context: news can be good or bad, and it is hard to predict the market’s verdict, but news can also be important or unimportant. You might not know how the market will react to important news, but you know that it will react. This knowledge is enough to win you a binary option.
Binary options offer a tool called boundary options. Boundary options define two target prices – one above the current market price and one below the current market price. Both target prices are equally far away.
With boundary options, you can trade news effectively. You do not have to predict where the market will move, it is enough to know that it will move – exactly the situation you face when important news is to be published.
If a government releases unemployment numbers at 2 PM, for example, you can invest in a boundary option at 1:55 PM and use a 15 minute expiry. A short expiry keeps the target prices closer to the current market price than a long expiry, which provides you with the best chance to win your option.
To safely trade this strategy, you only need to be able to identify important news. As a general rule of thumb, you should trade important economic data such as unemployment numbers by investing in the country’s stock index and earning reports by investing in the company’s stock.
Both strategies offer the advantage of combining low risk with high profitability. If you want to find many trading opportunities in any market environment, we recommend using long-term high / low options and technical analysis. If you want to avoid having to learn technical analysis, trade the news with boundary options.