While the safest binary options strategy is always the strategy that suits your personality the best, there are a few characteristics that generally identify safe strategies. Regardless of which strategy you trade, you can always use these characteristics to make your strategy safer. These characteristics are:
- Using mostly high / low options,
- Investing in long expiries,
- Validating your signals with another indicator.
In this article, Safest binary options strategy, you will learn the details of these characteristics and how to use them to make your strategy safer.
The safest binary options strategy: The three elements of safety
Binary options allow for an almost endless amount of strategies. Some of them will suit you and some of them will not. Generally, the safest strategy for you is a strategy that you feel comfortable with.
Nonetheless, any strategy allows for many little variations. These variations define a strategy as safe or risky, and by adjusting these variations in the right way, you can turn any strategy into a safe strategy. Let’s look at all of these variations one by one.
1. Binary options type: Safe strategies use high / low options
There are many different types of binary options. Each option type offers a unique relation of risk to reward that makes it the perfect fit for a certain trader personality. For risk-averse traders, the best binary options type is high / low options.
High / low options allow you to predict whether the market will rise or fall over a given period of time. This way of investing allows for relatively safe predictions because even the smallest movement in the right direction will win you your option.
Compared to option types such as one touch options, where the market has to move far enough to reach a distant target price, or ladder options, where the market has to close above a distant target price, high / low options allow for much safer predictions. If you want to keep risk low, trade your strategy with high / low options.
2. Expiry: Safe strategies use long expiries
Long expiries greatly reduce the risk of your trading. On long time frames, the market creates more long lasting trends and holds its direction longer than on short time frames, which are more erratic.
As a general rule, you can assume that choosing a longer time frame reduces your risk, while choosing a shorter time frame increases your risk. Of course, there are nuances to this rule in real-life trading, but a prediction with an expiry of one hour will always be safer than a prediction with an expiry of 30 seconds.
If you want to reduce your risk, prefer long-term options and long expiries for high / low options over 60 seconds options and short expiries.
3. Trading signals: Safe strategies combine indicators
Signals based on a single indicator are generally riskier than signals that are validated by more than one indicator. To create safer signals, you can add another indicator to your current strategy.
If you are trading simple candlestick formations, for example, you could add trend analysis as a second indicator and only invest in candlesticks that point in the direction of the market’s main trend while you ignore candlesticks that point into the opposite direction of the main trend. With this simple change, you should be able to make a lot safer predictions.