Today we are going to share our binary options trading strategy with you. This strategy is designed to help you identify whether you'll like trading binaries and teach you how to trade binary options the right way. If you prefer to play it safe over gambling, you'll need a strategy or tactic to help you master binary options and other trading activities. This is where our TSG team comes to the rescue. We will provide you with the best binary options strategy.
The main reason we’re interested in learning about trade binary options is the fact that binaries simplify what we’re already doing in Forex. At the same time, binary options also allow us to make more money in the process. We are also controlling the risk.
Binary options are easy to understand. This is coming from someone who has little or no experience in the area. If your favorite approach to trading forex is to jump in on a fast price movement and ride the intraday trend for as long as the momentum lasts, you can learn how to make money trading binary options very quickly.
When we first discovered binaries, the light bulb in our heads turned on. We figured out the same thing that we’ve been doing in Forex can be done. But walk away with 75%, even 95% winning trades because we only needed to get the direction right. No need to worry about how many pips we could grasp in the process.
And that, my friends, is the real beauty of binary options.
What are Binary Options?
Binary options are a form of derivatives that have a fixed profit or loss. Trading binary options is simple. All you need to do is ask yourself a simple yes or no question. Will the price of the underlying asset be worth more than the strike price at the expiration date?
Now, let's start by understanding how binary options work.
Essentially, we can trade binary options for any type of instrument. Whether it be commodities (Gold, Oil or Silver), Forex exchange currencies (EUR/USD, GBP/USD or USD/JPY), or stocks (Amazon, Tesla or Twitter).
So, the first thing you need to decide upon is to select the asset to trade.
Second, before submitting our trades, each of these instruments has a current value at any given point in time. How to trade binary options depends on our trading skills. It is used to predict where the current value will be some time in the future. In other words, we must use our skills to predict the market direction. This will determine our success in trading binary options.
The market can only go up or down. If we believe the current value will go up in the near future, then we buy a Call option. On the other hand, if we believe the current value will go down in the near future, we buy a Put option. Read more about call options vs put options.
Third, we need to determine what the most critical aspect of trading binary options is. The expiration time will ultimately determine if you’re making a profit or not.
Trading binary options require you to correctly forecast two things:
- Whether the market will rise or fall.
- Your forecast needs to be accurate during a certain time frame – called the expiration time.
If you’re right on the market direction by the time of the expiration time, you earn a profit. Being wrong means you incur a loss. The way binary options works is that if you’re right on the market direction, you’ll get a percentage of what you initially invested in.
Typically between 75% and 95% and in some cases, even 100% of your initial investment, depending on your Binary Options Broker.
Supposing we’re wrong on the trade, then we’re going to lose the whole amount invested in the short term.
We have made a nice infographic that highlights the four steps on how to master binary options trading.
Now we’re going to focus on step two, which is how to predict the price movement. If you manage to figure this out, then knowing how to make money trading binary options will be a piece of cake for you.
Now, before we’ll outline a method on how to make money trading binary options, we always recommend taking a piece of paper and a pen and take notes on the rules of the best binary options strategy.
In this demonstration, we’re going to look at the buying Calls.
The Best Binary Options Strategy
Our team at Trading Strategy Guides is ready to share with our beloved trading community our 60-second binary options strategy. We don’t just hope this strategy will make you money, we're certain it will. The mathematical model behind this binary options trading strategy has a proven market edge.
The only tool you need to trade binary options successfully is the RSI indicator.
Even the RSI indicator is not good enough if it doesn’t have the “right” settings. The RSI default settings need a little bit of adjustment if you want to master the 1 minute time frame. We use a 3-period RSI to trade binary options profitably.
Naturally, a lower RSI period means that the indicator will tend to be noisier than normal. But it is more responsive to the immediate price action. Along with the RSI settings adjustments, we also played around with the overbought and oversold readings. We found out that by using an 80 RSI reading for overbought and 20 RSI reading for oversold condition, we get more accurate day trading signals.
*Note: Make sure you adjust the RSI settings before you jump into the binary options trading strategy.
By changing the RSI overbought and oversold line, we have eliminated the noise. So now we’re ready to highlight our binary options step-by-step guide:
Step #1: Find an instrument that is showing a low the last 50 candlesticks. Use the 60-second chart (1 Minute TF)
The 1-minute binary options or the 60-seconds time frame is the best chart for trading binary options. In other words, the best binary options expiration time is the 60 seconds time frame.
We recommend highlighting the starting point on your charts. And the ending point of your 50-candle low that you have identified. Simply draw two vertical lines on your chart through the starting point and ending point of your 50 candle low.
When you count the 50 candle low, you should always start from the current candle. Then go from the right side of your chart to the left side of your chart. If you manage to count 50 candle low, obviously the starting candle point will be your 50 candle low.
Moving forward, it’s time to put the RSI indicator in use and spot if we have extreme oversold reading or not.
Step #2: At the moment the 50 candle low develops, we need an RSI reading of 20 or below
Since this is a reversal trading strategy we need the RSI indicator to show a bullish reversal signal. An RSI reading below 20 shows that the market is in oversold territory and it can potentially reverse.
In our example below, the 1-minute EUR/USD chart is satisfying the two conditions.
Keep in mind that in order to move to the next step, we need the 50 candle low. We also need an RSI reading below 20 to happen at the same time.
We added one more factor of confluence that needs to be satisfied. If used in conjunction with the previous two conditions, it will make you a money maker binary options trader.
Step #3: Look for a bullish divergence to develop between the RSI indicator and the price.
When trading reversals, you need to be as precise as possible. The more confluence factors you have in your favor the more accurate the reversal signal is.
What we need to see here is for the price to continue moving lower after the 50 candle low was identified. At the same time, we need the RSI indicator to move higher in the opposite direction.
If the price moves in one direction and the momentum indicator moves in the opposite direction, it means they are diverging from each other. This signals a potential reversal signal.
Now it’s time to highlight how to find the right entry point for the binary options trading strategy.
Step #4: Buy a Call Option after the first candle that closes above the high of the 50 candle low
The first thing you need to do is to mark on your chart the high of the 50 candles low with a horizontal line. The first candlestick formation that breaks above this high is your trade entry signal to buy a 60-second Call option.
It's that simple!
After you decide the amount to invest and pick the 60-seconds as your expiration time, it’s time to sit back and wait 1 minute before hopefully collecting your profits.
Step #5: You collect your profits if the next candle closes higher than your trigger candle
If at the expiration time, the price is higher than the price you opened your Call binary options, you’re lucky because you’re about to check-in a big payout.
For example, if you've invested $1,000 and your binary options broker offers you an 85% payout, it means that you accurately predicted the outcome of a trade. You get back your initial investment of $1,000 plus the 85% payout which in our case is $850 in profits.
If you want to buy Put binary options, use the same binary options guide, but in reverse.
Conclusion – Binary Options Trading Strategy
Before learning how to make money trading binary options you need a great Binary Options broker. You can’t start hitting home runs right out the gate without making sure you have a binary options broker who wants you to succeed. Secondly, you need a strategy based trading technique to reveal the market direction. You only need to forecast if the price will be up or down during the next 60 seconds, making it very convenient.
We use a heuristic approach to speculate on which way the price is going to move during the next 60 seconds. At the end of the day, traders are looking for a reliable binary options system that will help them make money from trading.
The good news is that the best binary options strategy is exactly that system. Our team is built of many traders with experience in the industry, including binary options traders who know how to make winning trades. We’re ready to help you with every step of the way.
Thank you for reading!
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Don't forget to read our guide on regular options trading for beginners here.
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