Those who spent at least several hours online with trading platform in search of a successful strategy probably noticed that strategies in options not always work. Legitimate question may occur: if the easiest option trade involves predicting the direction of the trend, and guess it’s a 50/50 shot, then why do we need strategy if they don’t provide the result?
Strategies in options: what determines the success of the trade
Strategies are paid and free strategies on the basis of one or more indicators copying of trades, both free and paid expert advisors, both free and paid signals — all of which should make trading as profitable as possible. But in the end still about 90% of novice traders lose their deposit. Why is it so?
Strategy in binary options is a set of methods (technical, psychological, mathematical, fundamental), designed to make the forecast as accurate as possible. And it is logical that for each case the strategy should be individualized. This is comparable to the game of chess, where the scenario on the board depends not only on the strength of the partner and the game that he sets, but of momentary circumstances. Similarly, in options: a strategy, based on various indicators not only depends on the asset and time interval, but also on the situation on the market.
- Important: do not think that the free strategy is the key to success in binary options trading, and even more do not consider that it can bring 100% of success. Every trader should develop his own personal tactics, built on the obtained knowledge, experience, psychology and desires.
Binary options trading based on technical analysis
There are hundreds of technical analysis indicators. Their task is to determine the direction of the trend, but “a nuclear bomb always hits the epicenter” — if the direction of the trend exists, the indicator will display it, but the trend will also be visible to the naked eye. Theoretically, the indicator lines should take into account the historical experience (based on historical data), but exactly the same situations do not happen. The result: a technical strategy in options triggered by time.
Technical analysis is more applicable to the Forex which can be a 50/50 probability to earn higher profits. In options, where profits are fixed, technical analysis begins to falter, leading to losses in the medium distance.
Binary options trading based on fundamental analysis
A common method of speculative trading, for example, after the release of important reports or force majeure events. Strategies based on fundamental factors, can generate income, but because of the unpredictability of news are not the basis for continuous trading. This method has several disadvantages:
- Publishing of reports from, for example, the USA is relatively predictable, and in the quotations the result is already laid smoothly. That is, the coincidence between the forecast and reality does not always change the prices news. It is also difficult to predict the balance of forces “bulls” and “bears.” Because the one who makes a bet before the news or right after it, plays the lottery;
- news can be manipulated. It is enough to apply the material on one side only to shake the market in the right direction. Accordingly, the inexperienced trader is conducted in the manipulation of losing money in favor of the one who rocks the market.
Fundamental trade is applicable to the futures or spot assets, but not to binary options where the trade is short term and has a fixed profit.
In the analysis of economic processes mathematical modelling is indeed the case. But it has nothing to do with those strategies, which are based on mathematical analysis offered by binary brokers or are sold to developers. Binary options are not options, but only a deal between a trader and a service regarding response of the trend. If in Forex there is purchase and sale of an asset, binary options is a simple bet.
It happens that brokers “simplify” the task of the trader, offering trading signals. And even offer a free trial period. As the terminal is under control of the broker, then “suddenly” signals will be at a loss from the occurrence of a paid period.
The strategy is based on the fact that each next bet after a losing trade is doubled. The calculation is done on the theory of probability. A similar strategy in the options requires a large deposit. I think it makes no sense to talk about the risks, it is enough 3-4 times in a row the transaction to be unprofitable (probability theory works on a large number of events) to be left with nothing.
Summary. Strategy in options doesn’t not work for one simple reason — wrong approach of the trader. Binary options trading is more like 50% of intuition and positive attitude and 50% tactics. If all strategies would be profitable, then everyone would have earned a profit. But how could it be taken, if there is no generation of more money? Therefore we strongly advise you not to spend money on paid signals or strategies, and to practice tactics and to develop your own trading mechanism. And of course rely on intuition!