7 Rules For Binary Options Trading Plan No Need For ‘Plan B’

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7 Rules For Binary Options Trading Plan: No Need For ‘Plan B’

Binary Options Trading Plan

Just like anything else, there are some necessities that should be met for binary option trading.

While all other guides will help you with how to trade and what are the exceptions for binary options, this guide is specifically designed to let you know about the rules and conditions required for binary option trading.

If you are looking to become a better trade, these key components are essential in order to develop trading strategies and to earn more and more profits.

Discipline is essential to reach anywhere in life, just considering various trading strategies and copying other style will only give temporary solution and will be a roadblock being a successful trader.

It is perfectly alright to consider others trading style to learn how everything works and to get a start in binary option trading ;

But then after a point of time, you should be able to be independent and come up with own trading strategies by applying marketing knowledge, forecasting and logic.

The top 7 rules for being a successful binary option trader are:

Binary Options Strategy

Welcome to our binary options strategy section. Here you will find a beginners guide to strategies, leading on to more advanced information about things like money management, and articles on specific strategies.

Basic Strategy For Successful Trading

Strategy is one of the most important factors in successful binary options trading. It is the framework from which you base your trade decisions, including your money management rules, and how you go about making money from the market. There is no one Holy Grail unfortunately, if there were then we’d all be using it!

The two most very basic categories of strategy are:

Fundamental strategies focus on the underlying health of companies, indices, markets and economies and while important to understand, is not as important to binary options as the technical aspect of trading.

Technical trading, or technical analysis, is the measurement of charts and price action, looking for patterns and making educated guesses, speculations, from those measurements and patterns.

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Strategy simplifies your trading, takes guesswork out of choosing entry and reduces overall risk.

The text book definition reads like this; a plan of action designed to achieve a goal or overall aim, the art of planning and directing operations in order to achieve victory. When it comes to trading the goal is to 1) make money and 2) not lose money.

The number one method of achieving this goal is to use a rules based approach to choosing entries that relies on ages old, tried and true technical analysis indicators. There are dozens, possibly hundreds if not thousands, of ways to trade the market, all strategies. They can be categorized in terms of the tools used, the time frames intended, the amount of risk associated with and many other ways, these being the primary.

  • Price Action/Scalping Strategies – Price action strategies rely on the movement of the market to time entry. These can be trend following or not, long or short term and utilize bullish or bearish positions.
  • Trend Following/Directional Strategies – Trend following strategies target assets that are trending strongly to pinpoint a series of profitable entries with a high rate of success.
  • Range Bound/Short Term Strategies – 99% of the time the market, or an individual asset, is not trending but trading in a range within a high and low mark. These strategies focus on support and resistance levels, reversals within the range and short term trends as asset prices move up or down from support to resistance and vice versa.
  • Long Term/Momentum Strategies – These are the less risky of the strategies as they target stronger signals and longer term time frames. These signals have a higher chance of success but take longer to develop and longer to unfold than other types of signals.

A technical analysis indicator is, most often, a mathematical formula which converts price action into an easy to read visual format. Common types of indicators include but are not limited to moving averages, trend lines, support and resistance, oscillators and Japanese Candlesticks.

Money Management

Strategy is 1 of the 2 pillars of risk management, the other is money management. You control risk by targeting only good signals, weeding out obviously bad signals, and never putting so much money on one trade that it will wipe out your account.

Money management is the control of your overall trading fund. It should clarify trade size, and long term financial management – leaving you to focus only on trading. A well thought out money management structure should simplify:

  • Trade size
  • Risk management
  • Future growth
  • Stress

A trader with a clear financial plan should not need to be concerned with whether they can trade tomorrow, or if their trade size is correct or how they might grow investments in line with their progress. All those decisions are controlled by managing their overall capital with a clear plan.

Japanese Candlesticks

This is the most common method of viewing price charts. The candlesticks give an easy to read view of prices, open high low and close, that jumps off the charts in way that no other charting style can do. They are the basis of most price action strategies and can be used to give signals as well as to confirm other indicators.

Support And Resistance

These are areas of price action on the asset chart that are likely to stop prices when they are reached. Support is found when prices stop falling, this happens when buyers step into the market and are said to be “supporting prices”. Resistance is found when prices stop rising, this happens when sellers enter the market (or buyers disappear) and are said to be “resisting higher prices”. These areas, often represented by horizontal lines, are good targets for entries and possible areas where price action may reverse.

Trend Lines

These lines connect highs and lows formed by asset price as it moves up down and sideways. A series of higher lows and higher highs is considered to be an uptrend and a sign that prices are likely to move higher, a series of lower highs and lower lows is considered to be a downtrend and a sign that prices are likely to move lower. The trend line can be used as a target for support and resistance, as well as a an entry point for trend following strategies.

Moving Averages

Moving averages take an average of an assets prices over X number of days and then plots those values as a line on the price chart. Moving averages come in many forms and are often used to determine trend, provide targets for support and resistance and to indicate entries. There are dozens of methods of deriving moving averages, the most common include Simple Moving Averages, Exponential Moving Averages, volume weighted moving averages and many more. They can be used in any time frame, and set to any time frame, for multiple time frame analysis and to give crossover signals.

Oscillators

Oscillators may be the single largest division of indicators used for technical analysis. They include tools like MACD, stochastic, RSI and many, many others. These tools, in general, use price action and moving averages in a combination of ways to determine market health. They are displayed as a stand alone tool, usually as a line that ranges between two extremes or above and below a mid point, that can help determine trend, direction, support/resistance, market strength, momentum and entry signals.

Trading Psychology

With any form of trading, psychology can play a big part. A lack of confidence can mean missed trades, or investing too little capital in winnings trades. At the other end of the spectrum, over-confidence can lead to over trading, or increased risk – either of which could wipe an account very quickly.

So the trading psychology of the trader is very important. It can also be actively controlled or managed (at the very least, acknowledged). It is another often overlooked area of trading skill, but one well worth spending time to consider.

Read more on trading psychology and learning from experience.

A Basic Binary Options Strategy

Here is an example of some basic rules for a binary options strategy.

  • The trend is your friend, only take trend following entries.
  • In an uptrend only enter when prices are near support, in a downtrend only enter when prices are near resistance.
  • When prices are near support/resistance wait for a confirming candlestick signal.
  • When the candlestick signal appears wait for stochastic and/or MACD to confirm, a bullish crossover in an uptrend or a bearish crossover in a downtrend.
  • When rules 1 through 4 are met, enter the trade, only use 3% of account on each trade.
  • When choosing expiry use 2XCandle length. IE, if you are using 1 minute candles then 2 minute expiry, if 1 hour candles then 2 hour expiry.
  • If the trade fails examine why it did not work, make adjustment if necessary and move on to the next trade. If the trade works move on to the next trade.

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Strategies for Different Markets

Choosing a Trading Strategy

Developing a trading strategy for the binary options market requires a key understanding of how the market operates in terms of the trade contracts available, the various expiry times, and the understanding of the behaviour of the individual assets.

Unlike the forex market where the asset has to move in one direction or the other by an appreciable number of pips to the trader’s favour before profits are made, the binary options market is peculiar. Apart from the Up/Down trade which is based on direction and mimics the requirements of the trades in other markets (except the pip movements), other trade types in the binary option market operate in totally different ways. There are different trade contracts for different platforms. Some binary options contracts do not even require the trader to get the direction of the asset correct. For instance, trading the OUT contract will need the asset to hit one price boundary or the other for profit to be made. So it takes the trader being able to identify a suitable trade contract to be able to fashion a suitable strategy. What is used to trade the Up/Down contract is not the same as will be used for the In/Out contract. The contract type will determine the strategy.

For instance, trading the Up/Down contract will require a strategy that can determine if the asset will make a bullish or bearish movement. Trading the In/Out contract will require either a range trading strategy or a breakout trading strategy to identify a time when the asset stays in a range or breaks out of that range. If you are looking to develop a trading strategy for the In/Out trade, this is how your mind should be working.

In developing a strategy based on the binary options trade types to be traded, there are tools that can assist the trader. This is where chart patterns, signals services, candlesticks and technical indicators will come in. A simple tool like the pivot point calculator can be used as part of a TOUCH trade strategy with very effective results. Using tools like these will take us to the next part of choosing a strategy, which is how to understand and set expiry times.

Understanding Expiry Times

Expiry times are very important to binary options, because all trades in this market have time limits. However, not all binary options trades require time limits to be successful. Trades such as the Up/Down trades must reach expiry before the trade outcome is known. In contrast, trades such as the OUT component of the boundary trade or the TOUCH component of the High Yield Touch or Touch/No Touch trade contract must not necessarily reach maturity before the outcome of the trade is known. If a trader bets on a TOUCH outcome and the asset touches the strike price well before expiry, the trade outcome is already known and the trade is terminated as a profitable one.

So if the trader is not very good at setting expiry times/dates (and really, no trader in the market can boast of getting his expiry settings right all the time here), the binary options trading strategy will have to be tailored towards trade contracts which are not totally expiry-dependent.

Now when you identify and separate trades that are not so dependent on expiries from those that are, you can better understand what kind of strategy you would be looking at.

Understanding Asset Behaviour

The binary options market combines assets from different asset classes into one market. These assets do not behave alike. Some assets are very volatile with large intraday movements. A very clear example is gold. Some binary options assets are not traded round the clock but only at specific times e.g. the stock indices. The factors that may trigger a massive move in a stock index would obviously not be the same for a commodity or a currency. Even within the same asset class, no two instruments are exactly the same or behave alike.

An understanding of asset behaviour is therefore key to being able to develop a trading strategy for the market. It is up to the trader to study the behaviour of assets, understand the technical and fundamental indicators that will influence the behaviour and price movement of that asset, and then create a trading strategy that will work for that asset.

Demonstration

In this section, we will demonstrate the application of all the parameters we have mentioned above using a simple but effective trade strategy.

– The strategy we will use determines price bullishness/bearishness, so we will trade a Call/Put contract.

– We will trade the strategy on a one hour chart, so it will be have an expiry of one hour. We do this using our understanding that the effect we want to trade on the hourly chart, will happen in an hour.

– We want to use this on an asset that is liquid and responds to the strategy. So we will use the EURUSD.

The strategy has been used to create a colour-coded indicator, which shows a green arrow on bullish signals and a red arrow for bearish signals. It aims to trade the EURUSD because this currency responds very well to price stimuli during the London/New York overlap in the forex time zone, and the response can be delivered in an hour.

As soon as the red arrow appeared (as shown above), the signal was to trade a PUT option on the Call/Put digital option. Using this signal, the trade was executed on the binary options platform. The price of the asset (EURUSD) fell in one hour from the time the signal was generated to the expiry, producing a trade result in our favour.

This strategy (a custom strategy) fulfilled all our conditions:

a) It was suited to a trade contract on the binary options market.

b) It was a strategy that was suited to help the trader use a suitable expiry.

c) It was suited to the behaviour of the asset and above all, THE STRATEGY WAS A PROFITABLE ONE.

Binary Options Trading Strategy – Best 60-Seconds Strategies

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:

  1. Whether the market will rise or fall.
  2. 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!

Also, please give this strategy a 5 star if you enjoyed it!

Don’t forget to read our guide on regular options trading for beginners here.

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