Top 10 Tips to Pay Attention When Developing a Binary Options Trading Strategy
Never risk any funds that you cannot afford to lose. This genre is high risk. Even seasoned veterans run into a bad streak at some point. Capital devoted to binary options should never be more than a small percentage of your entire portfolio. Remember the benefits of diversification;
Prudent money management principles still apply. Trading involves losses and gains, but markets range within tight spreads for the majority of the time. The opportunity for a large gain comes when the market trends dramatically in one direction or another. You have to “keep your powder dry”. The general rule is to limit your positions to 2% to 3% of your account, never exceeding more than 2 to 3 positions at any one time;
Always start with small amounts until you gain a level of confidence with the asset class that you have chosen. When the odds move in your favor, you will want to increase your chances for winning. Patience is crucial;
Do not force a trade. In other words, you do not have to be in the market at all times. You may be itching to jump in, but until your charts or other support mechanisms make a prediction seem highly probable, the best strategy is to wait. Do not allow emotions to govern your entries;
Always be aware of the calendar of events for the day, from important data releases, to central bank announcements, or to any other event that is significant enough to be on the radar screen.
Many releases occur in the morning. If you notice the market go flat for an extended period, it is usually pausing before an expected announcement;
For currencies, the opportunity to gain is highest when liquidity is highest, which happens when both London and New York markets are open;
Keep a journal to record each trade and why you bought the option. Review and learn from your winners, as well as from your losers. Experience is key when acquiring the skills you will need for consistency in this market;
If you hit a losing streak, walk away from your trading desk. Many traders follow the “3-Loss” rule – if you have three consecutive losing trades, it is best to walk away and re-think your approach. The market is always shifting and changing its personality. What may work on one day, may not hold water on another. Adapt, and move on;
Never get discouraged if you missed a big move or had several losses. Veteran traders understand that losses are part of the game, and, more importantly, that there is always another opportunity around the corner.