Price Action Binary Options Trading Strategies
As Price Action traders we analyze the movement of price across time. Things are kept simple and clean. No confusing indicators, no cluttered charts. Price action provides us with all the signals we need to trade binary options profitably, therefore it is one of the first binary option strategies you need to fully understand.
Binary Options GuideIf you are new to Price Action trading please review our binary options guide before continuing on with the section below.
One of our main weapons of choice as Price Action traders are price charts. Price charts show us how the beliefs and actions of all market participants change over time. From studying these price charts we can pick up on the clues or signals the market leaves behind. Then we combine these signals to create high probability trading setups – Price Action Strategies.
Binary Options Strategy to Save Money – Trade Multiple Time Frames
When making a decision it’s generally a good idea to look at the situation from different perspectives. Price Action trading is no different. Analyzing a trading signal from higher time frame charts allows us to get multiple perspectives on that one trade. If all the time frames are in agreement, that’s great – we may have a potential trade. If not it’s something to note down and to be cautious of. Mastering this binary options strategy alone could save you a lot of money.
Multiple time frame analysis is a sure way to increase your chances of success. Think of it as consulting the ‘higher powers’. If I’m trading binary options that expire every 15 minutes then I’m not just looking at a 15 minute price chart; I’m scanning multiple charts – 60 minute, 240 minute and daily charts. Now I can see how Price Action is developing across numerous time horizons. If all the time frames are telling me the same story I know I could be onto a high probability trade.
It is important to note that you do not need to get too carried away with analyzing every time frame possible. A common mistake traders make when first learning binary options trading strategies is to analyze them too much and then not take any action for fear of losing money – also known as analysis paralysis! As Price Action traders our goal is to keep things simple, not over complicate them. I recommend reviewing 2-4 higher time frames when evaluating a potential trade i.e. if I was trading 60 second binary options I would look at the 1 minute, 2 minute, 5 minute and 15 minute charts.
Only Trade Great Signals
“There is the plain fool who does the wrong thing at all times anywhere, but there is the Wall Street fool who thinks he must trade all the time.”Jesse Livermore
To profit from binary options we need to trade high probability Price Action setups. To achieve a higher probability of success we need to stack many Price Action signals in our favor. For instance, you might spot a good looking candlestick pattern on a price chart and think it looks like a good trade. But what else does this potential trade have going for it? Will you be trading in the same direction as the predominant trend? Is the price bouncing off any significant support or resistance levels? Is the trade backed up by higher time frame charts? These are the questions you need to ask every time you place a trade. Don’t just look for trades that meet the base requirements of your strategy. Be picky. Only take the standout trades. If there are no obvious trades that meet or exceed your requirements then it’s better not to trade that day at all, there will be new opportunities the next day.
You can probably start to see already that it’s the combination of several key binary options trading strategies that will lead to your ultimate success in binary options trading.
Losing is Part of Trading – Even With the Best Binary Option Strategies
Even if you are extremely disciplined, armed with the very best binary option strategies and only take the very best trading setups, you’re still going to lose some of the time. This can be minimized to some extent but some losses are inevitable. Don’t beat yourself up when you lose on a trade, it happens to the best of us and always will.
Losses are a natural part of trading – you lose some, you win more! I like to think of losses as a cost of doing business. If I were to run a bakery my business would have to incur the expense of the employees, rent, flour, yeast, grains and baking equipment. But would I be worried? No, because in the end I know I can sell bread for a profit well over and above the cost of all the expenses. The same mentality should be applied to the trading business — losses are just an expense we must incur to have wins.
Learning to deal with losses comes with time. The sooner you learn to accept them, the sooner you can progress as a professional trader. Remember to implement the binary options trading strategies you learn as these will help you to stick to the rules, which should result in more wins than losses. And if you’re not OK with losing don’t trade, or at least trade on a demo account until you gain confidence.
The Most Important Binary Options Strategy of All
Other than at some point taking action and choosing a binary options broker, perhaps the most important aspect of being successful in binary options trading is not knowing when to enter, but knowing how much to trade with. The problem is that trading naturally incurs losses, but no trader knows for sure which trades will lose and which will win. All we know is that on average x% will win and y% will lose. So how much do we risk on each binary option trade when we don’t know the outcome?
Simple Yet Key Binary Options Strategy – Money Management
One of the simplest money management strategies to implement is the percentage risk model. Here the amount risked per trade is a fixed percentage of the total account. The percentage amount can vary from 1-10% and it generally depends on the size of your account and the type of binary options you trade. For instance, if you had an account value of $300 and they chose to risk 1% of your account per trade, you would stand to lose $3 and gain $2.40 ($3 * 80% payout). $2.40 isn’t a lot of money and most traders would look to yield more from binary options. However, if you were trading 60 second binary options and placed 30 trades a day then a lot of small wins could start to add up nicely.
If on the other hand you were trading daily options and only traded 1-3 times a week with the same 1% of your account on each trade, you would have to question whether the outcome is really worth the effort for such little reward. In this case risking a higher percentage per trade might make more sense.
The outcome of any trade is randomly allocated, regardless of which binary option strategies you follow. Thus, whilst you can enjoy a series of consecutive wins, it is not uncommon to experience multiple strings of losses in a row. If you were risking 30% of your account per trade, and then experienced 4 losses in a row, your account would be crushed and you’d be out of the game. Money management is all about understanding your risk profile, as well as trying to maximize the amount you win while minimizing the amount you lose. The aim of course is to keep you in the game longer and exiting profitably.
To learn how to apply the trading concepts above check out the Retracement Price Action Strategy.