- It used to be that the only way to get any meaningful results from a stock trade was to follow the old rule “buy low and sell high.” This is no longer case, as binary options trading doesn’t work that way. The other given was that in order to get any meaningful profit, you’d have to purchase stocks in large amounts, and part of the reason for that was to negate the loss of fees charged by brokers just to even make the trade. This is also not the case.
- Because of all these changes, binary options trading requires a new way to think and strategize, even though the goal is still the same; to profit. With that in mind, we’ve got a few tips that traders might want to keep in mind if they’ve decided that they’d like to focus on the stock market as their area of interest for binary options trading.
Stocks Don’t Need To Do Well
- This is going to be a difficult notion for traditional stock traders to accept, but a stock with rising price is not necessarily the be-all, end-all of successful binary trading. In fact, that’s just one of a few acceptable permutations by which a binary trade can be successful.
- The reason for this is that with binary trading you are not actually buying stock, you are simply making a prediction on how its price is going to move. In other words, you don’t need to make money by selling the stock later. Binary options trading has in common with Forex currency speculation than it does with traditional stock investment and trading.
So binary options traders—if they don’t, already—need to get out of the habit of thinking that the only good stock movement is upwards. If a stock’s price is rising and you make a “call” trade, you can profit. If a stock’s price is dropping and you make a “put” trade, you can still profit. Take advantage of this expanded opportunity and don’t get trapped in the traditional thinking.
Trends Are Good
- The best friend of the binary options trader, and the basis of many classic binary options trading strategies is the trend. A trend in binary options terms is merely a consistent type of price movement that sustains itself over a period of time. If a stock’s price is rising steadily, that’s a trend. If it’s dropping, that’s also a trend.
- This is the type of opportunity that binary options traders look for because, regardless of direction, a consistent movement is something that makes binary options trades much easier. Knowing that a price will continue to rise or fall for a sustained period of time means you can rely on that stock to make your trades and continue to profit as long as the trend is stable and continues. It’s certainly not a fancy strategy, but it’s one that never fails to deliver for people willing to take advantage of its simplicity.
Fluctuations Are An Opportunity
- For a traditional trader, one of the most unpleasant experiences when tracking a particular stock is wild fluctuations both up and down. This usually indicates a lot of uncertainty with a company, and is reflected in the way that the buying confidence rises and falls in time to the price of the stock.
- For a binary options trader however, these kinds of fluctuations actually present a trading opportunity that a traditional stock trade doesn’t offer. Because of the up/down nature of binary options trades, and the speed at which these trades can occur, it’s actually possible for binary options traders to place both a “call” and a “put” trade on the same stock, at different points in a trading period, and actually profit from BOTH. This is just one more unique property of binary options trading that lets traders take advantage of unusual market situations.
Use Your Tools
- Make sure that you study up on exactly what a candlestick chart is, and learn how to read one properly. This is one of the best tools for visualizing data in a fast, efficient manner that binary options traders have. Candlestick charts represent the buying price, selling price, and movement of a price in a stock during trading periods.
- These are all vital pieces of information that can be very helpful for a binary options trader. It’s important to get comfortable quickly with how this data is presented, and figure out what it means to the trader, because anyone that can use this information is arming themselves with the data they need to make smart trading decisions, and considerably raise their chances of success with their trades. It’s the difference between planning and strategizing and merely making a random bet with your own money.
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