Trading in financial markets, and especially binary options , attracts many novice traders, as it allows you to earn a good income with proper preparation.
But you shouldn’t think that everyone will be able to start earning large sums on the first day, after reading a short guide, without risking anything. The reason for losing the deposit is precisely the attitude towards binary options trading as a way to make easy money, and not as a serious business.
Therefore, in order for trading to be profitable and allow development in this area, it is necessary to decide on both the trading style and the trading methods used.
It is worth noting that experienced traders do not use any one technique, since the best results in trading are obtained when various methods and types of analysis are combined.
Binary options trading methods
There are quite a few methods for trading binary options, and at the initial stage, beginners most often start using 1-2 methods, since it takes time to master each method thoroughly. Having chosen a certain trading method, you must:
- Study the principle of operation of the method.
- Understand whether it suits the trader’s trading style.
- Test everything on a demo account by making a sufficient number of trades.
You should not rely on the fact that by looking at historical data you will be able to understand how this or that trading method works. This approach in most cases will lead to losses in real trading, since in real time everything is perceived completely differently.
If we talk about the most common and at the same time effective trading methods, we can highlight:
- Technical analysis (which has many branches).
- Fundamental Analysis .
- Indicator analysis (use of trading strategies and indicators for binary options ).
Next, we will consider each of the methods in more detail, and we will also pay special attention to technical analysis, since it includes the most simple and effective methods of trading binary options.
Note: any trading methods, no matter how effective they are, always work best according to the trend and therefore, before you start studying them, you should know what a trend is and how to determine it .
Technical analysis of binary options
The principle of technical analysis of binary options is that:
- All economic factors and influences are already taken into account in the price.
- Price moves due to price trends and trends.
- History repeats itself.
Of course, you should not take these factors literally and look for an exact repetition of the previous reversal in each movement, since there is always a deviation from the norm. But generally speaking, over the years, all markets move in the same way, and strong growth is always followed by a fall, and trends continue to rule prices regardless of market events. It is on the principle of repeating history that techniques such as trading by levels, graphical analysis, candlestick analysis and volumetric analysis work.
Support and resistance levels in binary options
Trading by levels can be considered one of the simplest techniques, since in addition to independently constructing levels or zones, this can also be done by special indicators of support and resistance levels .
The essence of trading by levels is to search for strong price points that can be observed both in a flat and in a trend. And a simple example of such trading can be the execution of transactions during a rebound from the levels:
To build levels yourself, you should pay attention to places where prices sharply rise or fall, since such price reactions in 90% of cases indicate a strong level that will be worked out in the future:
Experienced traders use not only simple price levels, but also trend channels, flats and levels from higher time frames, which makes it possible to see where the price is most likely to stop.
Graphical analysis of binary options
Graphical analysis involves searching and constructing technical analysis patterns to predict price movements, but this can also be done by a technical analysis pattern indicator .
This method has been used by many traders around the world for decades and has proven itself to be one of the most effective.
There are a lot of graphic figures:
- Head and shoulders.
- Double and triple tops/bottoms.
- Different types of triangles.
- Flags and pennants.
All known figures have long been tested not only by many traders, but also by time, and if you learn to identify them, you can conduct profitable trading without using any auxiliary tools.
Note: Levels work very well in conjunction with graphic shapes.
Candlestick analysis of binary options
Candlestick analysis of binary options, or more simply put, Price Action , makes trading even easier by tracking candlestick formations, which are much easier to learn than graphic patterns.
For beginners, at first you can use the candlestick formation indicator to simplify the search for patterns, but in the future this can be done independently without any problems.
The essence of the method is to trade using candlestick formations, such as Doji, Hammer, Pinbar, Absorption, Rails and so on.
But you shouldn’t think that to successfully use them you need to learn and remember all the candlestick patterns, since this is still almost impossible and there are tens of times more patterns than those mentioned above.
If we talk about experienced traders, they use candlestick formations in conjunction with the trend and levels, thanks to which they can see very precise places to buy binary options.
Volume analysis of binary options
Not the most popular, but quite effective method of trading binary options is volumetric analysis, which can be divided into:
- Analysis of vertical volumes.
- Analysis of horizontal volumes.
- Cluster analysis .
The essence of volumetric analysis comes down to searching for large volumes that will indicate the strength of sellers or buyers. Such volumes can be either targeted or with a specific price or time range.
Most often, traders carry out analysis using vertical volumes, which are also available in the MetaTrader 4 terminal . But it is worth noting that volumes from MT4 are tick volumes and do not reflect the full picture of what is happening, although they can be used in analysis.
You can also use horizontal volumes, or, more simply, the volumetric profile of the market. Thanks to the market profile, you can see powerful price zones, from which in most cases the price bounces, or, after breaking through such a level, it returns to it for a test and a new rebound.
The advantage of the profile is that tick volumes are also suitable for it without any problems, and it is built using indicators that are free.
It is worth noting that the low popularity of this method is due to the difficulty in understanding the essence of volumes, as well as the lack of real volumes in some markets. For example, the Forex market is decentralized and does not have one common platform, therefore the volume of financial transactions for the purchase of currencies cannot be calculated. But on the American stock and derivatives markets you can see real volumes, since the assets of these exchanges are traded in one place, but to obtain such data you need to have a special paid terminal or use paid services.
Fundamental analysis of binary options
There is a small part of traders who fully understand and use fundamental analysis in trading. Fundamental analysis involves taking into account various macroeconomic indicators, economic factors of different countries and the world as a whole, as well as monitoring the latest news from the world of finance and politics.
Fundamental analysis also takes into account the study of events such as natural disasters, catastrophes, wars and much more. A simple example can be considered the cases of earthquakes in the United States, after which the dollar exchange rate could fall by a large number of points in a matter of days.
Of course, there is news that may seem important, but will have little or no impact on the market, so fundamental analysis involves extensive study of many factors.
It is important to understand that this trading method is absolutely not suitable for beginners, since fundamental analysis is often confused with using an economic calendar :
But the economic calendar is only a small part of the analysis and its use does not indicate an understanding of this method.
To understand what factors can lead to the growth or decline of an asset, it is necessary to understand the economies of countries, and most often for this it is necessary to receive specialized education, which takes many years of study. Of course, you can learn to understand economics on your own, but this approach will most likely take much more time in terms of learning.
It is also worth noting that fundamental analysis is not suitable for short-term trading and there is absolutely no point in studying it for those who like quick transactions.
Indicators and strategies for binary options
A special place in binary options trading methods is occupied by analysis using indicators or trading strategies, since this method takes almost the first place among traders, and especially among beginners.
The advantages of using indicators include:
- Simple and clear signals.
- Quick analysis.
- Ease of use.
- Availability of indicators for any trading style.
And the indicators themselves can be divided into the following types:
- Trending.
- Scalping.
- For short term trading.
- For medium-term trading.
- For long-term trading.
And for such types as:
- Oscillators.
- Histograms.
- Volumetric.
- Signal.
Also, indicators can be either complex (professional) due to complex trading rules, or simple, since the rules will be clear even to beginners. In addition, there are both paid and free indicators, but they all work on the same principle, namely, to generate accurate trading signals.
You can often notice that inexperienced traders attach very great importance to indicators, which is not correct, since there is no such indicator that would bring profit in 100% of cases, so the search for the Grail for binary options only leads to a waste of time and to nothing more.
But of course, all of the above does not mean that there are no working and profitable indicators or strategies. Any tool can be profitable if you use it correctly and study each of its elements. Examples include video reviews of some effective indicators and strategies for binary options from our YouTube channel:
It is worth noting that in order for a certain strategy or indicator to be profitable, it is necessary not only to thoroughly study the principle of their operation, but also to test them on a demo account, and only after that switch to a real account.
It is also very important to maintain competent money management and risk management, as this will allow you to maintain your trading account even in very stressful situations that may arise due to long unprofitable sessions.
Binary options trading methods
In addition to binary options trading methods, there are some trading methods:
- Independent trading.
- Trading using signals.
- Copying trades (social trading).
- Transfer of money to management.
Independent trading is the most reliable in terms of preserving capital, since no one except the trader himself can lose it, and any of the above binary options trading methods can be used in trading.
Trading using signals is also most often carried out independently, but the trader makes decisions about transactions based not on his own forecasts, but on the forecasts of another trader or service. An example of signal trading is the free signals of the Pocket Option broker .
Copy trading or social trading involves passive trading in which the trader does not directly participate. This method can be useful for those who do not have time for independent trading or do not yet have enough knowledge for this. Examples of the best services include social trading by the broker Pocket Option and social trading provided by the broker eToro.
Transferring funds to management is far from the most popular among binary options traders, and there are reasons for this, since those traders who offer their services are unofficial representatives and do not have any evidence of the stability of their activities. Therefore, you should be very wary of offers to invest in binary options traders and not invest large sums.
Conclusion
In conclusion, I would like to say that the choice of binary options trading methods should be taken seriously, since possible future profits depend on it. And also when choosing, you should take into account your trading style and psychological preparation , without which it is impossible to develop in this area.
Speaking about trading methods, it is also worth choosing what will be more comfortable, but if we talk about signals and copying trades, it is imperative to test and check everything, since you never know how effective the chosen service will be.
And don’t forget that a quality broker plays an important role in profitable trading. You can find a broker with excellent trading conditions in our rating of binary options brokers .
See also:
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