Trading in financial markets, especially binary options, attracts many novice traders. With proper preparation, you can earn a good income.
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, to make trading profitable and allow development in this area, it is necessary to decide on both the trading style and the trading methods used.
Experienced traders do not rely on just one technique. They achieve the best results by combining various methods and types of analysis.
Binary Options Trading Methods
There are quite a few methods for trading binary options. At the initial stage, beginners often use 1-2 methods since it takes time to master each technique thoroughly. Having chosen a specific 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 looking at historical data will help you understand how this or that trading method works. In most cases, this approach will lead to losses in actual trading since everything is perceived ultimately differently in real time.
If we talk about the most common and, at the same time, effective trading methods, we can highlight the following:
- 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. We will also pay special attention to technical analysis, which includes the most simple and effective methods of trading binary options.
Note: Any trading methods, regardless of their effectiveness, always work best according to the trend. Therefore, before studying them, you should know a trend and how to determine it.
Technical Аnalysis of Binary Options
The principle of technical analysis of binary options is that:
- All economic factors and influences are already taken into account when calculating prices.
- 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, all markets have moved in the same direction over the years. A decline always follows strong growth; trends 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, special indicators of support and resistance levels can also be used.
Trading by levels involves identifying strong price points in flat and trending markets. A simple example of such trading can be the execution of transactions during a rebound from the levels:
To build levels yourself, focus on areas where prices sharply rise or fall, as these reactions indicate intense levels that often test in the future.
Experienced traders use not only simple price levels but also trend channels, flats, and levels from higher time frames, which allows them to see where the price is most likely to stop.
Graphical Аnalysis of Binary Options
Graphical analysis involves searching and constructing technical analysis patterns to predict price movements, but a technical analysis pattern indicator can also do this.
Traders worldwide have used this method for decades, proven 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. 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 Аnalysis of Binary Options
Candlestick analysis of binary options, or Price Action, simplifies trading by focusing on candlestick formations, which are much easier to learn than chart patterns.
For beginners, the candlestick formation indicator can initially 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 successfully using them requires learning and remembering all candlestick patterns. It is nearly impossible, as many more patterns exist than those mentioned above.
Experienced traders use candlestick formations in conjunction with the trend and levels, thanks to which they can see very precise places to buy binary options.
Volume Аnalysis of Binary Options
Volumetric analysis, though less popular, offers an effective method for trading binary options and is divided into:
- Analysis of vertical volumes.
- Analysis of horizontal volumes.
- Cluster analysis.
The essence of volumetric analysis is searching for large volumes that indicate the strength of sellers or buyers. Such volumes can target a specific price or time range.
Most often, traders perform analysis using vertical volumes, which are also available in the MetaTrader 4 terminal. It is worth noting that MT4 volumes are tick volumes and do not provide a complete picture of what is happening. However, they can still be helpful in analysis.
You can also use horizontal volumes or, more simply, the market's volume profile. The market profile allows you to identify powerful price zones from which the price usually bounces. After breaking through such a level, the price returns 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 free indicators.
It is worth noting that this method's low popularity is due to the difficulty in understanding the essence of volume and the lack of real volumes in some markets. For example, the Forex market is decentralized and does not have a single common platform. Therefore, the market cannot accurately calculate the volume of financial transactions to purchase currencies.
However, since the assets of these exchanges are traded in one place, the American stock and derivatives markets can show real volumes. To obtain such data, you need a special paid terminal or paid services.
Fundamental Аnalysis of Binary Options
Only a small number of traders 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 is 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, news may seem important but will have little or no impact on the market, so fundamental analysis involves extensive study of many factors.
It is essential to understand that this trading method is not suitable for beginners since fundamental analysis is often confused with using an economic calendar:
However, 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. Most often, this requires 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.
It is also worth noting that fundamental analysis is unsuitable for short-term trading, and there is no point in studying it for those who like quick transactions.
Indicators and Strategies for Binary Options
Analysis using indicators or trading strategies occupies a special place in binary options trading methods since this method is almost always the first choice among traders, especially beginners.
The advantages of using indicators include:
- Simple signals.
- Quick analysis.
- Ease of use.
- Availability of indicators for any trading style.
The traders divide indicators 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.
Indicators can also be classified as either complex (professional) due to their intricate trading rules or simple, with rules that are clear even to beginners. Additionally, there are paid and free indicators, but they all operate on the same principle: generating accurate trading signals.
You can often notice that inexperienced traders attach great importance to indicators, which is not correct. Since no such indicator would bring profit in 100% of cases, the search for the Grail of binary options only leads to a waste of time and to nothing more.
But of course, all of the above does not mean any working and profitable indicators or strategies. Any tool can be profitable if you use it correctly and study its elements. Examples include video reviews of some effective indicators and strategies for binary options from our YouTube channel:
It is worth noting that for a particular strategy or indicator to be profitable, it is necessary to thoroughly study its operation's principles and test it on a demo account. Only after that should you switch to a real account.
Maintaining competent money management and risk management is also very important, as this will allow you to keep your trading account even in very stressful situations that may arise due to long, unprofitable sessions.
Binary Options Trading Methods
There are additional methods:
- Independent trading.
- Trading using signals.
- Copying trades (social trading).
- Transfer of money to management.
Independent trading is the most reliable method for preserving capital since no one except the trader can lose it.
Trading using signals is also most often carried out independently. 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 or social trading involves passive trading in which the trader does not directly participate. This method can be helpful 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. 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, binary options trading methods should be chosen carefully, as future profits depend on them. Additionally, when choosing, you should consider your trading style and psychological preparedness, as both are essential for growth in this field.
When it comes to trading methods, it is also worth choosing what is more comfortable. However, when it comes to 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 a vital role in profitable trading. In our binary options brokers rating, you can find a broker with excellent trading conditions.
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