Binary Options Trading is a new type of platform for making money online, which is by speculating the financial market trends and price movements. Although the basic principles of trading are the same, it is much simpler to understand and execute. In this type of trading, you can speculate and make money on the price movements of stocks, indices, commodities, and metal. The best thing about this market is that you can make money even during the falling markets.
Typically, binary options trading is very volatile hence it is quite difficult to have a unique strategy which can fit in all situations. As a beginner, you need to follow certain rules that will guide you throughout the trading journey and adopt strategies that will help to maximize your returns.
Guidelines on How to Trade Binary Options for Beginners
Learn the Attitude of a Good Trader
One important factor that can make you become successful in trading is the right attitude. Indeed, even if you have so many tools and strategies in trading but you don’t possess the right attitude towards trading and losing, you will end up making loses. As trading has lots of risks and uncertainties, it is also an advantage if you are comfortable working with risks.
Learn the Basics
Have a sound knowledge on the concepts, the rules as well as strategies of stock trading. It is important that you know the basics before putting your money at risk. You can find a great resource or a good mentor to help you understand and get yourself familiarized with the basics of trading. Keep in mind that venturing into trading without preparation can cost you a fortune in this risky venture, so make sure that you are well-prepared as well.
Binary Options Trading Strategy
For active learning on how to trade binary options for beginners, one has to identify a strategy or system in trading. You need to have a strategy in trading before you put your money at risk. Indeed, in any business venture that you make especially those that may involve risks and uncertainties, it is important indeed to have a trading strategy and have the discipline to stick to it. A successful stock trader must also know how to analyze the market using technical as well as fundamental analysis, which are crucial in helping you make wise trading decisions.
Learn binary options trading tools for identifying the market trends and price movements
Time Series Forecast: Time series forecast is a price movement indicator which is being used by many successful traders. This indicator integrates multiple linear regression models for chalking down the line of price movement tracking. Since it uses the moving linear regression, this indicator is able to predict the future price movements, based on market trends.
Many seasoned traders consider it to be better than the Moving Average indicators. However, when learning how to trade binary options for beginners, it is better to use it as support along with other trend line indicators that show resistance and support markings. This indicator is ideal for placing long trades.
The Golden Ratio – Fibonacci Series: The Fibonacci series has been used to predict the financial market movements from many decades. If you are new to trading, then you should first learn about how the Fibonacci series can help you in identifying the market trends.
This retracement tool identifies the trend in either direction, and then creates a series of support and resistance lines. It gives you clear indications on when you need to pullback from the trade, makes the necessary corrections, or about when to go ahead with the rally. The resistance and support lines give fairly accurate predictions if the prices will bounce back or break through to the next line. This tool is very handy for placing identifying the short term trends, and making the short trades accordingly.
Here it is very important for you to make sure that there is a trend in upward or downward direction, and it should clearly show on the charts. Fibonacci retracement levels are very helpful for predicting the free market movements, price returns, and breakthroughs.
High Low Moving Average: Moving averages are very important variables to consider for technically analyzing the market. This indicator includes the theories of both envelopes and channels, which is why it is considered to be more accurate for following and confirming the market trends.
It also indicates the starting of market volatility, which is generally the right position to enter into a trade. The indicated averages can come very handy for identifying the buying signals. Although it is a good practice to check the averages of one month at least, you will also be able to recognize the short-term signals with moving averages.
Without proper money management skills, it might be hard to know how to trade binary options for beginners. Essentially, whether you are a beginner in options trading or not, money management is important in business, especially in trading where you can lose a fortune if you do not manage your money well. Here are tips to help you mitigate risks in your investment portfolio:
Always use a stop-loss — This is trading rule not as much as money management rule, but you always need to use stop loss or otherwise you will lose a lot of money. But you need to use it wisely. First, you need to backtest your system and find out what is the win-to-lose ratio of your system. Once you know it adjust your stops accordingly and do the backtesting again.
Find out the mathematical expectation of the system — Now it’s time to know mathematical expectation of your system. If it is positive, you can trade it on your live account. If it’s negative, you may want to adjust the parameters of your system or change the system completely. Remember positive expectation does not guarantee the gains in the future, but negative expectation will surely make you lose money if you were to implement it on your account.
Calculate your risk — Now once you know your stop-loss level for each trade and you know that expectation is positive it is time to calculate your risk per trade. Never risk more than 5% of your account per trade. If you have a big account, it’s better if you keep the risk as low as 1%.
To learn how to trade binary options for beginners, one has to understand that money management rules require discipline. It is very tempting to violate the rules of money management when you see a streak of winning trades. You may feel invincible with your system and take a much bigger risk in your next trade hoping to double your account. But the next trade may turn out to be a losing one.
For sufficient knowledge on how to trade binary options for beginners, it is advisable to be patient and keep things simple. If you are following a particular trading system, then it should also be flexible for changes depending on the changing market conditions. Use only a handful of tools after thorough testing, rather than confusing yourself with too many.