Binary options trading employs a number of strategies that all incorporate a number of indicators and factors including market sentiment. Many strategies work for new traders, while some strategies are refined by those who have been trading longer. In essence, the binary options trader must learn to be comfortable with the strategy that they are using. Traders must be aware of the risks and returns when using a certain strategy.

Short Straddle — The short straddle strategy requires the trader to sell both a put and a call option at the same strike price and expiration date. Conversely, traders take advantage of a market price with little or no volatility. By selling the options, a trader is able to collect the premium as a profit. Profits will be purely based on the market’s inability to move up or down. If the market develops a significant bias either up or down, then the strategy fails to deliver significant profit.

If you’ve studied and understood my previous posts about the fundamentals of binary option FX trading and binary options indicators, you are now ready to trade for real. Here are 3 different strategies that I use, choose one based on your risk appetite. Good luck!

The binary options trader can slide the purchases up and down but most strategies are centered around ITM options because the trader does not care which direction it goes as long as it moves. The maximum loss occurs if the underlying stock remains between the strike prices until expiration. If at expiration, the stock’s price is between the strikes, both options will expire worthless and the entire premium paid would have been lost.

Since the binary options trader wants a big move in either direction, an increase in implied volatility would have a very positive impact on this strategy. Even if the stock price holds steady, a quick rise in volatility would push up the value of both options and might allow the trader to close out the position for a profit well before expiration. A decreased volatility will not help the trader’s position.

On the outside this strategy looks like an Easy earnings on the Internet winner. Use the straddle strategy during volatility instead of during periods of already high volatility. Also, look to close out the position early if you get a quick move in implied volatility without any movement in the underlying stock.

The semi conservative strategy involves 4-6 trades per day. The rules are the same as for the conservative strategy, only with one exception: We take the trade at Fibonacci projection level 127 as well as 161.8.

Now, for level 127 trades, I would advise not to take the trade with more than 6 minutes to the expiry. This is because usually level 127 represents a consolidation level to draw buyers/sellers into the trend to get more liquidity and the price usually carries on in the direction of the trend within the next 3 candles.

The simple moving average is typically designed to measure 21 periods when used classically alongside bands set at two standard deviations. However, depending on your trading time horizon, these inputs might want to be adjusted to fit a certain trading style and strategy.

First, While Bollinger bands are exceptionally helpful in determining when an asset has overshot to the upside or downside, it is important to use the bands to also set risk conditions, not just entry points.

The maximum gain for the long straddle strategy is theoretically unlimited. This occurs if the underlying stock keeps going up, and also would show a very substantial gain if the stock becomes worthless. The net profit is calculated as the gross profit less the premium paid for the options.
This is why it is important that you always keep a record of every single transaction on the trading platform. You must record every deposit and withdrawal you make no matter if it is in-the-money or out-of-money. Recording down all your transactions will make it easier for you to manage the tax preparation at the due date when you are supposed to file for your income tax. You can use a spreadsheet to keep track of the deposits/withdrawal as well as calculating how much you profit or loss. When the time comes for you to file the income tax, you just need to refer to the excel sheet you have created.

Within each price cycle between 3 points there are on average 3 ITM trade setups during normal volatility trading conditions. And for this strategy it goes without saying that if you don’t ‘feel’ the trade or something about the setup doesn’t seem right, don’t take it and wait for the next one.

One common strategy that is very popular among both novice and professional traders is the straddle strategy. The straddle strategy is an options strategy wherein the investor holds a position in both a call and put with the same strike price and expiration date. The straddle strategy is a neutral options strategy. This means that the straddle strategy is an options trading strategy that is employed when the options trader does not know whether the underlying stock price will rise or fall.