Before you accept the following binary options strategy, we recommend that you first read our page describing what binary options are.
We also have another page dealing with the question: Are Binary Options a Scam? Here, we look at the strategy and then run the numbers so that you can decide for yourself.
Since binary options always have an absolute outcome (you either win or lose - nothing in between) then one of the most important factors in any good binary options strategy should be your money management program. If you use this in conjunction with a simple trend following strategy, you're putting the odds in your favor and it should be unlikely that you will fail.
In case you're new to binary options, they're not like normal options. You're essentially betting on a short term outcome of any underlying security. If you're right, you get paid, if not, then you don't - simple as that. However to make it appealing, profits from any one trade are usually around the 70-90 percent mark, so if you invest $100 you receive $170. If you lose, you get nothing (some brokers return a small percentage).
It's like betting on dividends in a thoroughbred horse race, only in this case each race has only two horses - "in-the-money" or "out-of-the-money".
The strategy we are about to outline is an extension of what you have seen in the video. We have refined the numbers to make it easier for you. You will also need a spreadsheet so that you can calculate the amounts you will invest on each trade. You can use this strategy for either short or longer expiration times, but it's better suited to short term, say, 15 minute expiration periods on forex pairs for example.
1. You should start with at least $500 in your brokerage account. $1000 is preferable because it gives you greater odds for success, as we shall see.
2. Your initial trade should be no more than one percent of your overall bank. So if you have $1000, your first trade will be for $10.
3. Pick a forex pair, or another underlying security that you're familiar with and that is highly traded, such as the EURUSD. Your objective will be to trade with the trend.
4. Now look at a 5 minute price chart of the underlying. The better binary options brokers will provide this as part of the service. Look at the chart from left to right and observe if there is a trend - either up or down. If it's going sideways, disregard and move on to another security.
5. When you feel satisfied you've found a trending security, then enter your first trade with just $10 and choose either "up" or "down". Within the next 15 minutes the underlying price action will either be above or below your designated strike price. If you're right, you come out with $17. You walk away and start this binary options strategy over again. If you're wrong, you've lost $10.
6. If you've lost your first trade, the size of your next one needs to cover that loss, plus make you an overall profit. Here's what you can do:- From your spreadsheet, you will now calculate the next trade amount. This will be your original $10 multiplied by 2.5, so $10 becomes $25 etc.
If you win this trade at 70 percent profit you will now be $33 ahead and at this point, you start the system all over again. But if you lose your second trade, you will now be down $35. So your next trade will be $25 x 2.5 = $63 and so on.
This system will allow you to lose up to 5 times in a row before your capital is at risk. Should this unlikely event happen, considering that you're trading with the trend, you may need to reassess your next move - perhaps by accepting your losses and starting again by building up from a lower trading amount again. Many binary options brokers include a recommendation showing what the majority of traders are investing on, so if you select the majority view "up" or "down", you increase your chances of getting one of your first five trades right. If you keep getting it wrong more than 7 times in a row then maybe you shouldn't be doing this in the first place.
Take a look at the video below, to view another popular binary options strategy. They claim to show you how to make $593 in less than one hour.
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