In this video, Roger Hawes, an Analyst from the Corellian Academy discusses the different types of trading strategies and emphasizes the importance of avoiding one-dimensional trading.
Trading strategies are tools used to manage risk levels and expectations for specific trade ideas. While there is a myriad of trading strategies available, Hawes focuses on two trading strategies namely Binary Trading and Zero-Cost* Trading.
Binary Trading is a simple method that can be used across various timeframes. Its aim is to make a profit from moving markets, by buying or selling at a single entry point, setting a stop loss at a defined level, and establishing a take profit level. This method requires discipline as the trades are pure win or lose, and emotions may play a big part as volatility increases.
The zero-cost trading strategy, on the other hand, aims to improve the average entry level of the original trade. This is done through buying or selling at an initial entry point, setting a stop loss, and taking profit for a portion of the position. The remaining position is adjusted to break even or near it.
Accordingly, this method allows for minimal or no loss even if the market moves against the trade. As such, it instills confidence and encourages patience. However, traders should take into consideration that this strategy requires sacrificing some potential upside if the market moves strongly in one direction.
This video also provides an illustration of a situation where one desires to go long on natural gas (NG) but fails to catch the initial upward momentum, thus seeking a suitable entry opportunity. In the example, we see that a zero-cost trading strategy can increase trading confidence by providing traders with a comfortable and risk-reducing trading environment, enabling traders to manage emotions and possibly achieve break-even or profit regardless of whether the market initially moves against their position, so that losses can be minimized.
In conclusion, both methods are used to illustrate how each strategy affects the execution of trades and risk management, and overall, trading strategies can help traders avoid one-dimensional approaches and improve their overall trading performance.
*Trading CFDs will not be zero cost.
FAQs
#1: Trend Following Strategy
One of the most fundamental and effective strategies in binary options trading is the trend following strategy. It is based on the principle that asset prices tend to move in a particular direction for extended periods.
How to win in binary options? ›
Traders look for successive higher highs or lower lows to determine the strength of the trend. They also tend to use moving averages to help them trade the trend. By betting in the direction of the trend, traders aim to capitalize on the continuation of market movements.
What are zero cost options strategies? ›
Zero-Cost Strategies in Options Trading
One example of a zero-cost trading strategy is the zero-cost cylinder. In this options trading strategy, the investor works with two out-of-the-money options, either buying a call and selling a put, or buying a put and selling a call.
Which indicator is best for binary trading? ›
These are the top 5 technical indicators you can use when trading binary option contracts:
- Moving averages.
- Average true range.
- Moving average convergence/divergence (MACD)
- Relative strength index.
- Stochastics.
While it's true that binary options trading can offer significant profit opportunities, it's far from a guaranteed way to get rich quickly. Like any form of trading, success in binary options requires knowledge, patience, and a well-thought-out strategy.
What is the most consistently profitable option strategy? ›
1. Selling Covered Calls – The Best Options Trading Strategy Overall. The What: Selling a covered call obligates you to sell 100 shares of the stock at the designated strike price on or before the expiration date. For taking on this obligation, you will be paid a premium.
Is there any no loss strategy in options? ›
There is no option strategy that guarantees zero loss. All trading and investment activities carry inherent risks, including options trading. It's important to thoroughly research and understand any strategy you're considering and be prepared for potential losses.
What is the zero cost approach? ›
This strategy involves the use of various financial instruments such as options, stocks, and bonds to create a portfolio that does not require upfront costs. The benefits of this approach include flexibility, long-term cost-savings, and risk management.
What is a zero cost risk reversal strategy? ›
What Is the Risk Reversal? Risk reversal is the same strategy as a zero cost collar. You sell a call and buy a put on a long position to minimize the risk of significant losses.
Which timeframe is best for binary trading? ›
- TIME.
- TIME FRAME.
- According to a survey of binary options traders,
- the best time to trade binary options is.
- between the hours of 6.00-12.00 GMT and 18.00-0.00 GMT.
- This is when the highest percentage of profitable trades are made.
- YOUR TIME FRAME.
- DEPENDS ON YOUR NATURE AND AVAILABLE TIME.
How to trade binary options in 5 steps
- Know the market trends.
- Pick the market you want to trade.
- Select a strike price and expiration.
- Place your trade.
- Wait for expiration, or close out your trade early.
For binary options, pivot points can help predict whether the price will rise or fall. For instance, if the market price is above the pivot point, this is typically a bullish signal, suggesting it's a good time to consider buying a binary option that predicts that the asset will be above that pivot point.
Which option strategy has highest success rate? ›
A Bull Call Spread is made by purchasing one call option and concurrently selling another call option with a lower cost and a higher strike price, both of which have the same expiration date. Furthermore, this is considered the best option selling strategy.
Can you really make money with binary options? ›
Binary traders can make money by correctly predicting whether a market will be above a specific price at a specific time. At expiration, you either make a predefined profit or you lose the money you paid to open the trade.
Who is the best binary options trader in the world? ›
- Best Overall: Pocket Option. Pocket Option Review. ...
- Best for Binary Options: Raceoption. Best For: ...
- Best for Active and Global Traders: Interactive Brokers. Interactive Brokers Review. ...
- Best for Demo Accounts: eToro. ...
- Best for Long-Term Binary Options Traders: Dukascopy Bank. ...
- Best for Novice Options Traders: Closeoption.
