Binary options are regarded as the highly promising trading platform all over the world. Every day more and more traders are involving themselves to trade with binary options. However, the rules are same for all trading which is the development of an effective trading strategy. If you want to make your financial future well through binary options, you need to have your own binary options strategy.
Learn How Binary Options Work
Binary options are very popular because it is very easy to place a trade as well as understand the whole working process of the system. There are four easy steps to trade with binary options; Select an underlying asset; predict the direction of the asset’s movement; Set an expiry time for the specific trade; determine the amount of investment for the particular trade. In fact, a trader is always able to know the outcome of the trade before the placement of the trade. However, a good binary options strategy has to be followed to earn good profits from the binary options trading markets.
Basic Strategy – The Best Binary Options Strategy
The basic strategy is a simple but effective strategy for binary traders. Basic binary options strategy can be used when the trade starts with the proper direction. It means that, if you bought a call-option and the market raised, you are in the money. But still you have to wait for the expiry time. Basically, this is the best strategy because, it is newbie friendly and you can use this strategy to aim high with low risk.
Know More about It
The strategy is best described with an example, so this is what I’ll do. I have explained the strategy with an example so that you can understand how this strategy can be used. This strategy relies on two simple steps.
Step Number 1: Suppose, you buy a call option on EUR/USD at 1.3500 worth $100 with the expiry in one hour, and a payout of 80% with a refund of 10%. Also assume that, the market moves in your favor to 1.3520. In this given situation, this strategy can be used as described in the next step.
Step Number 2: You buy a put option on the same asset with the same value.
There are three possibilities at the expiry time of the trade:
Possibility 1: The closing price is above 1.3520 which means that the first option finishes in the money and the second one out of the money. Then, the total investment $200 and total payout $190. The outcome of this trade is a loss of $10.
Possibility 2: The closing price is between 1.3500 and 1.3520 which means that the both options finish in the money. Then the total investment is still $200 and total payout is $360. The outcome of this trade is a profit of $160.
Possibility 3: The closing price is below 1.3500 which means that the first option finishes out of the money while the second one finishes in the money. So, the outcome is the same as in the first situation a loss of $10.
By the above example you can see that, by using the basic binary options strategy you can take advantage of a good start and risk only an insignificant with the hopping of winning big. In fact, in this particular situation you risk to lose $10 in order to win $160. So the risk ratio will be 16:1.
In binary options trading, there are many advanced strategies are invented but this basic binary options strategy is best, reliable and followed by a huge number of full time or professional trader.
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