1. Choosing The Highest Payouts — Why It Matters The Most
Many binary options traders will focus on trading an asset they know and are familiar with, but while that’s ok, the payout could be severely handicapping them. For example, if a trader’s favorite currency pair in binary options trading is EUR/USD and in a given day the broker reduces its payout ratio to 70%, while another currency pair is offering 90% and more, then the trader should avoid trading his or her favorite pair and instead go for the higher payout pairs assuming that the charts will make some sense. More on that below.
So touching a bit more on the payout and why it matters the most let’s look at an example.
Trader B makes ten times more in profit than Trader A due to the payout ratio alone!
If they continue like this for a week, Trader A will end up with $100 in profit and Trader B will end up with $1,000. The difference becomes substantial if this continues for longer and assuming that they win 6 out 10 trades every day.
2. Looking for Market Structure That Makes Sense To You
Generally market structure describes the state of the market like trending, consolidating or sideways. One may believe that a market that has a messy chart, large and frequent price gaps and looks choppy without a generally understandable direction or well-defined structure, should not be traded. Is that so?
It sounds reasonable enough, but that’s not the reality. Many traders driven by their ego may want to be able to take advantage of such an asset either to prove it to themselves or because of a general laziness to hunt for a better market.
First, the chart of an asset should inspire you to take action, creating the feeling that you can anticipate what’s coming next and make a profit out of it.
Set up your charts in a way that you can scan the charts quickly in order to find assets with big swings that work well with your indicators and support/resistance strategy. This can help you make directional bets with ease. Avoid directionless assets that seem to not respect any support/resistance levels or patterns and indicators and in the end will drain your account and patience.
3. Zooming In For In-depth Understanding in Binary Options Trading
If a trader trades binary options on 5 min candlesticks with 15 minutes expiration, this means he or she hopes to guess the right direction for the next 2 to 3 candlesticks before the trade expires.
While candlesticks do reveal a lot of information about what’s going on in a market, sometimes that is not enough. For example, if zooming in on a 1 min candlestick time frame reveals a bullish pattern forming, but the 5 min candlestick only shows a weirdly forming candlestick with no use in terms of giving future direction clues, then zooming in lower gives you the extra resolution and clues you would have otherwise missed.
4. Zooming Out For Drawing Support & Resistance
Now going the opposite way and assuming a trader still wants to trade with the 5 min candlestick chart, then zooming out on a higher time frame like the 15 min chart will reveal the bigger picture.
I have many times made a trade that failed because I had either missed the fact that the price was forming a consolidation pattern on the higher time frame or it was hitting a support or resistance line visible on the higher time frame chart.
So as a general rule a trader focusing on a specific asset on a specific timeframe like a 5 min candlesticks chart, will have more information if in parallel he or she has the same chart open in a higher time frame, too, like the 15 min chart. Alternatively, if that’s too much, the trades should first start with the 15 min chart for analysis purposes and then use the 5 min chart to trade.
5. Use Rejection Candlestick Patterns On Support & Resistance Levels
Candlestick patterns in binary options trading can make the difference between winning or losing — you could say they are the icing on the cake.
Even if a trader has chosen the right market that makes sense to him or her and has used both the higher and lower timeframes for increased understanding of the market, has identified the correct support & resistance levels and any other pattern, the final trigger should always depend on the candlestick pattern.
For example, a trader has chosen a bullish trending market that is now in correction mode and the price is heading lower to the next support level that was identified correctly using the higher time frame.
He or she is ready to pull the trigger to buy a 15 min expiry option when the price touches the support level, in hopes that the price will bounce on the support level and will not go lower. But how can he or she know?
In the opposite scenario, if a bearish engulfing candlestick pattern is forming as the price reacts on the support level, the trader will understand in advance that the price is likely heading lower and that the support level will not hold this time. This way, a losing trade is swiftly avoided.
Have you used any of these tips in binary options trading before? Share your own tips with other traders in the comments below!