An Easy Binary Options Hedging Trading Strategy

binaryoptionstradingstrategyIf you’re new to binary options trading, then it’s imperative that you prepare yourself mentally by having a good trading plan, and then prepare yourself emotionally by strictly sticking to that plan through thick and thin. Being disciplined as well as dealing with the “ups and downs” of trading throughout the day can be the Binary Options traders biggest challenge.

So once you’ve selected a good binary options broker and have gotten familiar with the nuances of their trading platform, you need to make sure that your comfortable with using it. You will need to make sure that the platform is easy to understand, the trades are easy to execute, and the platform itself fits your particular trading style. This regardless of whether you’ve decided to trade: stocks, currencies, commodities/futures, or the index markets.

Once you’re ready to begin trading binary options, you may be wondering where you should start. Well, you’ve most likely heard time and time again, “Those who fail to plan, plans to fail.” So what you need is a solid, time tested binary options trading strategy. So that’s exactly what’s outlined below.

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Early Hedging Binary Options Trading Strategy

This is a basic binary options trading strategy which is easy to understand as well as execute. What you will need however is a basic understanding of what technical analysis is. If you are not familiar with technical trading, then it’s recommended that you do some research.

Also, if you’re not familiar with how to read or analyze charts, then it’s recommended that you read up on the basics of candlestick charting as well. Candlesticks are usually the tool of choice for the majority of binary traders as well as for market traders in general. Using and understanding candlestick charting and incorporating it into your binary options trading strategy, allows you to correctly pick entry as well as exit points a lot more efficiently.

Forex Binary Options Hedging Example – Payout 70%

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Setup: One hour (10:00 – 11:00) Binary Trade Hedge Trade
• You see a potential breakout of the EUR/USD at 1.4542
• So you’re thinking of placing a BUY/CALL position, speculating that the market will move higher and close above 1.4542 at it’s expiry @ 11:00
• You secure a $100 long CALL position at 10:20

• You continue to track the trade and around 10:40 realize that the market is going against you
• The market drops below your original strike price and continues to drop below 1.4542, down to 1.4535

You can just let the trade expire or
• You decide to place another $100 PUT order at 10:45 @1.4535 to counteract the original order

Once the trades expire at 11.00, by hedging, you were able to minimize your losses

Scenario 1
Ist Trade
CALL at 1.4542
Amount of trade $100
Payout $70.00 if trade becomes true

2nd Trade
PUT at 1.4535
Amount of trade $100
Payout $70 if trade becomes true

In this trade example:
The 1st trade (CALL) did not come true, loss ($100)
The 2nd trade the (PUT) order came true, payout $70

Final Outcome Of The Two Trades
Loss of ($30) Instead of losing ($100) if the second “Hedge” trade wasn’t made, which effectively minimized your losses

Alternative Trades
Scenario 2
CALL: $100
PUT: $150
Another scenario is if you were certain that the market was going to close out below the original trade strike price of 1.4542
You could place a PUT for $150 @ 1.4535

Ist Trade
CALL at 1.4542
Amount of trade $100
Payout $70.00 if trade becomes true

2nd Trade
PUT at 1.4535
Amount of trade $150
Payout $105 if trade becomes true

In this trade example:
The 1st trade (CALL) did not come true, loss ($100)
The 2nd trade the (PUT) order came true, payout $105

Final Outcome Of The Two Trades
Profit of $5 Instead of losing ($100) if the second “Hedge” trade wasn’t made

Scenerio 3
CALL: $100
PUT: $200
Another scenario is if you were certain that the market was going to close out below the original trade strike price of 1.4542
You could place a PUT for $200 @ 1.4535

Ist Trade
CALL at 1.4542
Amount of trade $100
Payout $70.00 if trade becomes true

2nd Trade
PUT at 1.4535
Amount of trade $200
Payout $140 if trade becomes true

In this trade example:
The 1st trade (CALL) did not come true, loss ($100)
The 2nd trade the (PUT) order came true, payout $140

Final Outcome Of The Two Trades
Profit of $40 Instead of losing ($100) if the second “Hedge” trade wasn’t made

The rules of the Early Hedging Binary Options Trading Strategy is described as follows:
1. Determine your entry point for the binary option trade as early as possible during the Expiration Cycle. For example. within the first 15 minutes, such as between 10:00 to 10:15, if the option expires at 11:00

2. Make sure that you allow the underlying asset enough time for it to be able to make its move, closely monitor the opportunities to potentially increasing the size of the trade

3. Begin looking to potentially placing a second trade approximately 10 to 15 minutes prior from the lock out period of 11:00

4. If the initial position happens to be deep in the money, then your best option may be to just leave it alone and allow it to expire

5. If the initial position however happens to be deep out of the money, then you might just want to leave it alone as well, just take the loss and then move on to your next trade

Or, depending on your capital and how the market is moving in the opposite direction, you can place 2 trades approximately 10 to 15 minutes prior from the lock out period of 11:00, going in favor of the trade, (which should be the opposite direction of the initial position). This will lock in a profit of one position

6. If the initial position happens to be trading near the original entry point, then you may want to place an opposite binary trade position which will limit the maximum original position loss

You can follow these steps which will guide you through your initial trading actions. This Early Hedging Binary Options Trading Strategy is a solid method of controlling the risk of what can be a potentially risky venture.

When using this binary options trading strategy, you’ll always give yourself the opportunity to be able to lock in guaranteed profits or exit bad positions while still maintaining a potential loss.

There are other popular binary trading strategies which will expose traders to substantial risk and loss without any considerations for safety. For new binary option traders, you’ll obviously be wanting to stay afloat for as long as possible, so it’s recommended that you attempt to follow these guidelines which are laid out in this binary options trading strategy when initially starting your trading career.

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