Making money with binary options can be consistently achieved. Sure, you may still end up losing a few dollars on some trades here and there but the losses might not be as significant as when you venture into riskier financial investments. The advantage of trading binary options, aside from its simplicity, is that there are techniques or strategies you can use to minimize the risks for losing money.
Some trading strategies include: money management strategy, which is when you only use a certain percentage (we recommend no more than 5 percent max) of your trading account; technical analysis strategy, which is when you rely on past trends and evaluate the value of assets through graphs and charts; and fundamental analysis, which is when you consider the factors (e.g., unemployment rate or GDP growth) that may affect the value of an asset. But perhaps one of the more tried and tested strategies is hedging binary options.
A hedging strategy is when you place both a Put and Call option on the same asset. When you place a Put option, you are assuming that the expiry price on a certain asset will close below the current price. When you place a Call option, you are assuming that the expiry price on a certain asset will close above the current price. By hedging your wager, you reduce your risk for losses and secure your potential for profits. Essentially, hedging is a strategy that will allow you to make the best out of a rather unpredictable market.
Hedging is mostly used for currencies but you can also apply the strategy for trading other assets. The key to hedging is to know when exactly to use it, which even for many seasoned traders should be done sparingly. When you enter a trade, you need to be able to track how it does before it expires. For example, when you put a Call option on an asset and it expires within the hour, you need to observe how it does in the next 30 minutes to determine whether you should place an option in the opposite direction. You need to be quick, yet analytical in making sure that your initial trade is really wrong because experts says that if you place a second trade and the gap between both trades is too large, then you may just end up getting two trades that finish “out of the money.”
Uncertainties are part and parcel of financial markets. But there are ways to get around such unpredictability by knowing strategies that will minimize your exposure to risks. When you are trading binary options, get to know more about hedging as strategy. Try to find out more about how you can maximize the opportunities from this form of trading and you will soon reduce your losses.