Learn How to Make Money Trading Binary Options

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Learn How to Make Money Trading Binary Options

Posted on by John Thiel

An Introduction to Binary Options Basics: Real Money-Making Trading Strategies

This blog is packed with free instructional material and articles outlining the fundamentals of binary options trading. Truthfully, everyone wants to make gains and profit, but only the best succeed in a way that allows them to do it in a full-time capacity without having to work for someone else.

No matter how you look at it, at the end of the day it always comes down to the same thing, willingness to take risks and understand how to manage them, coupled with an ability to analyze and identify the correct entry and exit signals.

So let’s start with a real trade I executed recently and ended up in the money.

call vs strike price

In this real-life scenario we will be buying a call contract and taking a long position on GOOG stock based on previous candlestick analysis indicating a series of hammers and multiple kicker formations. This is probably due to the fact that Google recently entered an agreement with a big Chinese telecom company that will use Android as their operating system.

Trading Tip: Start listening to financial news and make informed decisions based on the public knowlege that is available to you.

Now, if the strike price is $200 for all intents and purposes and we are trading technology stocks on May 6th, 2013, the expected ROI is the amount invested less the difference in the contract’s price during the expiry date and time. For example, if you bought shares valued at $1,000 and each stock was worth about $100 at the time of purchase, that would make you a profit of about $1,000. In other words the profit was $2,000 less the investment $1,000.

While it is true that markets are prone to fluctuations the actual strike price factors this into account. Hence, barring any unforeseen dramatic news event or a last minute statement by the Chairman of the Fed or corporate figures the deviations should remain within the norm.

Still, here are a few things can and do happen from time to time. In theory, when you buy a stock on the upside the potential profits are less than if you buy it on the downside. This is why traders look for undervalued stock and signals that indicate potential entry points and view them as market indicators that are telling us when a certain underlying asset will recover or show a reversal pattern. But if we fail to analyze the candlestick charts correctly, we will end up losing a lot of money. Below are a few common charting mistakes many amateur traders can make when they start taking positions.

The Bull Trap: When we trade in a bull market the investors are aggressive and stock prices are high. Still, certain formations create false indicators and the stock, or index will go down instead of up.

The Bear Trap: This is the exact opposite scenario, in this case we see a signal that indicates a reversal pattern of a rising trend for a certain stock, index, or commodity, but in fact this signal is false.

Confirmation: Instead of trying to predict prices try to act on confirmation of price changes. This will give you the leverage of having the price momentum  on your side when implementing your trading strategy.

Choosing the Right Indicators: There are many good indicators out there. For example, Fibonacci, Elliot Wave, and Gann Angles. A smart trader will match the right indicators and charting techniques to the actual trade that’s being made. Use intelligent tools like Bollinger Bands, Bar Charts, and Linear Scaling. Make sure you follow the moving averages since these are a good aggregate tool for short term insights.

Don’t Get Emotional: Stay focused and don’t lock on to any specific stock or commodity if you see the formations are showing consistent dips.

Have a Reversal Strategy to Fall Back On: Make sure your balance is high enough and you have a few alternate positions you can fall back on in order to recover your losses.

Now, one of the most important decision you will ever have to make is choosing the broker that is best for you. If you choose a CySec-licensed broker like Optimarkets, Redwood Options, or EasyXP, I highly recommend you go through our reviews section and select the one that is best for you. If you are a US resident, you need to make sure you find one that accepts traders from the USA, some of them choose not to due to regulatory or legal issues having to do with their license.

********CBOE Daily Market Summary for Tuesday, May 07, 2013*********

Total Put/Call Ratio 0.89
Index Put/Call Ratio 1.07
Exchange Traded Products Put/Call Ratio 1.22
Equity Put/Call Ratio 0.63
CBOE Volatility Index (VIX) Put/Call Ratio 0.84
BXM – CBOE S&P 500 BuyWrite Index
Open High Low Close
961.60 962.59 961.60 962.26
VIX – CBOE Volatility Index
Open High Low Close
12.63 12.96 12.49 12.83
Equity Options
Call Put Total
Volume 904,327 566,733 1,471,060

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