Gambling strategies in binary options trading

BinaryOptionsNow | Published on July 4, 2017 at 10:52 am

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When trading the financial markets, typically you want to predict the direction in which markets will move and place your trade in that direction. Also in typical trading, the further the markets move in your favour, the higher your returns.

However, binary options will pay out the same returns regardless of how much the markets move in your favour, making it a lot like gambling. This is why it can be profitable to apply gambling strategies in your binary options trading. Keep in mind that these strategies don’t need an understanding of the markets, after all, , let’s find out more about them.

Gambling strategies in binary options trading

Hedging

When hedging, you will be taking both sides of the trade, betting both that the markets will go up and down. Let’s see how it works with an example. Imagine the EUR/USD pair is trading at 1.25, and you don’t care what the technical analysis says. You choose a high/low binary option and bet that the pair will be trading higher than its current value in 60 minutes. Let’s also assume that the pay-out is 70% if you’re in the money.

After half an hour, the pair is trading at 1.3, your call option is already in the money, so you place a put option betting it will go lower in the next 30 minute. The hope is that even if prices do drop, they won’t go below 1.25, so that you win both trades. If the first trade goes bad, the second trade helps you make up some of the losses so that you don’t lose too much.

If you do this often enough, you will be making huge profits on good trades and only small losses on the losing trades. In the end, you will always have a profit. Unless you have a really bad day where you have a string of losing trades.

Cashing in on momentum

Another profitable type of binary option is the boundary/range which pays off if the asset’s value surpasses the set boundary. For example, if the is trading at 1.25, the boundary/range can be at 1.2 and 1.3. If the price hits any of these points before the expiry, they you win. Another advantage with this type of binary option is that it often has a higher payout than the typical high/low option. Depending on the width of the boundary, the payout can be as high as 300%.

To make use of this strategy, you only need to know if the markets have enough momentum to move significantly to break out of the boundary. For this, you will need a momentum indicator, such as the average true range (ATR). This indicator shows how fast the markets have moved in the past trading period. Therefore, when the ATR shows a strong trend just happened, it means that momentum may have died, and that prices may not move further from their current position. However, of the ATR has been moving in a range, it shows that traders have been inactive, and that there is the possibility of a big move.

The ATR often moves sideways before news announcements, and this is where you want to make your trade. Since the boundary/range binary option doesn’t care about direction, you would be in the money either way when the strong moves finally comes.

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