Binary options are the most straightforward financial instruments to trade. This simplicity arises from the binary notion at their core: you either benefit if you correctly forecast the outcome or lose your original investment if you don’t. Binary options trading has become extremely popular among novice investors due to the simplicity of its operation and the fact that it’s possible to trade binary options on MT5.
The following suggestions are provided as part of your planning process to help you get your mind in the right place. These suggestions will not ensure success, but you should pay attention to common sense in each one.
Choosing the Highest Payouts
Many binary options traders will stick to trading assets they are familiar with, which is fine, but the reward could be very limiting. For example, suppose a trader’s favorite binary options currency pair is EUR/USD, and the broker minimizes its profit margin to 70% on a given day while another currency pair offers 90% or more. In that case, the trader should avoid trying to trade their favorite pair but instead opt for the higher profit pairs, presuming that the charts make sense. More on this later.
Searching for a Market Arrangement That Makes Sense
Market structure refers to how the market is trending, holding, or moving sideways. One would feel that a market with a cluttered chart, big and frequent price gaps, and a choppy appearance with no discernible direction or pattern should not be traded. Is that correct?
It appears reasonable; however, this is not the case. Many traders driven by ego may wish to be able to profit from such an asset, either to prove themselves or just because they are too lazy to look for a better market. First, the chart of an asset should motivate you to act, giving you the impression that you can predict what will happen next and profit from it. Try a different asset if it doesn’t give you that feeling but instead makes you feel lost.
Set up your charts so that you can easily scan them for assets with large swings that are compatible with your signals and support/resistance strategy. This will make it easier for you to place directional bets. Avoid aimless assets that appear to ignore all support/resistance levels, trends, and indicators, draining your account and tolerance in the end.
Zooming In for In-depth Understanding
When a trader plays binary options on 5-minute candlesticks with a 15-minute expiration, they are hoping to correctly predict the direction of the next 2–3 candlesticks before the trade closes. While candlesticks convey a lot about what’s going on in a market, they aren’t always sufficient. If zooming in on a 1-minute candlestick time frame displays a bullish pattern building, the 5-minute candlestick merely shows a strangely forming candlestick with no future trend signals, then zooming in lower provides the added clarity and signals you would have otherwise overlooked. As a general rule, a trader concentrating on a given asset on a set timeframe, such as a 5-minute candlesticks chart, will have more insight if the same chart is open in a lower time frame, such as 1 minute.
Drawing Support and Resistance by Zooming Out
If a trader still wishes to trade with the 5-minute candlestick chart, then zooming out to a higher time frame, such as the 15-minute chart, will reveal the wider picture. Some traders have lost a lot of trades because they did not notice that the price was building a consolidation pattern on the higher time window chart or that it was reaching a support or resistance line evident on, the higher time frame chart.
The higher time frame exposes the wider picture and is where support and resistance levels and patterns like wedges, triangles, and channels can be found. Generally, a trader working on a single asset on a given timeframe, such as a 5-minute candlesticks chart, will have more data if the same chart is open in a higher time window, such as the 15-minute chart, as well. If that is too much, the trades should begin with the 15-minute chart for assessment and then go to the 5-minute chart to trade.
Use Rejection Candlestick Patterns
In binary options trading, candlestick patterns can mean the difference between gaining and losing – you could say they are the icing on the cake. Even if a trader has picked the best market for them, has used both higher and lower timeframes to gain a better grasp of the market, has noted the proper support and resistance levels, and has identified any other sequence, the final trigger should always be based on the candlestick pattern.
For instance, a trader may have selected a bullish trending market currently in corrective mode, with the price headed lower to the next support level that was accurately identified utilizing the higher time frame. When the price reaches the support level, they are ready to buy a 15-minute expiry option in the hopes that the price will bounce off the support level and not fall further. But how can they be certain?
The reaction of the candlestick pattern on that level is the answer. For example, if price responds with a hammer candlestick pattern (one of the best reversal candlestick formations) on a decline near the support level, then success is possible. If, on the other hand, a bearish engulfing candlestick pattern forms when the price reacts to the support level, the trader will know ahead of time that the price is going to fall and that the support level will not hold. A lost trade is quickly avoided this way.
Every poor trader begins with poor risk management. If you are losing, don’t increase the risk. When professional traders win, they raise the risk. It is pointless to put more money into a losing strike. It will amplify the negative impact of losing. On the other hand, you should raise the risk of a lucky strike.