A lot of folks treat binary options in the same way they treat a roulette wheel. They place “bets” and hope that fate favors them with a profitable trade. In other words, they guess. It shouldn’t be a surprise when their guesses turn out to be wrong, and their binary option trades expire out of the money.
The good news is that you can learn to make profitable trades. The “secret” is to set up a system and stick to it. Learn more here about systems. That means learning to follow pricing trends; getting intimately acquainted with candlestick charts; and taking advantage of certain trading features offered by select binary options brokers. The folks who hemorrhage money tend to ignore these fundamentals.
Before getting in too deep use http://www.fastbinaryoptions.com/binary-options-explained-anatomy-of-binary-option-trade/ to get your basics.
On this page, we’re going to focus exclusively on three key features you should consider using whenever you trade binary options. One is called the early exit – or “close now” – option. The second is called a rollover option. And the third is referred to as a double up option. We’ll explain what they are and when to use them below. Learning to implement them effectively could make the difference between turning a profit and suffering a loss on your future trades.
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Early Exit Or “Close Now” Feature Of A Binary Trade
Ask any experienced trader with a longstanding, profitable track record to reveal the key principles of successful trading, and he or she is bound to mention having an exit strategy. An exit strategy reflects the route you’ll take to get out of an investment. Smart business owners have one; venture capitalists have one; stock traders have one; and if you’re trading binary options, you too should have one. That’s the basis for the early exit feature offered by many binary options brokers.
A lot of novice traders are unaware they can close out binary trades before they expire. They assume the money they’ve used to back the trades is locked in, and potentially forfeit if the price of the underlying asset moves in the wrong direction. In reality, some brokers allow traders to exit trades before they expire. This valuable feature can be used to lock down profits or limit losses. The key is knowing how to use it effectively…
How To Take Advantage Of The Early Exit Feature
The best way to think of the close now feature is as a hedge. Although it’s technically a bit different than a conventional hedge, it has a similar result: locking in a profit or limiting a loss.
Let’s use an example to demonstrate how this option comes in handy.
Suppose you are trading a simple high/low contract on gold that expires in 60 minutes. Right out of the gate, the price of gold moves upward, putting your trade in the money. Let’s further suppose that 30 minutes pass, after which the price begins to falter. It begins to fall back toward where it was at the beginning of the trade.
At this point, you have a couple of options. First, you can wait for the contact to expire, and hope the price doesn’t fall below its starting point. If it does, your trade will expire out of the money, and you’ll lose your investment. The alternative is to exercise the close now feature. By closing your position early while the trade is still in the money, you can lock in a significant portion of your profit.
Keep in mind, there is usually a cost to taking an early exit. That means you’ll profit less than you would have if the trade had simply closed in the money. But this feature gives you an opportunity to protect your profit rather than risk losing your entire investment.
Let’s now take a look at a scenario that shows how taking an early exit can help you to limit your losses.
Suppose you’re in another high/low binary option trade with gold as the underlying asset. You expect the price of gold to move upward, which would put your trade in the money. Unfortunately, the price of gold heads south as soon as it opens, and shows no signs of rebounding. Further suppose you suspect the price will continue moving in that direction.
In this case, you can close your current trade and execute a new trade based on the price’s downward movement. Doing so would mitigate your losses on the former contract, and allow you to recoup a portion on the latter. That is a true, albeit simple, hedge.
The Rollover Feature Of A Binary Options Trade
The rollover feature is straightforward and easy to understand. It’s an option that allows you to extend your trade to the next expiry. Although it’s relatively new on binary options trading platforms, traders have already begun to use it to reduce their losses on out of the money trades.
Once again, we’ll use an example to show how it works.
Suppose you’re trading a high/low gold contract that expires in 60 minutes. The price moves downward, putting your call binary trade out of the money. Let’s further suppose the price begins to move upward approximately 10 minutes prior to the trade’s expiry. You have a feeling it may continue to climb.
You can roll over your trade, adding another 60 minutes to its expiry. This gives the price of gold more time to rise above its starting point. If it manages to do so, the trade will become profitable.
How To Leverage The Rollover Feature
The rollover option should only be used when a trade is out of the money. If a trade is in the money, there is no reason to roll it over. It is already profitable. In that case, using this feature would pose an unnecessary risk.
It’s also worth mentioning that you’ll be required to put up an additional investment to execute this feature. How much? While brokers vary, expect to pay up to 30 percent of your initial investment. That means you’re risking more of your bankroll to give your trade a chance to close in the money.
One last note about the rollover feature: most binary options brokers will place a limit on the number of times you can roll a trade over. Plan on being able to use it only once per trade.
The “Double Up” Feature Of A Binary Trade
The double up feature is as simple to understand and use as the rollover feature. It is essentially a way to double your profit on a winning trade. If you believe your binary option is going to expire in the money, you can double your initial investment before the trade expires. If it does indeed close in the money, you’ll reap a profit on both your initial investment and the amount you added by doubling up.
Keep in mind that you could potentially double your losses. If the trade in question suddenly moves against you after you double up, your initial investment and the amount you added will become forfeit.
When Is It Time To “Double Up”?
The most appropriate time to double your investment is when your binary option trade is already in the money. The further in the money it is, the better. That way, you can be reasonably certain of your profit.
It’s less advisable to use this feature if your trade is just barely in the money. Even a small movement in the price of the underlying asset can result in a major loss. Along those same lines, resist the temptation to double up when your trade is out of the money. Otherwise, you’re practically begging to take a loss. Traderush offers Double Up.
The most important thing to remember about trading binary options is that there is a substantial amount of risk involved. Even experienced traders lose money on a majority of their trades. The key is that a few big wins can easily catapult your trading record into the black.
As noted earlier, create a trading system based on sound strategies and stick to it. Then, use the features described above to further improve your trading results.
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