Binary options are variants of traditional options. There are 3 major differences between the two.
First and foremost, binary options are contracts for the much shorter duration, such as an hour or so, unlike the traditional variety which may even last for month and longer.
The second difference is, the investor does not gain more than the contracted amount in a binary options contract, even if the asset underlying the contract increases substantially in price by the end of that hour.
Finally, the investor using traditional options contract is at liberty to use the put option ahead of the expiry of the contract. If the price of the asset underlying the contract shoots up substantially within the agreed time frame. But the corresponding benefit is that in binary options, losses can also not exceed the predefined and accepted levels. Effectively, binary options are the safest derivatives so far, but profits are also lower.
By adopting some strategies, traders can increase profits from Binary options. These strategies are developed using signals, indicators, charts, etc. Almost all tools and sophisticated programs are now available for using even on mobile phones.
Following are some of the popular and best strategies that are used by most binary options traders trading on their mobile phones. These plans are ideal while using binary options app on your smartphones for fresh entrants in binary options mobile trading markets.
1. “1-2-3 Simple System”
This is where anybody who is accustomed to conventional trading in stock markets starts. Charts indicate the support levels at the bottom, and resistance level at the top for the asset. Binary trades within this band usually generate profits.
2. Relative Strength Indication
An asset increases or decreases about another asset usually of the same class. If the indicator suggests that it is oversold, a binary trade option, i.e., the call option may be initiated, anticipating the price of the stock to move up again. Vice versa, if the asset is overbought then expecting its price to fall in the short term, at least for a brief period, is reasonable.
3. Follow the Trend
That is what most traders will do. Therefore, if the market is upbeat on gold, opt for Binary options trade in that asset, and use puts instead of calls.
4. Moving Averages Indicators
There are enough tools in markets now for real time crunching of numbers and generation of data. These histogram indicators give swing in the asset’s price possible within a given time frame. These histograms are usually suitable for longer term trades.
Hedging does not qualify as profit generating strategy. It is more of a loss mitigating strategy. Therefore, trade in one asset class may result in a loss. This loss is set off by a trade in another class, or even a put or call of an option, i.e., trading in the opposite direction of one trade.
The list of such strategies is not exhaustive and requires study in depth for understanding their underlying principles. Some of the strategies such as early exit trades are useful if the binary options trade is going to give negative results. By paying more commission upfront for such exit, it is possible to keep losses to a minimum.
Trading platforms for binary options trades and other trades are provided by binary options brokers. Each broker offers different strategies and features, most of which are developed in-house. Following the suggestions by the tools often proves to be better than experimenting. However, each such strategy needs to be understood and its suitability to the specific binary trade option needs to be assessed before implementation.