If you’re a Forex trader, you probably have some questions about binary options. Luckily, the transition from the world of trading currencies into becoming a binary options trader is actually quite simple. A lot of the same principles can be transferred from one area to the other, and this makes binary options very popular amongst people with experience in Forex trading. Here is a quick guide designed to help make your switch to be as smooth as possible.
1. Start with what you know
If you’ve been trading the EUR/USD pair in the Forex market, start out by trading this as a binary option. The switch here will be as painless as possible and you will find that you will be more successful at first by doing this than if you were to try trading something that you didn’t know. However, something that a lot of new binary options traders forget is that time is important too.
If you were a Forex position trader, odds were you didn’t make 100 trades per day. With binary options, this mistake is pretty easy to make since 60 second options are becoming so popular. If you only made a few big trades per day, stick to this method.
Going from a meticulous plotted out approach where you make five trades per day into a strategy where you’re making 50 trades per day with 60 second or five minute options is not going to be profitable. So stick with the assets you know, but also trade the timeframes that you know, too. Read more about getting into Binaries.
2. Pick the best times.
If you trade the USD/JPY pair regularly in the Forex market, you know that this particular pair is going to see the most amount of movement during the Asian trading day. So why would you make a bulk of your trades during the European business day? The big thing about binary options is that they move in real time, yet a lot of brokers don’t advertise trading volumes within their platform. This leads to people forgetting that some times are better than others to make trades.
Pick the time periods that make the most sense for you just as you would when trading Forex. If your asset will move most during the Asian trading hours, make sure you’re awake and ready when this market opens and closes so you can hop on when your asset is at its highest volume and predictability.
3. Capitalize on the trades with the biggest potential.
You wouldn’t trade a currency when you expect a move of one or two pips only, so why would you commit to an option with the same amount of information? If you stop trying to find tiny bits of movement and instead put more money into trades that have a higher probability of success with more expected motion, you will find that yes, you are making fewer trades per day, but the big payout will be that those few trades that you make are more likely to be correct.
Bettering your correct trade rate is more important to a binary options trader than making a ton of small trades with only modest profits. Think about it like this: if you can make five trades in a day and make $500, this is much better than making 20 trades per day and making $200. The former is more profitable with less effort on your behalf.
4. Branch out when you feel comfortable.
There’s a lot more to the binary options market than just trading currency movement. Someone with a firm grasp on what currency prices are doing is likely to be pretty good at reading other types of assets, too. Continue reading here to find out which brokers offer the most assets to trade. Obviously branching out requires more research on your behalf, but there are a lot of things that you probably already can predict well with little extra work.
For instance, the U.S. dollar and the price of an ounce of gold usually move in contrary ways. When one goes up, the other usually goes down. If your just trading currencies, you would miss out on this easy money maker. Also, a firm grasp on what a nation’s currency is doing says a lot about its major stock indices—which can also be easily traded from your binary options broker’s platform.
5. Never be complacent.
Just because you’re a good trader doesn’t mean that trading is easy. People with experience know that a good trader never rests on their laurels but is always learning more and studying to improve their techniques and ideas. Trading is an ongoing process and it is one that you will never fully master, no matter how much effort you put in.
Occasionally, you will be wrong, but you can also always learn from your mistakes so that you don’t make them a second time. This page will describe some common mistakes that are made by most traders.
Binary options are a great way for a Forex trader to supplement their income and increase diversity. A good Forex trader will likely be a good binary options trader if they remember these skills and apply them to their trading.
