A solid strategy is necessary if you want to be successful in any form of trading. There are many different strategies out there, and you will want to customize whichever you choose in order to match your specific goals and needs as a trader, but settling on an effective choice is an absolute must.
Devising a strategy is only the first step. After you select a method, you need to make sure it works. There are two ways of testing this, and it is suggested that you use both. Before you start testing, you need a hypothesis. This means that, in explicit terms, you need to map out exactly what your method is, how it will work and be employed, and how successful it is supposed to be. For example, you might conclude that executing a put binary option after a currency has reached its resistance level will be a successful trade 60 percent of the time when dealing with 15 minute options. When you test this type of trade, you need to be specific about the range and how close the actual strike price needs to be to the resistance level. The more specific you can be, the better off it will be.
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Again, testing your strategy hypothesis comes in two parts. The first is to look at as much back-data as possible. Look over historical price fluctuations on the charts. Look at how often the resistance price was arrived at and where prices were actually at 15 minutes later. It is likely that you will have a huge sample size here and you do want to look at as many examples as possible, but don’t let this paralyze you. Look at the data, but don’t lose out on your trading time as a result. You want your education to serve a larger purpose, after all.
Once you’ve analyzed past data, start using a demo account to practice. Many brokers now offer these for free, but some brokers specifically will not give these out unless you make a deposit first and then especially request access the program. Find a broker that offers a demo account (you might need to email their customer service to find this out), and open an account. Then, practice your strategy as much as possible in real-time. This requires a lot of vigilance on your behalf, but so does real life trading. Virtual trading is good practice for this reason, amongst others.
Demo trade as much as possible before you start to reach a conclusion and start trading real money. Your hypothesis will hopefully be proven correct at this point. If after both set of tests are over (the research stage plus the practice), your strategy theory is successful, you’re ready to start real trading. If you have proven that your strategy is not as successful as you’d like, start over again. There is no time requirement saying you have to start real life trading right away. Take your time and devise a method that will give you the results you desire. There are no strategies out there that will give you 100 percent success rates, but you can be successful if you take your time and do the research necessary to figure out what works and what doesn’t. Simply jumping into real life trading is a bad idea, you will definitely not want to do this. Your money will be lost before you even start.
A good binary options trading strategy will overcome the deficit between the win rate and the loss rate. For most brokers, this hovers at around a 55-60 percent success rate. You can beat this if you put in the work. Stay realistic with your end results and don’t force a trade that doesn’t work on paper.