For many traders, this question is almost impossible to answer. Luckily, there are a few concrete criteria for a good binary options strategy or free systems yourself. This article will outline these criteria and show you how to build good strategy based on them.
While these might not be the criteria you read in most trading books, they are the criteria that really matter. Criteria 1: Repeatability Repeatability defines the characteristic of a strategy that it always gets you to do the same thing in the same situation.
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- Regulation and fraud[ edit ] Further information: Securities fraud Many binary option "brokers" have been exposed as fraudulent operations.
- Let us take them one after the other.
A strategy is repeatable when it clearly defines which assets you analyse, how you analyse them, and what you do once you find a trading opportunity. There is no room for gut feelings or hunches, the only thing that drives your decision can be cold, hard facts.
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For every reading over 80 and below 20, you know how you would invest. For all readings between 79 and 21, you would stay out of the market.
There is no grey area and no room for personal judgments.
Faced with the same value, you would always do the same thing. Repeatability is so important because random trading is the number reason why traders lose money.
They follow their gut feelings, and sometimes they will make some money, and sometimes they will lose some money. But they will never know why. After popular binary options systems while, they will face a loss significant enough to wipe out a large part of their popular binary options systems balance. Coming back from this loss will be impossible.
Because you always do the same thing, you know whether what you are doing works. This brings us to the next criteria for a good binary options strategy: comparability. Criteria 2: Comparability Our second criteria directly builds on our first one.
When you have created a repeatable system, you can compare it to other repeatable approaches. You compare the winning expectancies of multiple trading systems.
The winning expectancy is the factor of your strategies average payout and total return. The total return is the average payout plus percent because you also have to factor in that you also get your initial investment back.
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It calculates how much of your original investment you get back on an average trade. A winning percentage over percent indicates that you make money on an average trade.
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A winning percentage below percent indicates that you lose money on an average trade. You can compare the profitability of multiple strategies by comparing their winning percentages. Comparability is especially important when you try to improve your appraoch.
After every modification, you can compare the new winning percentage to the old one.
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If your modifications improved your winning expectancy, keep them. If your modifications decreased your winning expectancy, go back to your original strategy. When you try something new, you can avoid having to judge the make money force based on feelings.
Demo account? They also allow you the rare opportunity to sell your contract before the expiry time to lock-in profit or minimize your loss. Be aware that this may not be seen as legal depending on your home country. To answer this, you first need to understand what a binary option is. These are actually simple traded options that many low skilled traders can take advantage of.
You have hard facts that help you decide which way is better. This brings us to the third element of a good trading methods: improvability. Element 3: Improvability Improvability is the final characteristic of a good strategy. It combines the first two criteria and builds on them.
Improvability is the most important criteria of a trading system, but it would be impossible without the first two. This statement might surprise you.
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How do popular binary options systems get better? And what if you made money but suddenly start turning a loss?
What is the Best Binary Options Broker? Binary options trading hinges on a simple question — will the underlying asset be above or below a certain price at a specified time? If so, you can make substantial profits with one of the most straightforward financial instruments to trade. But what exactly are binary options, and what are their benefits and drawbacks?
When you know how to improve your strategy, its initial winning expectancy is unimportant. After a while, you know that you can get the winning expectancy over percent. Even if you should slip into sloppy trading and start losing money, you can always improve again and fight your way back out. To answer this question, we will now translate the three elements into concrete elements that you can add to your strategy, too.
Because binary options are short-term investments, a trading strategy for binary options must be based on technical analysis. Technical analysis uses indicators that predict what will happen to the price of an asset in the future based on what happened to the price of the asset in the past.
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There is an almost endless amount of indicators, ranging from mathematical indications such as oscillator values to indications based on pattern recognitions such as trend analysis. Fundamental aspects such as the economic future of a company are unimportant when you predict what the price of an asset will do over the next 15 minutes or one hour.
With this step, you have fulfilled half of each of the first two criteria — repeatability and comparability. For the second half, you need our second element: a money management strategy.
Element 2: A Money Management Strategy A money management strategy defines how much you invest in every single trade.
With this type of strategy, you trading becomes fully repeatable and comparable. You invest the same percentage of your account balance in popular binary options systems trade, which means that every trade bears the same weight.
With a strategy that always invests the same amount of money, this would be different. As your account balance grows, each single trade becomes less meaningful to you. After a losing streak, every trade becomes more meaningful to you. This is a problem because no two trades are completely alike. Even with a clearly defined strategy, you will trade at different times of the day, in different moods, and in different market environments.
You want all of these things to have the same effect on your overall success. Otherwise, you would sooner or later encounter a situation in which most of popular binary options systems weight falls on lost trades, and you could lose a lot of money. The key to long-term success is not losing money. As long as you always make money, you will get continually richer.