Binary options, despite the financial prospects for potential investors, require in the process of profit making the solution of many technical and analytical problems. To effectively use binary contracts, traders use strategies that, thanks to specialized approaches, methods and tools, are able to give certain statistical advantages to the market, and also provide an opportunity to more clearly generate effective trade forecasts for the formation of market positions.

Today the network is full of various systems and strategies that can certainly satisfy certain requirements of investors in the process of trading options. However, if we talk about professional trade and the achievement of financial heights, it should be said that the bulk of well-known investors and financial market professionals have achieved success due to their own high-quality trading systems. Schemes of work on the market, which the trader has developed independently, are the most universal and profitable tool.

Of course for most private non-professional online traders with minimal experience in trading and only basic knowledge in financial trading it is rather difficult to independently develop an effective and working strategy, but it is possible! Against this background, we offer a useful guide to developing a trading strategy for binary trading, which will help you understand the technical subtleties of the process of forming trading schemes.

How to develop your own binary options trading system?

So, before embarking on the formation of a strategy, it is necessary to clearly understand the principle of the main trading instrument – binary options. What task should we solve for profit? Everything is extremely simple – the main condition for the profitability of the contract is to determine the direction of the market fluctuations or the forecast about the value of the price at a certain point in time. Hence the logical conclusion is that to determine the necessary indicators we need a system that will effectively determine the most profitable market positions for betting an option. In this case, the most attractive moments are the levels of origin of new trend movements or a stable market trend. Simply put, the most optimal conditions for binary trading is the work on the trend of quotations. In this way, you can achieve the most effective statistics.
To determine the trends and points of their origin, as, indeed, for the calculation of other indicators, there are two directions of analysis in trade:

Fundamental, where as the indicators for forecasting the market are the fundamental statistics, political and economic news, as well as the activities of financial regulators and government bodies. On the basis of such drivers of influence on the market, the trader’s behavior pattern is built when working on the trading platform
Technical – here traders evaluate current market indicators using a wide range of specialized techniques and tools: from patterns and cyclic regularities to the generation of signals using indicators of automatic analysis

A professional trader must master all areas of analysis in order to create an effective trading system. In addition, in the preparatory stage of strategy development, the investor needs to first understand what type of system suits him the most. Here you need to take into account a lot of indicators – a comfortable rate of trade, the choice of working assets, the preferred mode of forecasting and a list of tools that the trader understands.

Most professionals seek to develop the most efficient and simple systems, which include Price Action strategies or indicator approaches to generating forecasts. These types of trading schemes are characterized by simpler algorithms for estimating market indicators, efficiency, high level of performance and correct evaluation of short-term trading periods. Having determined the type of trading strategy that suits you for all indicators, proceed to the direct development. To do this, you need to take the following steps:

• Outline the list of trading assets

Trading quotes of various financial instruments are subject to a diverse spectrum of patterns and drivers of influence. If you open asset schedules, then you will not find two of the same. Therefore, for effective trade, you need to create a set of the most attractive trading resources. The fact is that some assets work perfectly on strategies of fundamental analysis, for example, “Trading on the news” – this includes commodity assets, gold, stock market instruments (stocks), others show excellent results using graphical or indicator strategies – mostly currency pairs. Therefore, the choice of assets for trading is an important factor in building a trading system.

• Determine the optimal trading time

Effective time management is also the foundation for the formation of a profitable approach to trade. Firstly, here there are several time periods for trading – night, which is characterized by low volatility of the market, minimal dynamics of trading, limited list of assets. Day, which is characterized by the activity of the movement of quotations, strong impulse movements of the trend, the maximum dynamics of trade operations. In addition, there are several additional time periods for trading – weekend trading, which uses specialized assets for trading or artificial trading quotes generated by the algorithm of the brokerage platform, as well as the time of the release of the fundamental data. Having determined the optimal time period of work in the market, the investor can improve the level of performance of his trading. Let’s continue, the next step is the direct development of the system.

• How to build a strategy

So, you have decided on the assets for trading, set the trading time for yourself, now you need to create a system template. For this, it is necessary to analyze the quotation chart well and identify the most accurate and cyclical patterns. To informatively show the principle of system development, we take two simple and most popular types of strategies – indicator and Price Action.

 Indicator systems – to create a template for market analysis using indicators, select from your list of understandable analysis services tools with different modes and algorithms. Ideally, if you use a set of oscillators, trend indicators and auxiliary services, for example, volume determination tools. Expansion of the estimated market indicators will allow you to build a system with high efficiency and versatility. Next, analyze the performance of indicators on the history of quotations. This is necessary to determine the system of signals that can form an instrumental set of strategies. Having identified the necessary indicator signal indicators that can be used in practical trading, fine-tune the analysis services. This is necessary for a correct estimation of quotations of a particular asset. It is through the combination of indicators and experiments with their technical settings that professional indicator-type strategies are born.

Strategies for Price Action – this format of systems is more complicated in development. To form a system of this type, you need to have a relatively large trading experience and attention. The bulk of Price Action systems are strategies based on cyclical patterns and the identification of certain market indicators that can be used as signals for trading. A simple example is working on trend levels. The developers of this system simply noticed the regularity of the market, in which the price, reaching certain indicators, carried out a trend reversal. So the trading strategy was born. Another example is candle models. The chart in the mode of Japanese candles generates a wide variety of shapes, combinations and figures of quotations of quotations that are able to inform the trader about changes in the movements of the market. Having identified this model, you can draw up a lucrative rate. Thus, the development of the Price Action strategy is to monitor the market for the identification of certain cyclical patterns. It should be noted that such indicators are considered by professionals to be the most effective signals for trading.

Calculation of expiration for trading by strategy

The second most important indicator of binary trading is the option redemption time. It is completely unimportant whether you predicted a market movement if at the time of the expiration of the option the price is not in the place where it was supposed to be according to the trade forecast, as the market can oscillate in different directions in a rather limited time range, and considering that the bulk traders trades contracts with expiration from 1 minute to an hour, then without correct calculation of this indicator, trading can be ineffective.

To correctly determine the optimal repayment range for bets, you first need to study the history of the market. Here you can simply calculate the candles of the chart with a certain period of construction (timeframe) to determine the most effective time range, which will effectively work out the signal of the strategy instruments.

Next, when calculating expiration, you should take into account the current volatility of the financial instrument market. For pulsed motion, it is preferable to use contracts with a minimum repayment range. At low quotes activity it is recommended to work with options with a longer range of repayment. A clear calculation of the time indicator of the action for each contract allows you to maximize the profitability and efficiency of trading.

• Managing

We determined the range of technical indicators that are necessary to create our own trading method for binary trading, it’s time for financial requirements for the work of the strategy. You should clearly understand that there are no systems with 100% efficiency. Each strategy gives a certain indicator of unprofitable contracts! Therefore, you must clearly understand what level of losses your strategy gives to properly manage your capital. Ignoring the calculation of risk management indicators can lead to a loss of capital even on the most efficient system. In this respect, you can use the classic limitations on the cost of options – it is usually recommended to use contracts that do not exceed 5% of the amount of capital. An alternative here is a test strategy on specialized services or demo platforms – in this mode, you must use the trade statistics to determine the number of unprofitable rates and calculate the level of the maximum allowable risks in trading.

• Testing the system

Undoubtedly, already during the development of the strategy you will test certain moments of its work. However, after the final configuration, the formation of the system template and the calculation of all the necessary indicators, it is extremely important to conduct a final test of the strategy’s work. Thus, you can finally make sure the system is working, evaluate its trading effectiveness in different trading conditions, and gain experience in its practical use. Believe me, this will definitely pay off in the form of profits!

Summary

Having passed all the stages of professional strategy development, you can create an individual and highly profitable trading method that will be optimal for your trading style. The optimality of all indicators of one’s own strategy is one of the main factors in achieving success by any trader in the binary market!

 

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“General Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.”

How to develop your own binary options trading scheme?
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