If you are new to binary options trading, it may be wise to research what are the best binary options strategies available to you.
While there are several strategies available, not all of them are suitable for beginners in South Africa and not all of them will help you to achieve your investment objectives.
So it is always a great idea to take the time to research the different strategies to ascertain which ones are more likely to be appropriate for someone who is new to binary options trading.
List of 5 of binary options strategies for beginners include the Trend strategy, the Pinocchio strategy, the Straddle strategy, Fundamental analysis and the Hedging strategy.
The Aim of Binary Options Trading in South Africa
With binary trading in South Africa, the aim is to make an educated guess about the price that you think a certain asset or asset-pair will reach within a specific time period. As the word “binary” implies, with this type of investment, there are only two possible outcomes – gain or loss.
In other words, either you will gain everything or you will lose everything based on what you had predicted about the price of that particular asset or asset-pair. The two types of binary options are call options or put options.
A call option gives you the option of buying an asset at an agreed price on or before a certain date. A put option gives you the choice of selling an asset at a particular price (strike price) on or before a certain date (expiration date).
If you believe that the price of the underlying asset is going to go up within a certain time frame, then you would invest in a call option. By so doing, you would make a profit when the price goes up because you would be able to sell that asset at a higher price than you bought it for.
On the other hand, if you believe that the price of the underlying asset will fall within a certain time frame, then you would purchase a put option which gives you the right to sell that asset at an agreed price within a given time period. Now let’s briefly discuss some of the top binary options trading strategies for beginners.
The Trend Strategy – South Africa
As the name implies, the Trend strategy is based on price trends. Over time, investors will notice that there are certain patterns in how the price of an asset moves.
For example, you may note that in certain circumstances, there is a downward trend, in other circumstances the price may remain relatively stable, and in other circumstances, there may be an upward trend in price. The aim is to study the trend and to make your trade based on the change in direction of the moving average price of the underlying asset.
You look at the moving average of the price of the asset over a certain period of time and make your trade when you notice a change in the direction of the moving average, ensuring that the trade is for the opposite direction.
The Pinocchio Strategy – South Africa
This strategy is a simple one and is used whenever the investor expects the price of the underlying asset to increase or decrease drastically in the opposite direction.
If the price is expected to increase drastically then a call option should be purchased, and if the price is expected to decrease drastically, a put option should be purchased. In the candle bar diagram, the wicks are usually very long indicating that the market may be lying (Pinocchio’s nose grew longer when he lied) so we should trade in the opposite direction.
The Straddle Strategy to Use as a South African Trader
This also falls in category of top 5 binary options strategies for beginners. Straddle strategy is most suitable during periods of high market volatility and is based on the expectation that breaking news or other important event will cause a sudden change in the price of an underlying stock.
In this case, both a call and a put option are placed on the same asset. Place one option first (call or put) and then when the price change occurs, place the other option (call or put).
The Fundamental Analysis Strategy – Trading in South Africa
Fundamental analysis involves looking at the smaller entity to gain insight into the probable performance of an underlying asset. This is especially applicable to binary options trading of underlying stocks.
The fundamental analysis basically involves the scrutiny of the organization’s financial performance in order to make an educated guess about the most likely direction that that asset will take under the prevailing market conditions. This method requires that the trader understands how to read and interpret financial statements.
So, this is suitable for beginner traders who have at least a basic understanding of how to analyse financial reports.
The Hedging Strategy for Traders Beginners
Hedging is a method of trading that helps to protect the trader from excessive losses. It involves setting up accounts that will offset any possible losses that the trader may make.
This strategy is perfect for beginners who want the benefits offered by binary options trading, but who cannot afford to rack up huge losses.
Conclusion – Top 5 Binary Options Strategies for Beginners
No matter how new you may be to binary options trading, it is possible to make gains and to minimize losses by choosing the right strategy.
Although there are several binary options trading strategies for beginners, some of the most appropriate strategies include the trending strategy, the Pinocchio strategy, the straddle strategy, the fundamental analysis strategy and the hedging strategy.
All these strategies, except the fundamental analysis strategy, involve the use of technical analysis as a means of trading. Although it is possible to make sizeable gains from binary options trading, it is wise to remember that all investments involve a level of risk. Therefore, it is best to conduct some amount of research before embarking upon binary options trading.
Binary options trading strategies for beginners should ideally begin with the establishment of a demo account. This will help new traders to acquire a feel and a good understanding of how binary options trading works, prior to investing actual cash.