Binary Options Trading Strategy
How To Trade Binary Options:
In this article, I want to show you a simple binary options trading strategy.
In the previous article, I’ve shown you how binary options work.
If you haven’t read that article yet, please do this first so that you know the basics before we actually start trading binary options.
Because in this article, I will show you:
- How to configure your charts
- How to find the right market to trade
- How to find the best expiration to trade and…
- As promised: A Binary Options Trading Strategy
So let’s get started…
How To Configure Your Charts For Trading Binary Options
In the previous article, we talked about reputable brokers for Binary Options, and I recommended that you ONLY trade Binary Options with NADEX.
In order to trade, open the NADEX platform, simply go to https://platform.nadex.com/npwa/index#/login
You can then log into a demo account or your live account.
By the way: If you would like to have a demo account with Nadex that never expires, use this special link: https://www.rockwelltrading.com/nadex
After logging in, the screen is pretty empty.
In the previous article, we talked about all the markets that you can trade:
- Indices like the S&P 500, DOW Jones, Nasdaq, etc.
- Currencies like EUR/USD, USD/JPY. AUD/USD, etc
- … and you can trade commodities like Gold, Silver ad Crude Oil as well.
And as you know, Binary Options can expire…
- in 5 min,
- in 20 min,
- at the end of the day
- … etc.
For this very simple trading strategy, I want to know which Binary Options expire in the next 20 min, so I’m selecting this here:
Right now, we see that only the indices are expiring in the next 20 min.
Depending on the time of day, you might also see currencies and commodities here.
But let’s get started with the indices:
- Simply click on one of the indices, e.g. US 500
- And then select any strike price.
This will bring up the chart and an order ticket. For now, we only need the chart.
This is what it looks like:
For this simple Binary Options trading strategy, I want to remove the RSI, and I want to add the Bollinger Bands as well as the Bollinger Bandwidth.
And I am changing the settings of these 2 indicators to 12 and 2:
Here’s what I’ve found when using Bollinger Bands:
- If prices are moving higher and the Bollinger Bandwidth gets larger, prices usually stay ABOVE the Moving Average.
- And if prices are moving lower and the Bollinger Bandwidth gets larger, prices usually stay BELOW the Moving Average.
A Simple Binary Options Trading Strategy
Here’s how I use this for trading Binary Options:
- When I see prices moving HIGHER and the Bollinger Bandwidth gets larger, I BUY a binary option with a strike price at the Moving Average
- When I see prices moving LOWER and the Bollinger Bandwidth gets larger, I SELL a binary option with a strike price at the Moving Average
I like to use LIMIT orders and I want to see at least $10 in profits.
$10 might not sound a lot, but if you can do this every 15-20 minutes, it adds up.
And you could always buy more contracts:
If you would buy 10 contracts, you would make $100.
Keep in mind that there’s always the risk of losing money!
But you already know that, right?
After placing the order, all you need to do it wait until expiration.
In this example:
- If prices close above 1581.4 in the next 6 min, you would make $10.
- And if prices close below 1581.4 in the next 6 min, you would lose $90.
If you need a refresher on how exactly Binary Options work, read the previous article.
Can Binary Options Make You Rich?
What you have just seen is a very simple strategy for trading Binary Options.
And there are a few restrictions when trading this strategy:
- You have to be in front of your computer during the day when the markets are open. And not everybody has time to do that.
- You have to wait for the right setup that I just explained.
- The strategy has a low risk/reward ratio.
I personally use a more advanced trading strategy for Binary Options that allows you to place the trades at night so that you don’t have to worry about it during the day.
I’ll show you this strategy in the next article – Advanced Binary Options Trading Strategy With Nadex Call Spreads