Strategies for use by traders in the binary options (digital option) market have increased as the popularity of this form of trading has risen quite rapidly. Top binary options brokers in the market, as well as investors who have been undertaking individual trades have all developed such strategies.
With the increase of investors in the binary options trading system, the risks have also increased proportionately. For this reason a proven strategy has become quite essential for every trader in this market. One must however not go blindfolded into adopting any one strategy without a comprehensive understanding of the nuances involved in the strategy. A few commonly adopted strategies are enumerated in the following paragraphs.
Purchasing a put or call option is the basic and most fundamental of the all the strategies that one can use in binary options trading. As an example, if one were to invest an amount of $500 in a PUT option and select the EUR/USD pair for an end-of-hour option, then the return would be $850 if the pair finishes lower in the trading at the end of the stipulated time. For a case where the end result is not as per that speculated there is yet a return of 15 percent of the $500 that had been invested initially.
Another strategy that investors in binary options rely upon is that of buying options in the reverse direction in the middle of a trade. They opt for this strategy when they note that their option is going to finish trading out-of-the-money.
If for example one invests $100 in a Call option and predicts an increase of the currency at some point of time, but finds the currency going the reverse way, then the best strategy is to buy a reverse option. That means invest $100 in a Put option and this would help in minimizing losses.
Experienced traders of the binary options use a strategy called doubling the trade. In this strategy one invests a second amount in the same option when one finds that the first selected option has been going in their favor. For example, one has invested $100 in a PUT option for an asset and then finds the trade is going in their favor.
The investor now invests a further amount in the same option which would reap double profits. This sort of strategy however requires very thorough knowledge about the financial process of the market.
Another one worth a mention is the market pull strategy. In this strategy the process is simple and straightforward but the execution is a bit tricky. A change in the market which is quite dynamic needs to be studied in this strategy and then either the Call or the Put option is to be taken in totality. This one is usually based on news leaks which a trained investor would be able to intercept and interpret correctly.
One can therefore get an overview of the different types of strategies that one can adopt in the binary option trading market. There are many more such strategies and only using them would give one the apt return.