There are two main schools of thought when it comes to trading binary options. Do you treat them like a bet? or do you treat them as if they were an investment? Either approach can yield very good results over the long term, but one strategy is clearly superior to the other. In reality, binary options have nothing to do with the traditional marketplace. The assets that you are trading are not actually attached to the asset it says, but are solely a prediction of that asset’s movement–this is why they are usually called “underlying assets.”
So in reality, these are not investments at all, but a prediction in movement. If you treat these like a bet, then, you will be making the most technically correct choice. However, you are acting upon what the actual asset will do, so you still need to have knowledge of the asset’s market–and this makes treating binaries like an actual investment the best choice for you.
There is a major problem with choosing either one approach or the other. If you just go with the betting approach, your estimates will always be lacking information. Yes, you can look at news reports and make some semi-educated guesses, but if you want to maximize your chances, you need as much data as possible. However, knowing a lot about a stock, index, currency pair, or commodity will not be enough. You need to know how to approach it with a proper investment size, and this boils down to betting theory.
In order to meet with as much success as possible, you need to wed these two approaches. Learn about the investing side of things. Learn the fundamental indicators and what they mean. Figure out which technicals will be most effective at predicting future movement and direction. This will definitely benefit you, and if this is all you do, you will definitely meet with success. But your profits will only be limited here. You need to be able to look at probabilities and size your risk amounts in order to maximize profits and minimize losses.
This is often problematic because of the intermediary nature of binary options. There are two big populations that are flocking to this new type of trading: Forex traders and online poker players. Obviously this points right back to the dichotomy that was previously mentioned. One group invests by finding value, the other bets. But the very best in each field are already very aware of how to translate their skills to the other field. So a good poker player is not only able to make an appropriately sized bet at the right moment, but they are also able to do the background work to learn more about what they’re doing. No, poker and finance are not the same, but the concept translates easily. Knowing your odds of winning with a suited king-queen in a five hand field is not really that far removed from knowing how crude oil will react when international bond markets are struggling.
The good news is that binary options are much simpler than both poker and the Forex market. You only need to predict direction, nothing else. Even if you’re right by one penny (or even one pip), you will realize the full profits. So even though binaries are all or nothing investments, there is actually a lot of wiggle room that you might not expect. The more knowledge that you have about an asset, the better, but you don’t need to put as much effort into researching prolonged trends as you might expect if you were trading stocks or indices over a long period of time. You don’t need to be right by a lot, you just need to be right. Finally, with some minimal research you can figure out the correct percentage of your bankroll to risk based upon market predictions. This will soon become second nature to you after a few tries.