Forex Binary Options Strategy

If you want to successfully trade Forex binary options (that is, if you want to have fun and make profits) youll definitely need a Forex binary options strategy in place. Without a well-defined Forex binary options strategy in place, youll just be twisting in the wind, as they say. As with any other type of trading, youll need a strategy to make profits and keep losses at a reasonable low. A Forex binary options trading strategy is not a luxury, nor an affectation. A Forex binary options trading strategy that is pre-determined and well-defined is actually a necessity.

When youre new to determining your own Forex binary options strategy, the two already established strategies that you should consider are the non-directional strategy and the reverse strategy, as they are called. Each one of these strategies helps you define your approach to trading on the Forex, which in turn provides you with focus and clear concentration. Investing in the Forex market is not for those who think they can trade on emotional surges or mere guessing. While the Forex binary contract option is an amazing hedge against risk, its only for those who can apply some proven Forex binary options strategy and take advantage of proven techniques for success.

Reverse strategy is the easier of the two Forex binary options strategies to master. It is a very safe strategy, perfect for new Forex traders. Reverse strategy considers market behavior, and using it Forex traders look for certain signs that a pattern is emerging into an up or down price movement trend. Forex binary options traders then take their cue from this as to what positions to enter and for how long. Experienced Forex traders know that while these cannot be precisely predicted as far as timing, there are routine events that take place in the Forex market. These routine events typically have a powerful impact on the value of currency pairs. The smart trader using a proven Forex binary options strategy makes use of contrarian investing (reverse psychology, hence the strategys name) as he waits and waits for these events to take place and for the currency pair prices to subsequently stabilize; then, he enters his position(s).

The element of reverse psychology entails waiting until currency pair prices have dropped to the lowest level (approximately) and then purchasing a binary option contract. The idea is that when the lowest level is reached, the price is nearly guaranteed to rise very soon, and taking advantage of this by going long is the strategic move that is made.

Of course, the risks involved are: 1) the price may still not have bottomed out, even though it has appeared to have done so; and 2) by using a binary option with its pre-determined pay-out, profits may actually be lost (that is, diminished from what they could be) if the price rebound goes quite high relatively quickly. But there is no trading strategy or method without risk, and the risks here are small in comparison to those with other trading strategies. If your prediction proves correct, you win a nice pay-out, while if it proves wrong, you only have lost a relatively small premium.

Non-directional strategy is sometimes called range betting. This Forex binary option strategy seeks to enter a position depending upon the present market situation. When the currency pair market is unstable, there are particular events that typically take place. Quite often this means that the values of specific currencies suddenly drop, while the values of others suddenly shoot through the ceiling. Forex traders using this strategy determine how the prevailing currency pair market conditions are going to affect the immediate future value of a given currency, and they then go long or short on a particular currency that they have in their sights via a Forex binary option contract, depending upon the present market If a trader believes that the currencys value will not change much or at all in the near future, she holds off and waits for more change in the market conditions before entering any position (buying a contract).

The non-directional Forex binary option strategy often involves purchasing more than one contract at the same time in order to offset the effects of high volatility. Long and short positions on the same currency pair may be entered simultaneously, with the risk of losing the premium outweighed by the increased possibility of winning a pay-out. This is why the non-directional strategy should be tried only after youve gained some experience in the Forex marketplace: reverse strategy usually involves buying just one contract, whereas non-directional strategy works best with multiple simultaneous purchases. Non-directional strategy potentially offers both greater gains and greater losses, and its not as easy to understand, at first, as reverse strategy.

As far as knowing, or being able to intelligently guess, when the Forex market is about to rise, fall, or experience sudden turbulence, that knowledge comes with research and practice. Therefore, dont forget that you should first practice any Forex binary options strategy in a virtual account with play money!