When trading binary options, a winning strategy requires a method that wins more trades that it loses, and crucially, at a payout that more than covers the losses. Digital trades generally payout at less than 100% on the investment amount – so simply winning more trades than are lost may not necessarily be enough to turn a long term profit.
The art of trading binaries profitably shares some similarities with the sports betting world. The important trait that links both enterprises is that of expectancy. Long term profit trading binaries can only be derived where the expectancy (the theoretical profit within any trade) results in a positive expectation from that trade.
Binary options trading strategies are therefore used to identify repeatable trends and circumstances, where a trade can be made with a positive (profitable) expectancy. It may be as simple as;
- If asset ‘X’ falls in value for three sessions in a row, open a call option for the duration of the next session.
The above is an extremely simple example of a trading ‘strategy’. Strategies do not need to be hugely complex (though they can be), sometimes the simplest strategies work best.