Getting the Edge on Binary Options Trading


Binary options trading is less about investing than it is about predicting accurately. In binary options there are simply 2 options- the stock or currency will more up or down in the selected time period. This eliminates trying to calculate what will happen tomorrow when the inflation report is released – tomorrow does not matter. All that matters is from the time the option is selected, will it go up or down in the few minutes that follow until the end time is reached. Since the up or down is largely dependent on order or trades entered on a computer even a upward trending item goes up and down from minute to minute and at the end of a longer time period ends up.

This leads many to claim that binary options is a coin flip and gambling. It certainly can be, as all investing can be depending on the approach used. On the other hand you can look at it as simply having fewer options to consider and less decision making to undertake therefore limiting losses to invested capital only.

To understand how to make money on binary options you need to understand the difference between predicting and guessing heads or tails (or more appropriately up or down). Like every investment strategy and option available for the home investor, there are fees collected when investing. This results in needing to win slightly more often than lose to break even. That is what detractors call the “house advantage”. Since that is a fact in all investing it is not an accurate representation. A typical fee structure means to make a profit on Binary options, you need to be correct about 55% of the time. That is as close to 50/50 chance of making a profit as you can get in the investing world and is based on blind guesses, not bad odds and better than you will find on any other game in the world. Since many years the majority of “safe” mutual funds lose money it is still not bad.

The real point of binary options is not guessing however. You need to do very little predicting to turn the odds in your favor substantially. As mentioned above, while you can lose on even a generally upward trending item that you choose as a gain, at the end of the day an upward trending item is going to be higher rather than lower on any 5 minute time period. Therefore the odds are not actually 50/50 but significantly in your favor. How much in your favor depends on the strength of the upward trend of course.

This is where analytic tools like and forex software like Meta Trader 4can give you an edge. These toolkits allow you to customize indicators and access historical data sets. By using the same market analytics as you would for conventional forex trading you can make excellent predictions of whether a market is trending up or down and the strength of that trend. This allows you to invest in binary options with a binary broker using up to the minute information to decide so you go with the odds instead of against them. This strategy will allow you to swing the number of correct predictions dramatically to your favor. Using the free market analytics tools included on other trading platform tools can help gain big wins on binary options.

Guest post by Alpari.co.uk

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