Binary options trading can be a lucrative endeavor if approached with the right strategies and mindset. For beginners, understanding the nuances of the market and having a set of reliable strategies can significantly enhance their chances of success. This article will delve into three effective and easy to implement binary options strategies for beginners, detailing the tools and indicators involved, and providing a clear framework for implementation.
Top 3 Binary Options Strategies For Beginners:
Strategy 1: Aroon Indicator with SuperTrend and SMA
The first strategy leverages the Aroon indicator, SuperTrend indicators, and a Simple Moving Average (SMA) to make informed trading decisions.
- Timeframe: 1-minute chart
- Trade Duration: 3 minutes
- Aroon Indicator Settings: Period 7
- SuperTrend Indicator Settings:
- First SuperTrend: ATR period 10, multiplier 1
- Second SuperTrend: ATR period 11, multiplier 2
- Simple Moving Average (SMA): Period 200
Strategy Details:
- Trend Identification: Use the 200 SMA to determine the overall trend. When the price is above the 200 SMA, the trend is considered bullish, and when the price is below, it’s bearish.
- Entry Signals:
- Bullish Signal: Enter a trade when all three conditions are met: the price is above the 200 SMA, the Aroon Up crosses above the Aroon Down, and both SuperTrend indicators show a buy signal.
- Bearish Signal: Enter a trade when the price is below the 200 SMA, the Aroon Down crosses above the Aroon Up, and both SuperTrend indicators show a sell signal.
3. Trade Execution: Execute trades with a 3-minute expiry time based on the above signals.
Why It Works:
This strategy combines the strength of trend-following indicators (SuperTrend and SMA) with the Aroon indicator’s ability to detect changes in trend direction. By aligning multiple indicators, this strategy filters out false signals and increases the likelihood of successful trades.
Strategy 2: Vortex and Schaff Trend Cycle with SMA
The second strategy incorporates the Vortex indicator, Schaff Trend Cycle (STC), and a Simple Moving Average to enhance decision-making accuracy.
Tools and Indicators:
- Timeframe: 1-minute chart
- Trade Duration: 3 minutes
- Vortex Indicator Settings: Period 6
- Schaff Trend Cycle (STC): Optimal settings for short timeframes
- Simple Moving Average (SMA): Period 200
Strategy Details:
- Trend Identification: Use the 200 SMA to establish the overall market trend. If the price is above the 200 SMA, the market is in an uptrend; if below, it’s in a downtrend.
- Entry Signals:
- Bullish Signal: Enter a trade when the price is above the 200 SMA, the Vortex Indicator (VI+) crosses above the VI-, and the STC indicates a bullish cycle.
- Bearish Signal: Enter a trade when the price is below the 200 SMA, the VI- crosses above the VI+, and the STC indicates a bearish cycle.
3. Trade Execution: Execute trades with a 3-minute expiry time based on the above signals.
Why It Works:
The Vortex indicator is excellent at identifying the start of a new trend, while the STC combines aspects of the MACD and stochastic indicators to provide early and accurate trend signals. This combination, along with the 200 SMA, helps in filtering trades to align with the prevailing market trend.
Strategy 3: Moving Average Convergence with Price Action
The third strategy uses a combination of moving averages and price action signals to identify trading opportunities.
Tools and Indicators:
- Timeframe: 1-minute chart for monitoring, 2-minute chart for signals
- Trade Duration: 3 minutes
- Simple Moving Averages (SMA):
- Long-term: Period 200
- Short-term: Period 20
Strategy Details:
- Trend Identification: Use the 200 SMA to identify the long-term trend. When the price is above the 200 SMA, look for buying opportunities; when below, look for selling opportunities.
- Price Action Signals: Monitor the 2-minute chart for specific candlestick patterns:
- Bullish Signal: Enter a trade when the 200 SMA and 20 SMA are close together (indicating consolidation), and a bullish engulfing pattern or a sizable inverted hammer appears.
- Bearish Signal: Enter a trade when the 200 SMA and 20 SMA are close together, and a bearish engulfing pattern or a sizable hammer appears.
3. Trade Execution: Execute trades with a 3-minute expiry time based on the above signals.
Why It Works:
Combining moving averages with price action patterns allows traders to identify potential breakout points during periods of consolidation. This strategy capitalizes on the market’s natural tendency to break out of consolidation zones, providing clear and actionable signals.
Importance of Risk Management
While these strategies offer robust frameworks for trading, it’s crucial to emphasize the importance of risk management. Beginners should adhere to the following principles to protect their capital:
- Position Sizing: Never risk more than 1–2% of your trading capital on a single trade. This helps to mitigate the impact of losses.
- Stop-Loss: Implement stop-loss to limit potential losses. This is particularly important in volatile markets. In Binary Options, before you start trading, set the amount per trade, and set the total amount your are willing to lose in your session. STOP when you reach that amount.
- Diversification: Avoid putting all your capital into a single strategy or asset. Diversify your trades across different assets and strategies to spread risk.
Backtesting and Demo Trading
Before deploying these strategies in a live trading environment, it’s essential to backtest them using historical data. This helps in understanding how the strategy would have performed in different market conditions.
Additionally, using a demo account to practice these strategies allows beginners to gain confidence and refine their approach without risking real money.
Example Calculations: Achieving a 60% Win Rate with $20 Trades
To provide a practical understanding of potential profitability, let’s consider a scenario where a trader uses $20 trades and achieves a 60% win rate. We will also suggest an appropriate capital amount for implementing this strategy.
Total Trades and Win/Loss Breakdown
- Total Trades per Month: 300 (10 trades/day * 30 days)
- Winning Trades: 180 (60% of 300)
- Losing Trades: 120 (40% of 300)
Profit Calculation
- Net Profit per Winning Trade: $18.40 (since $20 * 92% payout = $18.40)
- Total Profit from Winning Trades: 180 trades * $18.40 = $3,312
- Total Loss from Losing Trades: 120 trades * $20 = $2,400
- Net Profit: $3,312 — $2,400 = $912
- Monthly Net ROI: Calculate the return on investment based on the initial capital.
Suggested Capital
When starting with $20 trades, it’s important to have sufficient capital to manage risks effectively.
As a general rule, you should risk only a small percentage of your capital per trade. Using a conservative approach of risking 1–2% of your capital per trade:
- Capital Calculation for 1% Risk: $20 / 0.01 = $2,000
- Capital Calculation for 2% Risk: $20 / 0.02 = $1,000
Based on these calculations, a suggested starting capital for trading with $20 trades would be between $1,000 and $2,000. This range provides a buffer to manage risks and handle potential losses while adhering to sound risk management principles.
Charting Your Path to Success
Binary options trading can be a rewarding venture for beginners when approached with well-researched and reliable binary options strategies for beginners.
The three strategies discussed — using the Aroon indicator with SuperTrend indicators and SMA, combining Vortex and Schaff Trend Cycle with SMA, and leveraging moving average convergence with price action — offer robust frameworks for making informed trading decisions.
Remember, the key to successful trading lies in continuous learning, disciplined risk management, and thorough practice using demo accounts. By adhering to these principles and the provided binary options strategies for beginners, you can enhance your trading skills and increase your chances of success in the binary options market.
If you found this article helpful, please comment below and share it with others who might benefit from these insights. Happy trading!
Mark.
Affiliate Links Disclosure:
Some links in our articles are affiliate links. This means we may earn a commission if you deposit through these links, at no extra cost to you. These commissions help us keep providing high-quality, free information to our readers. We only recommend products and services we trust and find valuable. In addition, using our links you will get FREE access to copy our trades automatically.
Risk Disclaimer:
Trading binary options involves significant risk and may not be suitable for all investors. You could lose all of your capital. Always conduct thorough research and seek advice from a qualified financial advisor before making any investment decisions.
