As a manner of trading which has become exceedingly popular on the South African market, binary options trading hold the possibility providing lucrative profits for traders.
However, to reach that level all interested South African traders have to invest some time and effort to understand various trading tools, features as well as available strategies.
While there are many strategies traders can use, not all of them can be successfully used by newbie traders.
So, to save time and provide South African traders with five main strategies for beginners, we provide a guide which will offer key details about trading strategies.
Binary Options Trading in South Africa
The main focus of binary options trading is to make an educated guess about which direction the price of the underlying asset is likely to take.
As the very name of this online trading implies, only two possibilities are expected – the price can either move upwards or decline. Usually, the traders have a choice of four different underlying asset groups – commodities, stocks, currencies and indices.
If the South African traders are convinced the price will rise they will opt for a call option; if they think the price will dip they will go for a put option.
The possible wins are predetermined so traders know exactly how much they stand to gain of their prediction is correct, and they also know the possible losses.
However, there are ways how to improve the chances of making a profit by using some (or all) of 5 main binary strategies for beginners.
The Trend Strategy for Beginners
The first among the 5 main binary strategies for beginners is called the Trend strategy.
This strategy which beginners may use is, as the name implies, focused on current trends in prices. Since South African traders who invest into binaries have to keep monitoring the market, they are likely to notice certain patterns in when it comes to the underlying asset movement.
In some instances, traders will notice the downward trend while some other will dictate an upward trend.
The focus of using the Trend strategy is to study the prevalent market trend and base their trades on that information.
Traders ought to observe the moving average of the underlying asset price during a certain time period and then proceed to make a trade once a change in the direction of the moving average appears. The trade has to be made for the opposite direction.
The Pinocchio Strategy – South Africa
The Pinocchio Strategy South Africa traders may use is the most suitable when they expect the price of the underlying asset to move drastically. The direction of the price may move in either way.
Should the South African traders expect the price to move upwards drastically a call option should be selected, while the expectation of the downward movement calls for a put option.
The reason for the Pinocchio strategy being listed among the 5 main binary strategies for beginners is because of the simplicity of bar diagram.
With the Pinocchio strategy, the wicks tend to be very long which indicated that the market is likely to be lying ergo traders are advised to trade in the completely different direction.
The Straddle Strategy on South African Market
As high volatility also occurs on the market traders need to have a tool for dealing with such situations. For that reason, we also included the Straddle strategy on the South African market in our 5 main binary strategies for beginners.
Since this strategy is the best for high volatility circumstances on the market, it is usually influenced by important events or breaking news.
Those often cause violent changes in underlying asset price direction.
What is at the heart of this strategy is that South African traders are advised to place both the call and the put option on the same underlying asset.
First, they place one option and the moment the price changed the direction another option is placed.
The Fundamental Analysis Strategy
The fundamental analysis strategy is one of the most well-known strategies used in binary options trading which is why it is included in the 5 main binary strategies for beginners. The basis of this strategy is easy to grasp for beginners since it is focused on the smaller segment.
By observing the smaller entity the traders may draw conclusions about the overall performance of the particular underlying asset.
This strategy also demands that South African traders understand how to read and use various financial statements and financial reports which point the most likely direction of the underlying asset price.
Additionally, the Fundamental Analysis strategy is perhaps most suitable for stock trading as traders may scrutinise the financial performance of organisations like Google, Microsoft, Apple or Coca-Cola since there are plenty of information available.
The Hedging Strategy in South Africa
The last in our 5 main binary strategies for beginners is the Hedging strategy. The hedging strategy in South Africa is advised to safeguard against the huge losses.
The basis of this strategy is to set up an account that could offset possible deficit the South African traders may encounter.
This is ideal for those South African beginner traders who fear excessive losses but wish to enjoy the possible benefits offered by binary options trading.
The Benefits of Using Trading Strategies
The benefits of using trading strategies are numerous and can influence the profits greatly. Additionally, South African traders may also minimise the risks which are always present during financial trading ventures.
Because of that, we strongly advise all prospective South African trades to get well-informed on the possible risks as well to study carefully the strategies they wish to use in the binary options trading. The careful consideration of 5 main binary strategies for beginners is a good start as is the use of the demo account.
The demo account provides traders with a risk-free environment since funds on the demo account are not real but traders get to practice on it and test strategies they wish to use.