Why The Most Popular Strategies for Binary Options Are Not Successful?
As with anything in life, it’s best to have a plan and prepare for what lies ahead. If it’s running a marathon, you run consistently to build up stamina. Should you want to buy a nice car, you build a plan to afford the vehicle. With trading, the same philosophy applies and that is without practice and a plan, you are positioning yourself for failure. Trading has this get rich quick look to it with flashy profits and the benefits that go along. What many fail to realize is that it takes many hours of planning and hours of practice and experience to reach successful levels.
Binary options have been on the rise as they not only offer an affordable way to access the market, but they offer quick binary options contracts, some that only last 60 seconds. Most options strategies that are free and offer winning strategies are in fact the opposite, simply wanting your money. When starting to trade options, you need to identify your plans and objectives, building a foundation for you to continue growing off of.
Why 60-Second Binary’s Don’t Work
One of the popular binary option products out there is the 60-second binary option. These take 60 seconds to settle and offer quick returns. Individuals tend to ignore the risk and simply see the ability to make money in 60-seconds. Certainly you can make money in those 60-seconds but you can also lose your money in those 60-seconds.
The main benefit of these binary options is it does allow you to enter and profit from quick moves in the market. Certainly there are some individuals that can execute well in this environment, but 99% of individuals are simply gambling with their money using these products.
Drawbacks certainly out weigh the benefits using this product because 60-second binary options can quickly eat through your balance should you continue to lose trades in a consecutive manner. Quickly depleting your balance can entice panic, which ultimately leads to poor trading styles. Another reason this product and strategy is unprofitable for many is because it is littered with free trading strategies and is heavily advertised and a way to generate returns quickly. It is possibly to generate a return using 60-second binaries but many attempt trading these products with limited training.
Why 5-Minute Binary Options Don’t Work
Similar to the 60-second binary option strategy, there are the popular 5-minute binary options. Again, the idea with the 5-minute binaries like that of the 60-second are it allows you to enter and exit position relatively quickly, leading to quicker potential returns. With 60-second binaries there are very few strategies due to the small time frame. However, with the 5-minue binary, these were and still are arguably the most popular strategy.
Some of the typical strategies include moving averages, stochastic indicators, and RSI indicators that attempt to predict market entry and exit points. While these can be profitable, there are many companies and products out on the market that offer ‘free’ trading strategies. As previously stated, you need to find what strategy works best for you and begin understating your needs.
A main reason this strategy doesn’t work, like the 60-second is the lack of time in the trade. In the grand scheme of a trading week, 5-minutes is not nearly enough time to predict a market move. There’s an old phrase that goes there are many great coin flipping contest players, and this can be applied to 5-minute binary options. Certainly there are people that make money off of these products but again, without the time and energy dedicated to learning the markets, you will likely lose your investments and with 5-minute binaries, lose your balance quickly.
Why the Martingale Strategy Doesn’t Work
A very popular trading philosophy among those in the binary option community is the Martingale strategy. This strategy is essentially the same as doubling down when you lose a trade. For example, if you placed a $10 trade and lost on the position, you would then attempt a $20 trade to trying becoming profitable on the next trade and making up for the lost position.
Taking this a step further, the idea with this strategy is that you are playing on the idea of mean reversion. If you looking at a moving average and the underlying asset is far above or below, mean reversion states it will likely return back to the middle of the price area.
There have been many studies done on this and while there is some validity, it doesn’t make for a very profitable strategy because first, this is assuming you do not go on a losing streak. If you were to lose three or four trades in a row, you can quickly begin depleting your trading account and without a profitable trade, become discouraged. The second reason this doesn’t work is because it can quickly eat up your trading balance. If you have a trade of $10 and it closes out of the money, double it to $20 on the next and that finishes out of the money, the third trade is $40 and that quickly has become $70 dollars invested. While it may work it is more likely to dwindle down your trading balance.
Why Free Trading Strategies Will Lead to Lost Money
One aspect to remember not only in finance but in life is there are no free rides. If you find something that is free in finance, you should be skeptical almost immediately and question what is being sold or given away. While there are genuinely decent products that are free, many of the not so great outweigh the beneficial.
The first reason free trading strategies typically lead to lost money is the lack of understanding of the strategy itself. When implementing a strategy, it’s imperative that you understand what generates the buy and sell signals. The chart may be giving you signals but if it isn’t aligned with your trading strategy or objectives, you many suffer in the long run.
A second reason to avoid a free strategy is anyone can post content and claim it is a free strategy that can make you money. With the growth of technology, anyone can claim they have a free winning strategy, forge statistics, and lead people on a path of failure. Binary options and the community have genuine traders, but many are looking to trade and enter the markets for the wrong reasons.
Lastly, a strategy is typically not a one size fits all and may only work in certain market types and assets. This is something many overlook and think you can take it from one asset to another. In reality, it’s likely the strategy will need to be adjusted for the different markets and without understanding the underlying strategy you won’t know what needs to be adjusted.
How to Win with Binary Options
You may be wondering how an earth you can make money using binary strategies with all of these negative points of view. In the first paragraph, one of the main objectives in learning to trade is know your plan and practice. Just because the product has a bad stigma doesn’t mean it can’t be an effective tool to generate income and wealth.
First is to find a trusted platform and open a demo account, allowing yourself time to get a feel for how binary options work. Jumping head first into the deep may work out, but odds are it will lead you to a path of failure. By opening the demo account, you can begin understanding what fits your needs best and how to begin forming a trading strategy. Instead of using a free trading strategy, build one yourself and learn the underlying workings of that strategy.
Second is to build an education by utilizing some of the free educational section on binary option platforms. You can try to start watching free educational videos offered by platforms such as IQ Option, Binary.com or Olymp Trade. Here, you can begin understanding how certain things work and it avoids getting caught up in the get rich quick schemes. If you find yourself looking at ‘easy ways to million’ information, avoid it because odds are it is a scam.
Lastly, do not begin using any of the popular strategies out there because odds are it is not beneficial to you the trader. Many of the robotraders and products are designed to work against you, leading to a diminished trading account. Instead, look for something not as popular or even begin taking parts of others and building your own trading strategy. Traders are not all the same and everyone has their own objectives. Also, by understanding what goes into your strategy, you can build and adjust, making it your own and fitting your unique needs.
Trading binary options are not a scam but the strategies and products that go with it might be. Take the time to gain a simply working knowledge of what goes into your chosen strategy. From there, avoid the highly volatile products such as 60-second and 5-minute binary options, unless you are extremely confident in what you can do. Lastly, open a demo account and practice, practice, practice. Once you’ve mastered a system, you can sit back, enjoy the progress, and get ready for the next system to continue building your wealth.