Reducing The Risks With  Binary Option Trading

There are thousands of stories and reports written every week about economic markets. You can use this information to your advantage. You can easily access reports about employment, retail sales, income levels, monetary policies, production data and details on consumers’ behaviors. There are countless numbers and indicators that are recorded and studied on a daily basis and this information is easy to access online.

You can easily keep up with what is going on in all the countries that
have a large economy, including the U.S., Japan, Australia and European countries. These reports and stories come out throughout the day and will keep you informed. I have been trading on the wiki trader software Forex market and investing in futures for a few years. Things can be difficult to predict at times and I have made mistakes by investing too early or too late because I didn’t react to a piece of news at the right time. I have also made investments that seemed like the right decision to make and have the market behave in unpredictable ways. Some investments are difficult to manage because they are not easy to predict. Systems can freeze, spreads can go up unexpectedly and a number of things can happen to change how a market behaves and how your investments perform.

Binary options have been one of the best investments for me. I understand that this is not a good investment option for everyone and you need to focus on the style and on the financial products that are a good match for your goals. I like binary options because they allow me to take advantage of all the information available about different economies and markets without taking huge risks. I started trading with binaries a few years ago and instantly liked these products because they were easier to manage. Instinct plays a big part but you also need to understand how the product is likely to move. Let’s take an example. Imagine that you are trading with binary options on the SP500 and need to see what the unemployment rate to know if you made a profit with this binary option.

You need the unemployment rate to reach 10% to make a profit. The unemployment rate is currently at 9.5%. This information is likely to interest a lot of investors who are going to like this binary option since the odds of the unemployment rate reaching 10% seem really high. The market could be at 1100 just before the 9.5% number comes out and is likely to jump at 1120 or even higher once investors see this number and decide to take advantage of it.

This is a situation that I have encountered before. My first instinct is to think that investors are over reacting because the unemployment number makes this binary option look like an interesting investment. A lot of investors will act once they see the 9.5% number but they are soon going to realize that they are over reacting and the opposite trend will set in quickly. I have to decide what kind of risks I am willing to take in this situation. My best option is to invest in an option that is currently out of the money and to see how things go from there. I choose to invest in an option with a 1115 strike in case the odds come down a little once investors realize they have been over reacting. My next step is to look at the price of this option. It is currently trading at 70 bid by 75 offer. If I made the wrong decision, I am only risking 30 points on this option. I can reduce my risks by exiting the trade in case things do not look like they are going to go my way by the expiration time. I can earn 70 points on this option, which is really an interesting reward considering that the risk is only 30 points.

I can profit 70 points if I keep this option until it expires as long as the 1115 strike is reached when the market closes. This is an example of how I can make a profit thanks to other investors over reacting because a
number was released and made a binary option look attractive.

If the market ends up moving to 1116, I will end up losing on this trade by being 1 point below the Kelly Wallace Wikitrader  strike when the option expires. I would lose money if I let the option expire, but the price of the option has dropped since it doesn’t look very interesting anymore. The option is now trading at 25 bid by 30 offers. I can sell the option and buy it back at 30. I can earn 40 points on this trade. Holding on to the option means I would lose money but I can prevent this from happening by getting in and out of options whenever I want to with NADEX to reduce my risks.