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Factors to Consider When Making a Binary Options Trade

When you’re placing a binary options trade, there are four factors that TradeRush recommends considering:

  1. The price of the asset (current).

  2. The expiry time.

  3. The amount you want to invest.

  4. The payout and risk.

Step 1 – Current Price Of The Asset

Let’s look at these factors more closely. While this list simplifies the process of placing a trade on the platform, it doesn’t necessarily encapsulate the entire decision-making process. Starting with the current price of the asset, obviously you need to know that before you call, put, or do anything else. You also need to have some notion of where price is going—not just where it’s at. After all, that’s the basis for your bet. You can use technical analysis, fundamental analysis, or price action to figure out where price is heading—or some combination of those. So there’s a lot of work hidden in step 1.

Step 2 – Consider The Expiry Time

Step 2 is to consider the expiry time. This also contains a lot of hidden work. Not only do you need to know where price is going and not just where it’s at, but you also need to figure out when it will get there. There’s no point placing a call on oil if you don’t think it’s going to reliably break out of its current price bracket until some time past the expiry period. Likewise, there’s no reason to place a one touch on GBP/JPY if you don’t think the currency will hit that trigger until hours after your expiry period expires.

Step 3 & Step 4 – The Amount To Invest And The Reward

Step 3 is to consider the amount you want to invest. This really combines with step 4. Step 4 involves looking at the payout percentage and the out-of-money reward. What’s most important is really the out-of-money reward, since that determines your risk. Your risk should always determine the amount of money you want to invest—not what you hope to win. The last thing you want to do is overshoot your risk margin, or you’ll find yourself losing money faster than you expected to even under the worst circumstances, and you won’t be sure why.

So, we think that you could restate the four factors as steps, and that they should be listed as follows, if you want to become a profitable trader:

  1. The current price of the asset and which direction the asset is moving in.

  2. The expiry time, and whether the asset will reach a specific price level within that time period.

  3. The amount you want to invest based on the risk amount offered for the trade.

So there you go. You need to not only know how to physically place a trade on your binary options platform, but also how to place a trade which is likely to actually win. This is critical if you hope to be successful over the long term. Trading binary options is easy. Winning at binary options is not. Which do you want to be, a gambler or a winner? If the latter, you need to get systematic about this.

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