How to properly hedge binary options trades?

How to properly hedge binary options trades?

What to do if the deal goes negative? How to minimize risks when trading binary options? Of course, you can hedge trades!

The opportunity to make a profit is what all traders working in the foreign exchange markets are aiming for.

The absence of risk is something that is valued by all, without exception, traders more than any profit. Risk minimization is the main task of the strategy: Hedging trades!

Classic hedging

Classical trading of any financial instrument using hedging tactics is as follows:

  • At any given time, two positions are opened, in different directions;
  • After identifying a clear direction of the market movement, the losing position is removed from the market in the hope that the profitable one will grow.

This version of the strategy is not without all the risks, but if we consider it in relation to binary options, the strategy can be reworked and modernized so that it makes a profit from both trading positions.

Read also - How to make money on binary options for a beginner with minimal effort?

How to hedge on binary options?

You need to work according to the strategy on a long-term basis (make deals with a long expiration period, about 5-10 hours).

It is advisable to choose volatile instruments that pass a large number of points in one trading session. This is necessary so that the price chart can change significantly in a few hours.

You can choose the most basic: EUR/USD and GBP/USD. Next, you need to study the movement of the pair, how it behaves during all trading sessions.

At the very beginning of trading, it is necessary to determine the market segments where the price chart is located at the following points:

  • The lowest position of the graph;
  • The highest chart position;
  • Average, neutral position of the price chart.

An example of tactics on the chart

Binary options hedging

In this case, it was found that around 11 o'clock, the instrument was near its daily low.

Closer to 18 o'clock, the currency approached the maximum, and in the evening, around 20 o'clock, it returns to its average value.

After following the pattern for a few more days, you can set the appropriate time to enter the market and the expiration date.

Judging from the collected statistics, at lunchtime you need to open a position for growth, with an expiration time of 20 hours.

Binary options hedging - 2

At 18:00, when the price reaches its maximum, you need to open an opposite down trade with an expiration time of 20:00.

Binary options hedging - 3

After the end of the position time, they will be closed with a positive result.

But the essence of the method is to open transactions as far as possible from each other, securing a profit with minimal risk.

Risk calculation

For example, we open two deals for $100. The profit of each of them will be 80%.

The total investment will be $200. In order not to lose this capital, it is necessary to apply hedging tactics.

In case of profit, the increase to the deposit will be $160.

When the option closes outside the corridor we have defined, the loss will be only $20.

The percentage of risks and rewards can be impressive. In the event that out of 8 trading attempts, transactions are closed outside the corridors 7 times, the trader will not be able to lose his deposit.

Trading recommendations

Trading pairs: all the most volatile;

Working timeframe: doesn't matter;

Expiration: determined by the calculations above;

Time to trade: doesn't matter;

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