If you are trading binary options you already know of the big advantages this kind of trading offers. What I will try to show in this article is a very simple strategy that can be applied in certain situations and give great results for those who trade using binary options.
The strategy I'm about to explain is based on hedging and tries to obtain high profits while risking only a small investment. The strategy can be applied only in certain circumstances but it will prove to be very useful for any trader.
To best describe the strategy I will use an example from the very beginning and explain how to use the strategy on that particular example. Let's consider that you bought a CALL option on NASDAQ worth 100 dollars with the deadline after 12 hours. The NASDAQ value was 2380 at the time you bought the option and after 3 hours it raises to 2430 (a 50 points raise). In this moment you will have to buy a PUT option on NASDAQ worth the same amount and with the same deadline as the first option.
After purchasing the second option you have two possible outcomes: both options are winners if the NASDAQ price will be between 2380 and 2430 at the expiration, or you have one winning and one losing option, if the expiration value is lower than 2380 or higher than 2430.
Now let's analyze both possible results, considering the NASDAQ option had a 80% profitability rate and a 10% refund for losing trades. If both options are winners you will have a total profit of 160 dollars, while if you have one winner and one loser you will end p losing 10 dollars.
To resume the above, this binary options strategy ensures that you can only lose a small small amount with the chance of winning very much. The only disadvantage is that you can only use it in certain situations, when you already have an option that had a very good start.
There are many more possible strategies to use when trading binary options, but I like very much this one because it gives you the possibility to win a lot while risking very little.
Source by A. Abscident