What is the Binary Options Hedging Strategy ?

futures-trading-hedge-invest-traderDo you wish to become an expert in binary option trading? If so, then it is important for you to carry out your trading with an efficient binary option strategy. Irrespective of how bad the condition of the market is, with profitable strategies you can reduce the losses and get good profit.

Without a doubt, trading in binary options is the simplest to learn and make profits, however, it usually leaves traders amazed when they have to face the losses due to lack of skills in terms of binary option strategy. A lot of traders come into the world of binary options without acquainting themselves with binary option strategy. This becomes the main hurdle in their process of gaining profit at the time of volatile market conditions. Here we will be discussing about one of the lucrative binary option strategies called hedging strategy.

What is a hedging strategy?

Hedging is known as one of the most beneficial binary options strategies that ensure the least chances of risk involved with this trading. The aim of hedging is to decrease the risk of loosing and to increase the probability of income. To use this strategy, you need to make a bet two times- both on the price of the product increasing and decreasing. By doing that, you will make a situation where both of your bets can win and one of them will certainly win.

Hedging strategy is created to decrease the risk of investment by using call options, put options, short selling methods or future contracts. The key aim of using this strategy is to lessen the risk and probably volatility of an investment by decreasing the risk of loss. Hedging provides the benefit of locking in the current profits.

Basic binary options hedging method

  • During the first fifteen minutes of a trading period, try to choose a strike/entry price that looks like it may be either near the bottom or the top of a trend.
  • Wait for some time to check the price movement of the asset.
  • Approximately ten minutes before the lockout, start looking for a second position. This could either be the same as your previous position or opposite to it, depending on the progress of the asset movement.
  • If your first position is deep in the money, it is better to leave it alone.
  • If your original position is seriously out of money, you can either leave it alone, cut your expected looses and move to the next trade, or you can try to strategically place 2 more trades to make a profitability range.
  • If the asset price is trading almost flat from the original position, you can consider placing a trade moving in the opposite direction in order to limit your expected losses.

Advantages of this strategy

  • Can be used in a small period of time (15 minutes)
  • Very profitable if used correctly
  • Good for beginners, easy to understand and use.
  • By using this trading strategy, you can easily present yourself with both a chance to make substantial gains or safely exit bad positions with minimum losses.

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