Psychology as Trading Strategy in Binary Options

With binary options trading, we can use many different tools and take advantage of psychology when trading. Depending on the investment objectives you have,  the level of risk you’re willing to take to achieve those goals, you will make better use of strategies.

The psychology as a trading strategy we will try to explain is related to investor psychology and how to act in certain ways can help you to gain that confidence you need.

There are strategies that will help you to trade successfully and one of them is the strategy of round numbers, also called round numbers.

Round numbers are those that psychologically we offer more insight into our tradings. For me you understand, yes you are going to negotiate with an underlying asset either currency pairs, indices or values ​​have to do it when the prices rise to the double zero (00) or triple zero (000) for both bull and bears.

That is basically investing when price of an asset or a pair is in round numbers. Yet, so you see clearly finished I’ll put an example that can surely help you understand even better. Pay attention to the following practical example.

Trading Psychology Roller Coaster
Trading Psychology Roller Coaster

How the Strategy Works

Let’s take a currency pair as an example. The pair euro dollar (EUR / USD) is usually the most active in the currency markets (Forex). The latest news show that the euro is down to $ 1.0700, so it is already near a key psychological level by having double zero (00).

At this point you should be able to bet on a CALL option type without problems since it makes sense that prices rise a bit, which will generate benefits. Remember that when operating at other options only has the price rose or low, regardless of whether it was much or just a few tenths.

On the other hand, although often more visually appealing these round numbers, the fact is that you can also operate when prices are placed for example between 1.0789 and 1.0820. Thus you can also increase your chances of being right, and you’ll need to have analyzed the limit price levels.

Notably price levels psychological resistance and act as carriers, namely, the maximum limit and the minimum price quote can reach. In all underlying assets that can trade binary options these levels exist, either in raw materials, indexes , values ​​and the aforementioned pairs of foreign currencies.

Advantages and Disadvantages of this Strategy

How is a strategy psychological level there are no guarantees, and that psychology is not a science how mathematics can be. The chances of success depend on a bit of the way we have to deal with the situation in the markets.

In addition to finding the closed or round number in the analyzes is important to know what to do next, because the choice you make about which direction the value is really what will make you win or lose the operation.

However, note that the returns on success are really interesting because as you know the binary options offer high performance, especially in operations to 15 minutes.

They also offer good opportunities the operations of 60 seconds , where you can take advantage of sharp market reactions at times. As operations at short maturities offer a much higher level of confidence when using the strategy round or round numbers.

One advantage of this tactic is that it only need be aware of the level you are looking for is reached and operate just then. This strategy can be used in any quote and any temporary, always bearing in mind that when shorter the maturity period more likely you selected that your results are favorable.

In summary, the advantages of this strategy are as follows:

  • It can be used for any quotation and temporarily.
  • It offers high performance in operations 15 min and 60 seconds.
  • The shorter the period of maturity greater likelihood of success.

How disadvantage should also mention that you can not use this strategy based on news as the price could break without being corrected, which will mean that psychological price level is broken and therefore what you will incur losses. So better avoid it.

In any case, to try to prevent this from happening it is best to always observe the strong trends, and although breaks may occur more often is that they are corrected in time for you to collect your winnings.