When you are reading about Binary Options you probably know already how profitable they can be. But always have in mind: no form of trading in the financial market is easy. It can be simple but there is a big difference between simple and easy. Do not worry: after some time they will become simple and easy but it takes a little practice for sure.
Take Your Time
Binary Options are not complex and there is no doubt about that: you have to choose the expiry time, investment amount, forecast a direction and then place the trade. The mechanics are really simple but each choice raises issues. What can make the difference between a win or a loss is the expiry time but to choose the right one can sometimes be the most difficult deal. So let us look at an example: if a trader has recognized a down trend on a certain asset and places a Put the chances are good that the trade will be successful. But if a retracement higher starts just after the trade was placed two scenarios can occur: the first one shows the trader with a win because he chose a long enough expiry time to allow the retracement to end and the trend to resume. Unfortunately the second scenario shows a trade which finished Out of the Money just because the trader did not allow it enough space to develop before the time expired. Here you can see a visual representation of what we explained above:
Above you can see a 5 minute chart. Put the case that we place our Put at point 1 and if we choose a 15 minute expiry (point 2) the trade will end up Out of the Money so we managed to lose money although we got the main direction. If we would have chosen a 60 minute expiry time (point 3) the trade would have expired In the Money and it would have brought us the complete payout. You can exactly see how making the right decision about timeframes can be important for the outcome of a trade.
Fortunately some Binary Options Brokers are offering a tool to avoid losing trades just because they did not make the right decision about the timeframe which they used for expiry. You maybe heard about it: it is called Roll Over (some brokers have other names for it) and it allows you to extend the expiry time of your option. So if you have the feeling that you are right about the main direction but price is stalling and there is a high risk of losing the trade it is better to use this tool because sometimes it can make a difference between Out of the Money and In the Money.
A Few Tips for Choosing the Right Expiry Time
Always make sure that you allow the trade some space to breathe and go for longer expiry times. If you are on the right side of a trend your chances are higher with a longer timeframe.
So you have to correlate the expiry time with your strategy timeframe. In other words: when you are trading while using a strategy which uses the 5 minute Chart you have to choose an expiry time of at least 15 minutes. If the strategy is using 15 minute Charts you should go for at least an hour for the expiry time.
You should know exactly your strategy and know nearly how fast price starts to move in your desired direction after the signal was given.
Rate the current market conditions: if the market is volatile and moves very fast there is no need for a long expiry time. Slow ranging markets sometimes need a longer expiry time.
Binary Options Traders have to be very accurate with their entries because unlike in the Forex market you also have the time which is working against you. The perfect trade can be a loser if we forget to take into account this very important factor. Choosing the right expiry time needs practice and attention to detail but it can be a very powerful tool because it can also turn a losing trade into a winner. If you learn to use it correctly your Binary Options trading will really become simple and easy.