Scalping on binary options: too fast for some, what you need for others!
A quick and brutal price fluctuation for those who are cold-blooded!
Scalping on binary options has long been seen as the practice of financial trading, where the trader earns only a small fraction of what he could earn, that is, scalps, or scrapes the minimum earnings from the market.
Too close points are involved, but they can be presented several times, and each time their use can bring, albeit small, but profit.
For example, a trader using scalping can trade on the EURUSD currency pair with 10 stops, and exit trading every time the position moves 3 – 5 stops towards profit, it depends on many reasons, such as:
[list style=”check”]
- The price is approaching a support or resistance level
- Price is approaching a turning point
- The price is approaching the Fibonacci level
- The price is approaching a round number
- Etc.[/list]
It is quite obvious that in order for such a binary options strategy to work, the trader must count on a very high profit/loss ratio, which must be combined with a good average profit amount/average loss ratio. As a rule, traders who use the options strategy for scalping enter and exit trades many times, in one trading session.
This style of trading is sure to appeal to those who love the stressful, action-packed process of trading options. One experienced trader, whom I know well, likes to even count how many times he has exited trades and entered trades, with his friend, who also uses scalping. His friend drank a bottle of red wine and smoked a pack of cigarettes during the trading session, and his success was quite mediocre.
A fairy tale, or, rather, a story with a warning for those who choose this style of trading: that trader, most likely, is now far from being in the best condition …
However, for those who are more cold-blooded: the advantages of scalping binary options:
• Since many traders work within the framework of a typical trading session, the risk of one trade is extremely small. For example, during the day, a trader can risk from 0.5% to 2% anywhere, with his own money, on one trade, while a scalper will probably risk even less, from 0.1% to 1%, anywhere.
Needless to say, there is also a guideline, the actual risk of each scalper when trading on options depends on his risk profile, but is also influenced by the prevailing factors that create the situation on the market, the actual session and the currency pairs on which the trades are conducted.
• Following from the first point, if many trades are executed during one session, then the total amount of profit from that session can be quite large if the normal ratio of profit / loss to the average amount of profit / average amount of loss works. On a day, a trader can risk 1% on one position, and on a day favorable for trading, he can exit trading if the ratio rises to 2%. A scalper, on the other hand, can risk 0.5% per trade, but will enter the trade, perhaps 20 times per day. If the scalper equalizes the profit/loss ratio in this way, say, 70% of the profit, and the average number of earners is equal to the average number of losers, then they earned 4% profit during that session – twice as much as a trader who trades throughout the day.
• There is less need for market monitoring if you use a scalping strategy. In addition to pre-scanning the main points before entering the session, your attention and concentration are limited to the duration of the session, possibly for 1-2 hours of work. Traders who trade over long periods of time should constantly monitor opportunities arising in the market, as well as changes in open trading.
Unfortunately, the disadvantage of using this strategy in trading is that if used incorrectly, it will quickly lead to collapse.
There are enough other things that a scalping trader should consider when trading binary options.
• Since you will be earning a very small amount per trading session, the spread you will pay to the broker is important. There is no need to earn 5 positions, but to pay a spread of 2-3 positions. Such costs will lead to your collapse. Thus, we conclude that the choice of a binary options broker is a matter of primary importance.
• Be sure to limit potential losses by setting yourself up to stop trading as soon as you enter them, or shortly thereafter. This, of course, is extremely important for any type of trading, but it is especially important for scalping. Why? Since you are likely to trade during high levels of volatility as well, which is best for making small but quick profits, this brings another element of risk into the equation if the direction of price movement changes dramatically and the price moves in a different direction than the one you have chosen to trade. In this scenario, you can lose from 20 to 30 points, and this is before you can close the trade. Considering that the average amount of your profit will be several times less than the amount of losses, this scenario can turn into a tragedy! Some scalpers brag that they never adjust the stop time, but I honestly don’t know of any successful scalper who doesn’t do that.
• As a scalper, it will be difficult for you to consider all that number of pairs at the same time, so it is recommended to choose one pair that you will specialize in and in which you will become an expert. In general, it will be a pair that has a high level of liquidity during the session when you trade. For example, you can choose AUDUSD during the Asian session and EURUSD during the London session.
The best scalping strategies I’ve come across are those where pairs can be traced, e.g., a more experienced trader may choose several pairs, while a less experienced trader will concentrate on one or two in the early stages of familiarity with the technique. This strategy also applies to the definition of scalping, as it is usually aimed at making a profit of 10 or more points. More information about this particular strategy is given below.
• The profit limit you set up will generally be small, and centered around positions such as resistance/support, trend reversal points, etc., as mentioned earlier. A scalper in options trading will most likely not set distant profit points, and will try to track the stop behind the price position. The market changes too quickly, the reaction to interference with significant levels, however, is small enough, and it will be enough to literally sweep away all your profits in a matter of seconds if you try to do so.
• Many scalping strategies are based on the principles of price trading. This is because, in the heat of fluctuations, it is easier to concentrate on what is happening with the price at a certain moment, without being distracted by monitoring the overall price behavior.
• It is also possible to fundamentally scalp the market around announcements during the news, and for example, there are many examples where FX software has been developed for news trading. However, for scalping, this method is quite complicated, it is better to leave it for experienced traders.
If scalping is still interesting to you as a strategy, we can offer you two options:
The five strategies presented here can be adapted to the scalping time frame.
2) You can also take into account the London closing strategy developed by Shirley Hudson and improved with the help of the legendary Vic Noble!
Tagged with: Binary Options Strategy
