Tuesday, 24 September 2019

Trading Binary Options with the Straddle Strategy

One of the popular trading strategies among binary options traders is the straddle strategy. When traders expect significant price movements to occur, but they are not sure which way to go, this is the right way to go. This strategy, often referred to as neutral options, is often mistaken for hedging. In fact, the straddle strategy is more accurately said to be a merger of the two types of reversal binary options methods.
As discussed in the previous article, the binary options reversal strategy can be divided into 2 parts, namely the trend reversal used to place options on the trend reversal, and the risk reversal that places two opposite trading positions simultaneously. In this case, straddle binary options observe the top and lowest points of a trend before placing 2 options with the same expiry time. More clearly, the "put" option is placed at the strike price at the peak of the trend, while the "call" option is positioned at the strike price at the bottom of the trend.

In using this strategy, traders are certainly required to be able to analyze the location of support and resistance in previous price movements. These observations are guidelines in determining the position of "put" and "call" options. The level of support and resistance specified by a trader can be an imaginative range, which can provide confidence if the price position is within the range when the expiry time is up.

Because this strategy uses the highest and lowest points on a trend, finding these two levels can be the most difficult thing from using this strategy. If the determination is right, then trading will certainly end in-the-money because price movements can be predicted within range limits. However, incorrect estimates can cause prices to move out of range and cause one of the options to end up out-of-the-money.

When Is The Right Time For Straddle Strategy?
Straddle binary options are most appropriate when the market has stable volatility conditions. That is, high volatility at the prices of certain instruments moves regularly, with the display of support and resistance levels in the same range. Thus, price trends actually look sideways even though market volatility is high. Trading during this period is recommended if the two options you place are targeted to end up in-the-money. If this is done to anticipate losses, make sure that the expiry time that you set is able to accommodate new trading positions. This method is done if you believe the previous trading position will fail, so that the second trading position will be able to reverse the possibility of loss from the first option.

The suitability of straddle techniques for high volatility can be one of the binary options trading solutions. In one of the binary options trading tips, high volatility is a situation that is less recommended for binary options traders, especially for those who use a low expiry time limit. However, unpredictable price movement conditions require traders to be able to adjust their trading methods to various market situations. To overcome this, in addition to extending the expiry time limit, straddle strategies can also be applied so that traders can place options despite high market volatility.

How to do Straddle Binary Options
Because this strategy was first carried out by determining support and resistance levels, the first thing that comes to your mind might be the use of Fibonacci lines. This method is one of several ways that can be used to apply this strategy.

In addition to finding support and resistance limits with Fibonacci, you can also determine the highpoints and bases of a trend with "overbought" and "oversold" levels, which can be observed through the RSI indicator. Observation of the two levels can be used to determine the "call" and "put" point.
Determination of the "overbought" points of the RSI is when prices pass the 70 level, while the level 30 marks the "oversold" limit. In the picture above, trader A initially places the "put" option for the GBP / USD pair, because trading signals from the RSI indicator confirm an "overbought" when the price passes the 70 level. The selected expiry time is 20 minutes. But the reversal from the "overbought" position turned out to be very aggressive and the price slid down to near the 30 level when the expiry time was still 15 minutes left.

Shortly before the expiry time runs out, GBP / USD breaks the 30 level, or reaches its "oversold" position and experiences a reversal trend. For fear that his option will expire out-of-the-money when the expiry time arrives, A then chooses the "call" option at the strike price which indicates an "oversold" position, with the expiry time limit ending in the same as the previous "call" option. Thus, A has been incorrectlyGsung determine the price range in the 20 minute period. If GBP / USD then arrives at the estimated price range when the expiry time arrives, then both option A will end up in-the-money, and the profits also multiply. However, if the price is outside the range, one option A will still end in-the-money.

Excellence Straddle Binary Options
The binary options straddle strategy can provide benefits for those of you who like to trade with high volatility, especially if you are still not sure whether prices will move up or down. Some of the benefits that can be obtained from using straddle binary options are:

1. Can trade binary options even though volatility is high. If previously binary options traders are advised to choose market conditions with low volatility, now traders can use straddle strategies to trade binary options even though market volatility is high. What needs to be considered here is just the stability of the volatility, because if prices are very volatile but not stable, then determining the level of support and resistance will be more difficult to ascertain.

2. Keep profit wherever the market will move. Because the way of trading binary options straddle is done by placing "put" and "call" options for the same expiry time, then the profit of the trader will be more secure when prices move up or down.

3. Can increase profit opportunities and minimize risk. With an imaginative range of placing "call" and "put" options at the point of support and resistance, traders can increase the possibility of profit and reduce trading risk. If when the expiry time price is within range, profit can be gained from both options, while the risk can still be minimized if the price goes out of range, because one option will still end in-the-money.

4. Shorten the analysis time. Before opening a trading position, the trader will usually focus on technical and fundamental analysis. Not infrequently this activity becomes the main activity and very time consuming. However, if a trader can place two options at the same time, the trader can simply look for support and resistance levels. Traders also do not need to linger predict the next price will rise or fall, because the position of support and resistance can be used to confirm the price range in the span of time until the expiry time arrives.

Important Things in Straddle Binary Options
Although straddle in binary options can provide more promising profits, there are things that still need to be considered before you use this strategy.

Support and Ressistance levels
Determining support and resistance levels is not easy, especially if the drawing lines can be different for each trader. If you are hesitant to use the Fibonacci line because of its subjectivity, there are other ways you can do it such as using the RSI indicator or observing the formation of a reversal trend.

Fakeout and Breakout
Fakeout and breakout are two things that can disrupt your analysis if it cannot be anticipated properly. If you want both options to end up in-the-money, then you should be aware of a fakeout (where the price seems to be moving through the support or resistance limit, but it really isn't) and anticipate a breakout (where the price actually breaks the support limit or ressistance).

One of the most effective ways to confirm these two things is to wait for the completion of the price pattern formation at the end of the time frame you are using. For example, if you pay attention to a chart with a 15-minute time frame, then wait until the pattern formation is complete at one 15-minute frame to be more sure if the price is experiencing a breakout or just fakeout.

Modify Trading Size
As with hedging strategies and binary options risk reversal, trading size can determine the amount of profit to be received, if you can decide which option has a greater chance of occurring. Actually, trading profit can already be increased by the same trading size.

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