Straddle Strategy

The best way to develop and refine an effective trading strategy is something that many investors grapple with and it’s no different with binary options trading. Both new and experienced investors are constantly on the lookout for new and improved methods to help improve profits.

A savvy but challenging technique to incorporate into your trading strategy is the straddle strategy.

3-Sources-for-Reliable-Business-ReviewsThe straddle strategy is when traders invest on both the “put” and “call” option of an asset. It is primarily used when you think there will be significant movement in the asset price, but you are unsure if it will rise or fall.

Since you can’t make one investment in two different directions at the same time when trading binary options, this technique has to be implemented with a slightly different approach. Rather than making one trade that covers the put and call, investors can make two trades, one covering each outcome.

If you choose the same time frame and the same investment amount, however, it is a risky approach – if the payout isn’t more than 100%, you may lose money.

In order to see a profit from this straddle strategy, a trader needs to pick two different time frames and/or investment amounts. For example, you could select the put at 30 seconds and call at 5 minutes and still profit from both investments.

If you want to invest on each side within the same time frame, you will need to make one trade at a higher amount. If you finish in the money with the larger investment it will more than offset the losses from the smaller amount, and if your smaller amount investment finishes in the money you will effectively cut your losses.

The straddle strategy should only be used in markets that are extremely volatile and when conditions are unsustainably high or low. It is necessary to pay very close attention to movements throughout the day to have sustained success with the strategy. Generally it cannot be used effectively when the markets are not volatile, which limits its use.

Like with any trading technique, there are risks involved. This technique should only be used when the conditions are just right, by those that have done extensive research and are confident in their ability to forecast market fluctuations.

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