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High frequency binary trading: The strategy explained

15 September 2015 No Comment

canstockphoto12385282Binary options is quite a trading buzz phrase right now as more people than ever are finding out about the benefits of this type of approach.

As with any type of investment, especially one than does involve a risk factor, binary options have different systems that can be used and one of the most important is a high frequency strategy.

High speed

High frequency trading with binary options is a fairly advanced strategy, and some experts still maintain that it is a risky proposition in this niche market.

Access to a quick and efficient trading algorithm is essential, as the process does need to be fully automated to work to your advantage.

Whilst being too difficult to implement this strategy manually, the theory behind it is solid as it allows a trader to move in and out of several short-term positions very quickly. The speeds are so fast that the moves are measured in milliseconds, which is why automation is a vital component of using the strategy.

High popularity

In spite of the barriers to using the high frequency approach for casual traders, statistics show that almost 50% of exchange volumes since 2009 have involved contracts based on the system.

Computerized trading has, of course, been a reality of modern markets for many years and the speeds involved mean that human input has changed beyond recognition in many ways.

The ’60 seconds’ Binary Option method is entirely based on the concept of rapid price changes and even a minute is long enough for movements that can create quick returns in small amounts. This is one of the main reasons that high frequency trading with binary options is now appealing to many investors who may not previously have had the opportunities to take part in these trades.

Trading tips

If you are thinking of taking advantage of the strategy, expecting the unexpected is a good motto to adopt.

Clear entry and exit strategies are also vital and they must be realistically based on your own personal financial requirements and capacities.

Taking advice from experienced traders is a huge plus and this can be achieved by becoming a regular presence on reputable trading forums. In this way you can learn about useful high frequency trading strategies such as hammers, cups and handles.

Using Google’s daily trade volume metrics you can identify three general parameters that represent the upward swing (cup), the trading zone (handle) and the entry point (hammer). These signals are easy to spot and interpret, which means subsequent automating of the trading process isn’t difficult to apply.

Turnover potential

One of the reasons for the huge interest in the way high speed trading can be applied to binary options is because of the capacities for turning over large amounts of capital in such a short time.

Obviously the bigger the investment, the larger the potential rewards, but even pre-written algorithms that take into account variable market conditions aren’t foolproof. Indeed, there is still a great deal of debate about how the markets should regulate high speed trading in order to maintain transparency.

As an individual investor or trader you have your own responsibilities in making sure that you employ proper risk management techniques to protect your own interests and limit your exposure to losses.

Trusted advice

As with any financial proposition, whether it is a supposedly rock-solid no-risk investment or something of a more volatile nature, taking the best advice you can get is an essential part of any planning stage.

When it comes to options trading there are plenty of opportunities to learn what approaches will be best suited to your own unique personal financial circumstances.

Whether that means taking advantage of well-respected online brokerage platforms, seeking professional face-to-face advice, or asking the right questions of experienced traders via discussion forums, as long as you put the time in you’ll be in a good position to reap the rewards.

Advanced strategy

High frequency binary trading is certainly one of the most advanced strategies you can use as part of an investment portfolio, and as such it can be a risky proposition for novice traders.

However, by seeking the right kind of advice and taking the time to learn the basics it is something that can be employed to generate a large amount of profit in a short time. Of course, access to automated trading algorithms that can execute multiple trades over millisecond time frames is an essential part of the process, but at the end of the day it comes down to your own ability to read the markets that will determine your level of success or failure.

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