There are certain risks in any business. They also exist in a trading in the financial markets. And risks always accompany traders in their daily activity. You have to become accustomed to risk and take it as something inevitable. But you can try to reduce the part of the risks. The binary options strategy Reduce risks allow doing this particular thing.
Hedging currency risks
In order to familiarize with the risk definition in trading closely, we will consider example of tools, which come laden with both possibilities of quick earning of profit and possibility of sufficient losses if the decision is incorrect. Of course, now we mean the currency risks during speculations. In general, when we consider the currency risks, we have to note that the effective means to reduce risks were developed long ago. At the same time, methods used by the different hedge funds today (organizations which help foreign trade companies to hedge their risks) can be successfully applied in the currency speculations too.
Among the hedge methods (in other words, insurance) of currency risks we can accentuate conclusion of deals on different currency tools (the so-called diversification, the term which is widely used in the investment’s field when the asset portfolio is created and the invested funds are distributed among different tools in the certain proportion). In addition, companies which conduct the foreign trade activity can hedge their risks by the preliminary purchase of futures in the reverse side. For example, importers which are going to buy commodities for the foreign currency can buy futures for its sale, and exporters, conversely, buy foreign currency to reduce their risks.
How can this be applied in the binary options’ market? The Reduce risks strategy in the binary options’ trading was created for this. First and foremost, it is necessary to consider the possibility of the pre-scheduled sale of an option, in other words, sale before the expiration time.
For example, a trader has bought the Call option in the currency pair EUR/USD. But soon the tool started moving down. The trader understands that he has made a mistake, and the currency pair continues its descending movement. In this case, in order not to lose the entire amount of the invested funds, he can sell the previously bought option for the certain percentage. Of course, it will shorten the sum of funds on a deposit, but for the lesser amount than it would happen in case of expiration. Pay attention! Not all types of binary options provide such opportunity. The Dragon Options provides such opportunity within the tool Black Dragon.
Reduce risks by purchase of two options
In order to reduce your risks in the binary options trading, you can buy options for several tools at the same time. In a number of cases you can buy reversal options, sometimes you can buy options in one direction. For example, a trader sees that there is a possibility that the GBP/USD currency pair will grow. He makes the decision to buy the Call binary option. In order to reduce his risks and slightly increase his profit, he can conduct an analysis regarding other tools and make the decision about buying an option on them too. If the decision turns out to be correct, a trader will reliably earn a large profit. In case of the mistake, if the one tool has grown and the other one did not grow, trader’s loss on one position will be covered by the profit on another position. In addition, chances of making the correct forecast on one of the tools grow substantially.
Therefore, the Reduce risk trading strategy allows a trader to hedge his deposit from losses and improve his trading indexes substantially.
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