How to Use Binary Betting
Binary betting can be a particularly effective strategy when implemented as part of a wider trading portfolio. The flexibility it provides allows traders to speculate on market movements, either as an addition to their other trading activities or as a hedge against wayward positions in other transactions. A cost effective, straightforward, tax-efficient trading style, binary betting can be an invaluable tool when implemented correctly.
One of the key ways in which binaries can be used to good effect as part of a trading portfolio is in hedging. Hedging is the process of taking two complimentary positions to offset losses in either, with the ideal outcome being to provide traders with a win in either direction or to mitigate losses if markets move against their positions. Because binaries can be processed to determine exactly the profit or loss that will arise, they are a great tool for hedging, and can factor in to the risk calculus to help minimize losses.
Suppose you are backing the FTSE 100 to move considerably up on the day, off the back of some strong results and a strong close in the US markets. Spread betting on the upward movement of the market could pave the way for significant gains, but if the market falters, you could end up losing an equally considerable amount.
The solution? To sell the FTSE in a binary. This could lead to a situation where a rising market will cancel out the losses on the binary position, whereas if the market unexpectedly fell, you would be able to offset much of those losses by the downside gain on the binary bet. Of course, it’s all dependent on the prices and the spreads offered, but opportunities like this are available to help minimize certain of the risks associated with trading.
It is also possible to use binary betting to capitalize on market movements over short periods of time, as a sort of ‘double up’ to other positions. If oil prices look set to rise on the day, a binary bet could be a good way to enhance profits over the short-term, even if you have larger positions outstanding in the market for a longer time-frame. Because binary betting only works on the direction of the market rather than the extent of any movement in your favour, this makes it the ideal tool for capitalize on forecast market directional movements over shorter time spans.
Binary betting can be used in a variety of ways to bolster a trading portfolio, and depending on your individual trading style you might be able to integrate binaries to a greater or lesser extent in your trading. Either way, it is important to be aware of binaries as a comparatively straightforward trading option, to help maximize gains on the upside offset losses from elsewhere.