Equally as important as being able to identify a potentially lucrative trade opportunity is the ability to spot a bad binary options investment. Many traders are so invested in learning how to locate easy money opportunities, that the warning signs linked with some investments go ignored. Once you know what they are, undesirable trades are going to be easy to pinpoint. So let’s spend some time going over what these undesirables actually are.
If you’ve been trading binary options for any period of time, then you are likely aware of the fact that you’re able to profit from these trades under any type of market conditions. Volatile or stable, it makes no difference so long as your price movement predictions are correct. Does this mean that market conditions shouldn’t cause you to abandon a trade? No. Instead, you’ll need to pair existing conditions with the asset you wish to trade with. When comparing a few setups, you’re going to see that one of your available options is going to present less risk than the others.
There are additional easily verifiable good and bad setups. For example, a distinct price trend is an example of an excellent binary options opportunity. Lack of any noticeable trend or erratic price movement could be a sign of a bad trade (dependent upon the instrument you plan on using). Ideally, you want to be able to have a clear vision of what the upcoming underlying asset price movement is going to be. If you cannot make a determination with at least some degree of certainty, there really is no reason to enter into an investment.
You can also use expiry times as a warning sign at times. An example here would be entering into a binary options contract which is linked to an asset that will be reported on soon. Say for instance that you decide to enter into a trade using Starbucks stock and while your contract is open, the company will be issuing a financial data report. This information almost always influences investor sentiment, which in turn would influence the price of the asset. If your expiry is set to end anywhere near the time of this information release, this could be problematic.
Analysis and some common sense are going to help you avoid bad binary options trades. You may also want to keep your emotions in check, as these can cause you to enter into poor investments. You can still choose to make it your goal to locate easy profit scenarios, but be careful not to overlook opportunities which deliver an unnecessarily high level of risk.