The comparative simplicity of binary options trading means it has a strong appeal for many people who are just starting out in the markets. High frequency binary trading, however, is not for beginners – you’ll only be successful at it if you’ve already developed a feel for the markets that enables you to make good decisions instinctively. You’ll also need good software to run the numbers and back those decisions up. It’s an approach where there’s plenty of room to go wrong, but where skilled traders can do very well. So what do you need to know?
What is high frequency trading?
You may think of high frequency trading as something that involves making decisions in minutes. In fact, to be successful at it, you need to be making them in milliseconds – or rather, because that isn’t humanly possible, you need to have a machine to do that for you. This means that the machine will be making tactical decisions. You will still handle the overall strategy, however, and set appropriate limits and priorities.
When you’re buying binary options as a US citizen, it’s important to make sure that the company you’re dealing with is licensed to sell them to you. Binary trades made outside the US can involve different rules, so the US uses a strict regulatory system to protect its citizens from falling prey to scams. If you buy from an unlicensed operator, you may find it legally difficult to recover any money that is withheld from you.
Even if you stick to US brokers, liquidity problems can sometimes arise due to the amount of high frequency trading going on. Set up your software carefully so that you limit your dealings to trusted brokers large enough to cope, and don’t be tempted to break your own rules in pursuit of what looks like a good deal.
When you’re first starting out, you can reduce the learning curve by getting a company to alert you to promising market signals, reducing the number of skills you need to master at once. You’ll have to pay a fee for this but it usually reduces the error rate for new traders. Even seasoned traders find that there’s always more to learn, and there are online communities dedicated to exchanging tips as well as places where you can learn more about binary options strategies. Regardless of how you approach trading, be aware that it is really important to invest in good software and have a fast Internet connection so you don’t miss the moment.
Ultimately, the same rules apply here as in other areas of trading. Make sure you have solid entry and exit strategies, stay calm, and don’t exceed your preset limits. The strategic decisions you make while away from the trading platform will almost always be better than those made in the heat of the moment. Some people do very well at binary options trading, but this doesn’t mean it will happen for you – what’s more important is to make sure you don’t lose too much. If you can avoid this and be patient, your skills will improve over time.