Trading low risk high reward setups allows traders to recover even after a few losing trades. In this example, Gail risk $10.25 to make $89.75 on the DAX using binary options.
Trading Low Risk High Reward Setups
Knowing your markets is crucial to trading low risk binary options. In this case, Gail is using the DAX, which is quite volatile, even on a slow day. The market is in an uptrend and Gail trades a two hour binary with only $10.25 in risk. During the trade, price forms a reversal bar to the upside with only 15 minute left in the binary option. This indicates to Gail that she should remove her profit target and allow the trade to expire in the money. This is also why she instructs students why reading price bars is critical to their success and one of the first steps in trading.
In this video, Gail Mercer, founder of TradersHelpDesk, shows you why knowing how your markets move can enable trading low risk high reward setups. Then by incorporating reading price bars, you can identify whether to stay for expiration when trading binary options.
As you can see from the chart below, the binary option expires in the money and the full profit potential was realized on the trade. The risk to reward on this trade was $1 to $8.975 or for every dollar of risk there was a reward of $8.975. In other words because you are trading low risk high reward, it would take almost 9 trades to wipe out the winnings on this one trade.
Do these opportunities come along everyday? No, but when they do, traders need to be able to take advantage of them. This video also highlights why you need to know your markets. The most important question, which Gail explains in the video, is how to know how many strikes out of the money a trader can go and still expect a profit?