Hedging Binary Options Strategy
The aim of hedging is to reduce the risk of losing and to increase the income. To use this strategy you need to make a bet twice – both on the price of the product going up and down. With doing that you will create a situation where both of your bets can win and one of them will definitely win.
In the picture below you can see a graph of currency rate movement
In this situation when using the hedging strategy you would have to bet in point A that the rate will go down (DOWN) and bet in point B that the rate will rise (UP).
If, after your chosen period of time, the rate will be in the hedged area C, you will have won both bets. If the rate will be outside the hedged area, then you will have won either the bet A or bet B.
The worst possible scenario would happen if you had bet that the rate will go down (DOWN) in point A, but it keeps rising (UP), because then you lose all of the money you bet.
If you had bet 10 Euros, then in the case C you would win 16 Euros, in cases A and B you would lose 2 Euros and in the worst possible scenario you would lose 10 Euros.
This strategy is effective because, as you can see in the chart above, the rate has a tendency to change (“jump”), so it’s easy to predict the high points and make the right bets at the right time.
Advantages Of This Strategy:
- Very profitable if used correctly
- Can be used in a small period of time (15 minutes)
- Easy to understand and use. Good for begginers
Disadvantages Of This Strategy:
- If the rate goes against your prediction you loose all your bet
Tips For Bigger Profits
- Play for minimal stakes at the beginning
- Hold on to strategy – turn off your emotions