Digital options trading is at its best when trades are planned out in advance. There will be times when you’ll want to enter into a spur of the moment trade, but the majority of your trades should be completed only after you’ve done some planning. The planning process is two-fold, including selection and analysis. We’ll cover both here.
Trade selection can be just as important as analysis. Sometimes even more so. This is because there are bad trades and there are good trades. Bad trades are those in which market conditions are unfavorable, thus providing you with terrible odds for having your trade finish in the money. A good trade would be one in which predicting the upcoming price movement is easy because market conditions are sending asset prices trending.
When trading with Broker Options, trade selection could be rendered easier by using the Traders Choice bar. This bar is shown along the bottom of trade windows and shows you the percentage of traders who are opting for Put positions and the percentage of traders who are opting for Call positions. Sometimes, these numbers are quite similar. Other times, they’ll tip you off to easy profit opportunities.
Analysis should be completed with each and every digital options trade. The good news is that this does not always have to be a time-consuming undertaking. If you select your trades appropriately, then analysis is going to be much easier. Even so, great trade selection should not take the place of technical and fundamental analysis.
Basic trade planning will include selecting your preferred asset class, underlying asset, expiry time, investment amount, and price movement prediction. While you may think that the price prediction is most important, it is actually a combination of all of these selections that makes for a great trade. Expiry time, in particular, should not be selected without some serious consideration of how long you expect the asset price to move in the predicted direction.
Could you select any random trade, make a random price movement prediction, and still earn money? Of course! But when you do this, you’re taking on a high level of risk. Part of the appeal of digital options trading is being able to control risk via trade planning, strategies, and analysis. Skipping past these means that you’re just gambling with your money and most investors know that this type of action is never wise.