It is not only important to understand how a binary options strategy works, but to also know just how effective it is before applying it in an actual investment situation. Although it is possible to enter into trades based upon analysis results alone, at some point, most traders do want to use use strategies as a means of increasing their earnings. There is much to be learned from testing, and while testing does take some time, the process need not require any money to be spent.
There is no limit as to which strategies can be test. It matters not if they are related to specific forms of analysis, instruments, expiry times, indicators, or assets. The process simply calls for mock trades to be established using the strategy, with the outcome of each being noted. Some choose to write each trade down on paper, while others use a computer file to save the results. The choice between these two is completely up to you, as either will provide access to the needed information.
Another no-cost method of testing binary options strategies would be to do so by utilizing a demo account. These are not offered by all brokers, but when they are offered, they are provided for free. The only drawback would be that most demo accounts are only provided for a short period of time, which will not allow for much testing. When available, opt for a practice account that provides a set amount of virtual money rather than a time limit. When the lowest investment amounts are chosen, you’ll likely be able to complete a large number of mock trades.
It is quite important to track every outcome. The goal will be to determine the exact win percentage for each strategy. Ideally, you’ll only want to use strategies that provide an overall win rate of at least 60%. Anything less than this can be a waste of time and money. The win percentage should not be determined by evaluating a small number of trades. Instead, consider testing the same method 50, or even 100 times before establishing just how effective (or ineffective) it actually is.
Consider taking notes along the way, especially if you make any changes to the strategy. For example, if the method involves the use of specific Fibonacci levels and you choose to enter the market at different levels, this change should be noted. At times, it is possible to make modifications that will render a strategy even more effective. Even so, this is a task best left to experienced traders. Novice traders are advised to first use each method as outlined so as to avoid any costly errors.
It is not uncommon for traders to skip past the testing step and move right on to using a strategy. This is not advisable, but should you choose to go this route, be sure that the strategy comes from a trusted source. The internet is loaded with information related to binary options trading. Some of this information is excellent, while some is not. The ability to sort the good from the bad is necessary. Should there be any question at all in regard to how effective a strategy is, take the time to complete the process of testing.