Binary Options Knock-on Strategy Ins & Outs. Read it now!

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Binary Options Knock-on Strategy

This binary options strategy is one of the most frequently used by the binary options trading professionals. The strategy requires deep understanding and quick thinking. So, Binary Options Knock-on strategy is not recommended for any of the starting traders. But in case you know what you are doing and are confident in yourself read the full description of the strategy!

Binary Options Knock-on Strategy Details

Most of the strategies that you can find on the internet will be marked as suitable for beginners. But here, at Binary Options Hub, we do not lie to you. So, do not believe anybody who will tell you that you should use Binary Options Knock-on Strategy from the day 1 of your binary options trading. You can, but you definitely should not do this!

Binary Options Knock-on strategy is often called market pull strategy and is based on the influence of the related instruments on each other. The strategy requires deep understanding of the correlations between different trading instruments. So, the strategy is suitable for correlated stocks and some of the currencies, but not most of them.

Saying in simple words, the basics of this strategy is that significant changes of one stock will influence other instruments that are correlated with it. Do not be fooled, not all of the movements of the instrument affect prices of correlated instruments. All you have to do in this strategy is monitor the upcoming changes in the correlated instruments such as product launch or release of earnings. After that, you just observe the movement of the main instrument and predict if the correlated instrument will move in the same direction.

This is not as easy as it seems! For this reason, in order to use Binary Options Knock-on Strategy you have to get the deep understanding about how significant is the correlation between particular instruments. Believe us, it requires years of experience and technical analysis, so do not try this strategy before you know what you are doing.

Binary Options Knock-on Strategy Example

Before the release of Diablo III stocks of Activision Blizzard e.g. ATVI are traded at the level of 23.01 USD. Right after the Diablo III is released the price of stocks starts to increase to the level of 24.15 USD. As you know that Blizzard is correlated with NASDAQ you make a CALL order on the NASDAQ stock with the expiration period of one hour. Since your prediction was correct and NASDAQ share price become higher strategy was implemented correctly and you enjoy increased account balance.

Good job, keep it up!

The situation is the same, there is an upcoming release of DIABLO III and current price of Blizzard’s stocks is 23.01 USD. The release did not bring any positive results and stocks are now going down in value to the level of 22.59 USD. Since there is a correlation between ATIV and NASDAQ you apply knock-on strategy on binary options and predict the price drop of NASDAQ stocks. You create 60 minutes PUT order on these stocks. In one hour the price of stocks did not drop and you have lost your money.

Bad job, don’t play like this ��

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What it your mistake?

You overestimated the correlation between stocks and applied strategy when you shouldn’t. Some of the movements are not the same. Also, it could be the case, that NASDAQ was influenced by other stock in positive way, GOOGL for example. This is why you need more experience and total understanding of what you are doing. Believe, market does not play by your rules, it has its’ own.

Binary Options Knock-on Trading Strategy Conclusion

Overall, the strategy is great and works perfectly for advanced traders. But in order to use it, you have to be sure in what you are doing and should not experiment with this strategy on your real account. Also, it is recommended to make technical analysis, so you do not get into unpleasant situations with this strategy. In case you suspect that you are not good enough for this strategy now, go on and try our other strategies. If you are confident with your skills pick up one of the best binary options brokers and get your payday now!

Knock-on Effect – Binary Options Trading Strategy

Perhaps one of the most critical of all the basic strategies a binary options trader can learn is the ‘Knock-On Effect’. In theory it is also sometimes called as ‘Market Pull Strategy’. The basic concept behind the strategy is that a movement of an option will have an effect on another option. This effect is knock-on effect.

It’s a very useful tactic that experienced traders apply to any asset. This involves deep understanding of financial market inter-relations. By following these financial market interrelations, a trader can invest in either a ‘Call’ or ‘Put’ option based on dramatic changes one market experiences. This can lead to changes in other markets as well. Hence, knock on effect strategy can work for a trader when he develops an understanding of different relationships of various financial assets. The advantage of knock-on effect is when it does work it can be highly effective. Predicting price movements become much easier and more profitable. A trader needs to learn interrelationships and then apply them correctly in the financial market.

Knock-on effect strategy examples in real life

For example, we know that for different countries, currencies rely heavily on some assets as well as on country’s monetary announcements. Keeping aside monetary announcements factor, knock-on effect can be captured if a trader knows on which asset the currency relies.

Assuming that Australian currency (Australian Dollars, AUD) relies greatly on gold, increase in gold prices can reflect increase in value of AUD and vice versa. This is not just merely an example. Australia is a third largest Gold producer in the world. In the past few years increase in prices of precious metals have shown a positive correlation with Australian Dollar; 80-90% positive correlation. A similar correlation is amongst USD and Gold. Increase in gold prices tend to devaluate USD. Thus, knock-on strategy in this regard will signal a trader to place a call option on AUD and put option on USD if the gold market indicates an upsurge.

Likewise, knock-on effect can also be applied on stocks and indices. For example, if a company, i.e., Apple announces a new tablet; it’s likely result in an increase of its stock price and consequently will decrease stock prices for it rival; for instance, Samsung.

There are many financial interrelationships to consider in financial markets, some may affect greatly and some may act in a consistent way. However, developing knowledge and understanding these relationships can greatly increase chances of a payout in binary option trading.

The After Hours Trading Strategy For Binary Options

A web site I just reviewed made a statement that is sticking with me; “you got to have a good strategy”. That is only too true, a good strategy is a corner stone of a great binary options trading system. Systems include fundamental as well as technical analysis and money management in addition to a strategy but today I am focusing on the strategy portion. There are lots of great strategies to be found on the internet ranging from simple use of individual indicators to techniques involving complex indicators like Ichi Moku, Bollinger Bands ™ or Elliot Waves. For the purposes of this article my examples will be based on my chosen indicators; stochastic, MACD, support/resistance and moving averages. The good news is that this technique, the after hours trading strategy, can be applied to ANY good strategy and will probably improve your results.

The problem with most strategies, and for most traders in general, is that applying strategy is hard. Even the easiest strategy to master is a difficult one to master. First there are the rules. Each strategy has rules that must be followed, the tricky thing is that the market is always changing and rules have to be adapted. Another problem many traders face is knowing which signals to take. Some strategies are trend following, some are contrarian, some work better in range bound markets and some require decisive break outs. Compounding this problem are the indicators themselves. Many indicators, such as oscillators and moving averages, can produce both bullish and bearish signals regardless of market conditions. In addition there are false signals and whip saws to consider. I know that every one of my indicators, and every indicator I can think, can provide false signals.

Trying to make sense of all the possibilities is hard enough by itself before you add in time frames. What time frame are you looking at? How long are the candles? How long does it take a signal to develop? What expiry should I use for best results and more questions affect our trading decision every day. Now, try to synthesize all of these questions and answers into a coherent answer while the market is open. At any minute news could be released, economic data could be announced, a war could break out or oil supplies could be disrupted; all factors that could change your analysis in an instant. It is no wonder that so many new and experienced traders alike get their heads spun and end up washed out of the markets.

How is a trader to overcome all the noise and have the time to make sound analytical trade decisions? By using the after hours trading strategy. This is accomplished by focusing all your analysis time to after the close of the New York sessions and before the opening of the Asian/European sessions. This window provides a few hours of relative calm for market participants. There is typically no major business or economic news in that time and nearly all markets are closed. Traders can use that quiet time of the day for more efficient and effective analysis without the noise of an open and busy market. It also means that you don’t have to sit in front of the computer all day waiting for signals.

The really good news is that this method can be used in nearly any time frame of trading except the high frequency 60 second and 2 minute high speed turbo style of binary. I know some of you prefer to trade that way but statistically speaking less frequent longer term traders have a higher rate of success. You can use this method to get ready for a day of 60 second trading by determining your market stance and the underlying trend then only trading in that direction.

How To Use The After Hours Strategy

This is how it works, you can do this every day or any day that you want to make a trade. First, wait for the markets to close and give enough time for any after hours earnings reports to be released. Usually by 5PM the day is done and you can begin. I start by checking the earnings and economic calendars for the next day to see if any market moving events are on tap. Next I look at a chart of weekly prices, usually candlesticks, to get an idea of the underlying trend. I look to see what the long term trend is and where price action is relative to that trend. Basically, is price action moving in line with the trend or is it consolidating/correcting. This is usually a cursory look only as the long term conditions change so slowly.

Next I move down to the charts of one day prices using my trend lines, a 30 day EMA, stochastic and MACD. I may take a signal off any one indicator but a convergence of indicators is always a much better signal. If is see a signal I plan on a trade and enter it into my account as soon as the market is open. On the daily charts I stick to one week/end of week expiry for strong signals and one month expiry for weaker ones to give them time to move into the money. The thing is, if I don’t see a trade in the first 5 or 10 minutes of analysis I don’t trade. It’s that simple. The daily charts give signals on a weekly or bi-weekly basis which is not many I know. This technique also works very well with hourly and 30 minute charts providing numerous signals. The trick is to trust your analysis, enter each trade the next day and then sit back and forget about it because you are also using sound money management.

This one year chart of daily S&P 500 prices offers 12 stochastic and MACD signals. 12 signals in one year is not a lot I know but you need to consider the fact that every single one of them resulted in a win using a 3 day to one week expiry. What would you rather do, trade a lot with dubious results or trade a little and be 90-100% right in your analysis? I don’t know about you but I prefer being right to being a day trader.

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