Before you decide to open a transaction, you should always think about the maturity (the time horizon) of the position you want to open: 60 seconds? 15 minutes? 60 minutes? 1 day? Maturity is a key characteristic of binary options either for the options proposed by the broker or the one you personally craft with the option builder. It’s one of the three factors that are impacting the outcome of your investment with a binary option and the level of the proposed return (underlying asset or exchange rate, direction and maturity).
Professional traders tend to prefer binary options with short-term maturities because they want to generate profit on short-term trends and they prefer to open multiple positons with a low invested cash amount rather than one long-term big position with high amount of invested cash. It allows them to only lock a small portion of their available capital and give them a better flexibility for their risk management. This is the main reason behind the growing success of SPEED binary options trading (options with a maturity of less than one minute). This is also one of the main advantages of binary options.
Binary option trading beginners: give priority to long maturity
We strongly advise beginners to choose longer maturities for their first trades (1 day, 1 week) in order to focus on longer term trends of the market that can be identified with technical analysis tools. Focusing on longer term trends will force you to actively follow the market and identify shorter trends that you will be able to trade once you’ll have more experience. If your scenario still doesn’t materialize when approaching the expiry, you can use the “option extend” (also called “roll-over”) functionality that is proposed by most brokers. This feature enables you to extend the validity of your binary option in one click and at a lower cost. On the other side, if you believe that your scenario is unlikely to materialize half way through the maturity you can activate the “option close” feature and close the position before expiry in exchange for a higher “loss return” (you can recover from 35% to 50% of your invested capital)
Trading is a waiting game, no need to rush; a successful trader waits for the right opportunity to open a position. Trading is also a risky activity with high stakes (high gains but also high losses in counterparty). As a beginner we recommend you to focus on a small amount of transactions for which you have a high conviction. Take your time to follow and analyze the market and the assets you want to speculate on, make your own due diligences (technical analysis, fundamental analysis, economic news…) and wait for the most rewarding opportunity.
Should you have any question on investment strategies and maturities, don’t hesitate to contact us and we will be happy to give further insight into how to become a better binary option trader. We reply to every query we receive from our visitors.