Discover the Hedge strategy as a binary option

If the binary option is very popular with individuals, it is not only for its accessibility, but also for the different possibilities it offers. There are several techniques to exploit the binary option and increase its chances of winning, including the Hedge strategy. Then find out how to use this method for successful trading

Basic principle: controlled risk

To succeed in online trading, it is essential to determine the risks to be taken in advance (and the measures to be taken to protect against them), as well as the gains you hope to make. Before even placing a trade, it is then necessary to define a good risk/return ratio and implement a strategy accordingly. Every trader must protect his portfolio. And it is precisely the basis of Hedge or Hedging, which is a method of protection in stock market investment.

How does it work?

hedging analysisThe hedge technique consists in covering all of its losses with binary options. Conventional options do not compensate for all losses, but only cover part of the risks. While with binary options, and in particular the hedging technique, it is perfectly possible to protect yourself as much as possible. The principle is to anticipate all probabilities (price increase and decrease) and take precautions accordingly.

To protect against the risk of slippage, the trader can place large stops on the market, while using binaries to cover a position. In this case, he has the possibility to maintain his initial position and pocket profits if his estimate is correct; just as he can compensate his losses in the event of a slip.

Practical example

For example, if the trader invests in a company’s stock, but wants to hedge against a decline in the price, he can buy a PUT binary option in parallel with his investment. If, indeed, the share price is falling, he will then pocket his gains in binary option. While if there is no change, or the price is rising, he will be able to preserve the value of his company, even if he loses in his binary speculation.

This technique is particularly useful during the dissemination of economic reports, during which the hedging strategy is very easy to implement. The advantage of this method is that the binary option allows you to know the potential gains and losses before taking a position. It is thus an effective strategy for good money management.