Strategies Flashcards

In a straddle strategy on a binary option, when is it most effective to place a CALL and a PUT simultaneously?

Answer: Just before a major news release that may spike volatility

A straddle profits from large price movement in either direction, making it ideal around high-impact news events.

What is the primary purpose of a hedging strategy in binary trading?

Answer: To reduce potential losses by opening an opposing position

Hedging limits downside risk by taking a counter-position that offsets a losing trade.

The trend-following strategy is based on which core principle?

Answer: The trend is likely to continue until clear reversal signals appear

Trend-following assumes momentum persists, so traders enter in the direction of the established trend.

When using a pinbar candlestick to time a binary entry, what does a bullish pinbar typically signal?

Answer: Potential rejection of lower prices and an upward move

A bullish pinbar's long lower wick shows buyers rejected lower prices, hinting at an upward reversal.

In the Martingale strategy applied to binary options, what happens after a losing trade?

Answer: The next stake is increased to recover the previous loss

Martingale doubles or increases the stake after each loss to recoup losses with one win.

Why is the Martingale strategy considered high-risk in binary trading?

Answer: A losing streak can rapidly exhaust the trading account

Consecutive losses force exponentially larger stakes, which can wipe out capital quickly.

A range/boundary strategy is best suited for which market condition?

Answer: A sideways market oscillating between support and resistance

Range strategies exploit price bouncing between defined support and resistance levels in a consolidating market.