Who doesn’t like to double up or increase their profits? Every binary options trader yearns for that and tries to apply different strategies to achieve manifold profit. The reason for this is that although trading through binary options is very simple, the returns made through it are not. Hence, this is one of the main reasons people look for strategies or tools to double their profits.
Among the many strategies used, a double up strategy for trading is one of the most commonly used by different traders around the world. What does the term double up mean? How is this strategy used? Let’s find it all out in this article.
What is a double-up strategy in binary options trading?
Double-up strategy is considered more of a feature than a strategy, although it can be considered as both. The double up is a type of feature that brokers provide that allows you to double your stake once the trading starts. Doubling your stake means that the payout that you will receive at the end of the contract will also double as the feature has been applied in an existing trade. However, if the trader loses the contract, the losses will be doubled as well.
On the outside, the perks offered by this feature seem very attractive to the trader. However, if it is applied without a proper understanding of the trends of the market, this feature will only result in losses. It is also very important to note that the double-up feature will not increase your overall hit rate, rather it will just increase your profits. Nonetheless, this feature is very profitable when applied with a proper strategy. This is why it is offered by many brokers on their websites.
How to use the double-up feature in binary options trading?
If the double-up feature is offered by your broker, you will require an in-the-money option with a decent amount of time left before the contract expires to avail of this feature. Assuming that you have all these options checked on your list, you can now click on the double-up feature given on the upper tab of your website. The double-up feature is often denoted by 2x.
The key things to note when deciding to use a double-up feature are the expiry time of the contracts as this feature will only be applied towards the end of the contract’s expiry and not at its beginning.
Let’s understand the use of the double-up feature through an example for better understanding.
A trader decides to trade the EUR/USD using binary options. They study and analyze the market evaluating that the price of this pair of currencies will increase in the near time.
This trader invests 400 Euros on a standard option. Eight minutes before the expiry time, the trader sees that this prediction might hold for this currency, so to increase the profits the trader uses the double-up feature provided by their broker.
Luckily, things turned out to be as predicted and the trader is in-the-money at the end of the contract. This meant that their profit doubled to 800 Euros from 764 Euros, which would have been their original profit without the double-up feature.
If in case the trader’s prediction proved to be incorrect at the end of the contract’s expiry, their losses will be doubled up to 800 Euros as well.
Pros and cons of the binary options double-up strategy
The double-up feature is considered to be one of the easiest-to-understand features in binary options trading. That is if you win the contract, you double up your profits, and if you lose the contract, the losses are doubled as well. Another advantage of this feature is that it is very easy to implement in a range of different binary options trading markets. This easiness and versatility of the feature make it very attractive to binary options traders, which has made the feature quite popular among traders.
The double-up feature in binary options trading is an all-or-nothing feature. This means that if your profits double up when you win the contract, then your losses will double up as well when you lose the contract. Plus, the feature is only available toward the end of the contract so the trader would have to be very conclusive and confident when selecting this feature. This means that the trader would have to have experience when deciding for or against the use of the feature.
A double-up feature is an exciting tool in the binary options trading market. It has proved to be a blessing and curse for the traders. This is because, as the feature can double your profits it can also double your losses.
Some traders do not advise the use of this tool, especially for the newbies of the binary options trade. This is because this tool could easily lead to reckless decisions based on the hope for multifold profits in one go. So to avoid this, one should properly analyze the trends of the market and then apply this tool only if perfectly confident in winnings – it is better to gain your usual profit than lose double your investment.