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A stop-loss order is a special form of market order used by professional traders to limit their losses or open new short orders. Stop-loss orders are especially interesting for binary options traders because they usually occur in bundles at strategic places, which effectively allows traders to find profitable trading opportunities.

In this article, we will take a closer look at stop-loss orders and how you can use them to make money with binary options. In detail, we will answer these questions:. With the answers to these questions, you will be able to create a simple yet profitable strategy that can make you money with binary options. Try trading now with one of our recommended brokers or continue reading the article below the table….

A stop-loss order is a special form of an order with conventional assets. It is important to understand that stop-loss orders are orders made by traders of stocks and other conventional assets and that binary options traders do not place stop-loss orders themselves but can make a lot of money by understanding where stop-loss orders are placed and how they can profit from this knowledge.

Stop-loss orders serve a simple purpose: This simple limitation creates three problems:. Stop-loss orders solve all of these problems. Stop-loss orders allow traders to sell assets automatically when the market reaches a predefined strike price. That is what a stop-loss order is for.

When the market reaches that price, his asset is sold automatically.

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Once the market reaches this price level, it will trigger the order and sell the asset short automatically. The trader would now profit from falling prices. With these two simply ways, stop-loss orders can solve many of the problems classical traders have. Consequently, stop-loss orders are a popular tool used by many traders.

The key to making money by trading stop-loss orders is understanding that traders of classical assets place stop-loss orders strategically at specific price levels. When the market reaches the price level of these orders, they get triggered automatically. Many orders are executed at the same time, leading to a strong incline in supply and a rapid decline in prices.

By learning to identify the spots stop-loss order usually occur in, a trader can establish a secure way to finding good investment opportunities. By anticipating where traders have placed many stop-loss orders, binary options traders can identify price levels that, when triggered, are sure to lead to strong downwards movements.

When traded with a low option or, for traders with a higher risk tolerance with a one touch option or a ladder option, price levels that hold many stop-loss orders can provide high-quality trading opportunities that allow you to win a high percentage of your trades and get a high payout. Of course, you are unable to predict every single stop-loss order in the market. Some traders might have placed their orders randomly or without giving their decisions much thought.

Some traders might use a system nobody else uses. There is, however, one tool that allows you to predict where many stop-loss orders appear in bulk. This tool is technical analysis. Technical analysis is the form of market analysis that traders use to predict market movements on short time frames. When traders have to predict whether an asset will rise or fall over the next few hours, analyzing fundamental factors is of little help.

To solve this problem, technical analysis defines price patterns that often lead to a specific outcome. Technical analysts use these price patterns to arrive at predictions about what will happen next. Often, the market has to reach a specific price level to complete a significant event for technical analysts. At this price level, technical analysts place stop-loss orders. When you understand the price formations that these analysts will use to place orders, you can anticipate the strong movements they will create.

For example, stop loss orders are usually placed at support levels. Support levels are price levels at which the market has turned around repeatedly. Now, traders would expect the market to keep falling until it reaches the next support level.

Traders that had invested in rising prices will get out of their positions, some traders will invest in falling prices, and some traders will do both. When the market breaks through the support level, it turns into a resistance, which creates an entirely different environment for most investors. They will, therefore, liquidate their long positions and open new short positions, which creates a lot of supply.

Consequently, the market is likely to fall strongly. Similar patterns form when the market breaks through trend lines completes a continuation pattern or a reversal pattern. The strong price movement created by stop loss orders is called the breakout. As a binary options trader, you can profit from the breakout in a number of ways:. Make sure to choose an appropriate expiration time.

If you can predict the distance of the movement, you can invest in a Boundary option or a Touch option. To find stop-loss orders in the market, you have to learn technical analysis yourself. While this can seem like a tall order, there are several shortcuts you can take. You do not have to understand every little aspect of technical analysis; you only have to know a few aspects and trade them well.

So what are the easiest formations of technical analysis to learn? Trends Trends are the easiest formation of technical analysis because they relate to the way we intuitively think about the market. We are continually looking for assets that will rise or fall, and trends are the price movements that take assets to new highs and lows. Trends are zig-zag movements. When the market rises or falls, it never moves in a straight line. It takes two steps forward and one step back, moving in its main direction until it runs out of momentum , has to go through a consolidation period and can resume its main direction again.

A trend is intact as long as every new extreme is further in the direction of the trend than the previous extreme. No trend lasts forever. An ending trend is a significant event for technical analysts because those traders who had invested in the trend have to close their positions and are likely to invest in positions in the opposite direction.

These events are sure to generate strong movements. Depending on your risk tolerance, you can trade them with a low option, a 60 seconds option, a one touch option, or a ladder option. Simple candlestick formations Candlesticks are a special way of displaying market movements. Instead of using a simple line, as many conventional price charts do, candlestick display market movements in many small symbols that look like candles.

Candlesticks are the favored way of displaying price movements for serious traders because they display more information than simple line charts. Line charts only use price for each period and connect them to a line. In an hourly chart, for example, a line chart would only use the last price of each hour and connect them to a line. Every other price is ignored. This is a problem. A period where prices moved far from the opening price and returned is displayed in the same way as a period where prices remain flat.

Line charts deprive you of significant information. Candlestick formations solve this problem by displaying the opening and closing prices of each period with its thick body and the high and the low of each period with its thinner wicks to each end. With this system, you know every price of a period without having to zoom in.

Consequently, a single candlestick can provide significant information about what is happening in the market. Technical analysts have defined many formations that allow for simple predictions that you can learn quickly. You do not have to understand all of the formations, but even if you understand just one or two, you can find plenty of trading opportunities. One significant candlestick formation is the inverted hammer.

When the market started to move upwards, far away from the opening price, in a period but turned around to move close to opening price or the low of the period, the market has ended the period in a downtrend. You can anticipate these orders and the strong movement they will create. When the market reaches the low of the preceding inverted hammer, invest in a low option, a 60 seconds option, a one touch option, or a ladder option. You can follow a similar strategy when a downtrend creates a new low.

Whenever a trend breaks through the price level of the latest low after it has created a new high, the trend proves that it is still intact. Those traders that had invested in a turnaround will close their positions, and many traders will invest in falling prices. The result will be a strong movement that you can take advantage of.

Of course, there are many more candlestick formations that allow for similarly simple predictions. By learning to recognize a handful of candlesticks and the predictions they allow, you can create a versatile and effective strategy that utilizes the power of stop-loss orders to make you money. Moving averages Moving averages are technical indicators that calculate the average market price over the last periods and draw the result into a price diagram. The result is a line that displays the average price of the preceding periods for each respective period.

Some significant moving averages are used by many traders use. When the market crosses these moving averages from the upper side to the lower side, it is a significant event for technical analysts that is sure to trigger many stop-loss orders.

Moving averages are so significant because they allow traders to easily evaluate whether an asset is currently moving up or down. Think of this example: When you use a moving average that calculates the average price of the last 20 hours, there are two possibilities:.

When the market crosses the moving average from the upper side to the lower side, the market environment has changed. What was a bullish market environment where many traders invested in rising prices turned into a bearish market environment where traders invest in falling prices. Because this change happens at a specific price, it is radical and sure to trigger many stop-loss orders. As a binary options trader, you can profit from the strong market movement these orders will create by investing in a low-option, 60 second option, one touch option, or ladder option.

Stop loss orders are a convenient way for traders of conventional assets to open short positions or close long positions automatically. When many low options are triggered at once, the resulting surplus of supply will push the market lower in a strong movement. Binary options allow you to anticipate this movement and profit from it.

The three easiest movements to find are trends, simple candlestick formations and moving averages. This website is independent of binary brokers featured on it. Before trading with any of the brokers, potential clients should ensure they understand the risks and verify that the broker is licensed.

The website does not provide investment services or personal recommendations to clients to trade binary options. The potential client should not engage in any investment directly or indirectly in financial instruments unless s he knows and fully understands the risks involved for each of the financial instruments promoted in the website.

Potential clients without sufficient knowledge should seek individual advice from an authorized source. In accordance with FTC guidelines, BinaryOptionsStrategy.

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