Easy How To: Use Hedging With Binary Options


Many subtle aspects of Binary Options often go unnoticed by Binary Option traders. The most interesting perhaps is that there are many ways to trade Binary Options in a manner that reduces risk. One of these is hedging.

Binary Options Breakout Success

The principle is simple: Strengthen your position if you are right and hedge it if you are wrong. Let’s see how this works. In the images below, the GBP/JPY succeeds in a breakout in CASE A and fails the breakout in CASE B. Using your Binary Options trading account, at www.StartOptions.com for example, you would place a CALL Binary Option trade at the moment of the breakout in both CASE A and CASE B. In CASE A the breakout succeeds and you reap an 85% profit, say $85 if your trade stake was $100. However in CASE B the breakout fails. At this point you have 2 choices: lose $100 or hedge your trade. If you choose to hedge your bet by placing a PUT Binary Option trade when the breakout fails, the trades now cancel each other out resulting in a $15 loss instead of a $100 loss(win $85 – lose $100 = $15).

Binary Options Hedge Breakout Failure

So let’s assume that 50% of breakouts succeed, in a pessimistic world. Under this assumption you will win $85 (50% of the time) and lose $15 (50% of the time) which makes a steady income of $70.

One interesting comment on Binary Options hedging: don’t try this with your conventional Forex account…conventional Forex accounts don’t allow you to hedge on the same instrument…if you try it you will find yourself selling off you own position!

Get the 5 most predictable currency pairs

About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.


  1. Binary options are a great tool and hedging is a much better use for them than an outright speculation. Interesting.

  2. TheGeekKnows- Forex Articles on

    Interesting article on alternate ways on trading currencies. Clear transparency on affiliation status. Well done!

  3. Pingback: Forex Articles for the Weekend – February 5 | Forex Crunch