Backtesting binary options is a bit different than testing traditional trades because of the way that the timing is set up. You may have the option of exiting your trade early whether at a win or a loss for partial profit. You also may have the option to extend your trade with rollover. The only control you have is the decision to enter or not. This is an extremely important step to becoming a professional trader.
If however you actually want this to become a consistent part of your income, you absolutely must test your trading method before you go live and put your money on the line. Anything you hope to do professionally must be treated as a business.
Companies test products and services before they spend money promoting them or risk disappointing customers. As a trader, you also need to test your methods before you use them and risk losing money. Traditionally, when you backtest trades, this is what you do. Depending on how long you expect your trades to last minutes, hours, days, weeks , you might be scrolling back a couple of days, months or even several years.
This means setting your support and resistance lines and whatever, if any other signals, tools or points you use to trade. Next, you move the charts forward one candle at a time, looking at the far right-hand side of the screen. Pretend you are looking at it in real time.
When you see a trade setup, you stop scrolling, plot an entry point as if you bet at this point. Now, start scrolling forward again one bar at a time , and then you exit based on your trade rules ie 60 seconds, 15 minutes, etc. Having trouble reading a candlestick chart? Mark that down, and continue onward. You should be profitable over a couple of hundred backtest trades before you even think of proceeding to real-time trading.
This can confound your results, making you think you would have been more successful than you truly would have been. If you can, you can use early closure to get out before the trade is finished. If you find a broker with the right features and you do all your testing diligently, you should be able to find workarounds for the expiry time issues. The differences between binary options trading and other types of trading are no excuse not to backtest!
Your capital is at risk. Trade with caution, these products might not be suitable for everyone so make sure you understand the risks involved!More...