Binary Options Trading is a relatively new way to trade the markets. You don’t need to look at dozens of different indicators and charts—everything you need is contained within the broker’s site. You need to know about the movement of the price and how that might affect future prices. This is something that comes with heavy risk and should only be traded with money you can afford to lose. We will try and help you learn about binaries, but nowhere will we guarantee you will make money. You should not consider this site as trading advice. We will also try and cover all the sites you shouldn’t use. Please be very diligent when it comes to this.
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This is how they work: you pick an underlying asset, a stock, a currency, a commodity, basically anything that the binary broker offers, then you decide whether the price will move in one direction or the other. A call option should be used when you think the price will increase, a put option is for when you think there will be a drop in price. Once you decide where you think the underlying asset will move you select how much you want to risk. The returns are stated right on the broker’s website; usually it’s between 70 and 91 percent for a winning trade. *Amount will be credited to account in case of successful investment.
The items you trade are actually underlying assets, and not the assets themselves. Binary Options Trading does not give you ownership of the assets you invest in. Assets have predictable price fluctuations, you can use this to your advantage.
You can find trades with an expiration time just a few minutes in the future or up to a month long. This appeals to both day traders and position traders alike.
You know exactly how much you will get in return when your trades are successful. Some brokers offer refunds on losing trades, some up to 15 percent. This cushion can help over the long run. Refunds like this are most beneficial to traders just getting their feet wet, but they remain a good choice for almost everyone in the market. Make sure that you are getting a good return on your winning trades as well, however. Sometimes a low winning percentage will offset the refund amount.
New traders need to look out for their best interests. Having a high payout return on winning trades is the best place to start looking. Obviously, you want to make as much money as possible, so it only makes sense to start out by trading with the sites that offer the highest returns. But different brokers have different rates for different time frames and different underlying assets. We are here to make your search a little easier. We’ve compiled information of the Best Binary Option Brokers in the business. Our reviews will help you to wade through the waters of selecting a trading site.
For new traders, you should focus on one type of trade until you have mastered a demo trading account. Expert Option demo is very popular among traders and if you are from USA, you should definitely check the Nadex demo. Trading too erratically will only hurt you. No matter the circumstance a demo account will show you some things and keep you out of a lot of risky situations. Just be ready when it comes to switching.
Every hour, hundreds of thousands of trades are made in various financial markets, such as Forex, commodities, CFDs, indices, and cryptocurrencies. The brains executing these trades may be of very experienced and seasoned traders or those of new entrants in the market. The success in any trading market depends on a whole range of factors, including but usually not limited to the availability of data, traders’ analytical skills, the right analytical tools, timeliness, market conditions, and, sometimes, sheer luck.
Trading can be overwhelming, especially for amateur and beginner traders, as one is expected to deal with a lot of data and information when making trades on a regular basis. The good news is that, like most other fields of business, modern technologies and sophisticated algorithms have resulted in some amazing tools to make life easier for traders. Imagine if, instead of having to analyze huge chunks of data in real-time, you were to present simpler options in the form of a Yes or a No.
If you feel excited by the above lines, then binary trading may be the most appropriate option for you. As the term also suggests, binary trading relates to making simple decisions in the form of either Yes or No. Even though binary trading is not regarded as an exact science, as the brains behind these signals can vary from highly evolved algorithms and sophisticated computer systems to a team of highly experienced traders, binary trading is known to provide reliable information about which trades to execute and which opportunities to let go.
As a result, many traders see binary trading directly having a positive impact on their long term profitability.
Binary trading became popular a few years ago. Today, a lot of platforms and firms provide binary trading signals to their registered clients/ members. While some of these providers offer binary trading signals for free, others charge a certain monthly fee. In either case, it is important to fully equip yourself with the fundamentals of binary trading before subscribing to these signals and executing real trades.
This article intends to provide a detailed account of various aspects of binary trading, including legitimacy and useful strategies of binary trading. So, let’s dig deep into this interesting topic and have a look at some very useful information about binary trading.
In the era we live in, there are virtually limitless possibilities to earn money either as your main income stream or earn passive income. Binary options are one of those possibilities which offer some fixed return either in the form of cash or assets, depending upon the outcome of the option. Income through binary options is linked to the output of options.
Binary options derived from the name binary due to the “yes and no” possibility for the future of the underlying asset (currency, commodity, stocks, etc.). Investors earn money if the option expires in the money when it expires.
The basic principle and working behind the binary options are simple, and investors don’t need to learn complex market strategies to invest in them. For example, a binary option for the shares of a firm offers the yes or no possibility for shares’ price to go above a certain level.
If the trader makes the decision of yes, it means that he is rooting for the price to go higher than the current point. We assume that a trader, based on his insights or instincts, thinks that the share price of ABC Company will go above $40 on the specified date and time, and he bets $100 on this option. It doesn’t matter now how the price behaves before the expiry of the option; it just needs to be above the price level exactly at the expiry time.
If the price stays above the $40 all day long, but right at the time of expiry, it goes down the level; the contract will expire at a loss for the trader. But if the price does end up on the higher side of the $40, the trader will receive the pre-decided payout. If we suppose the decided payout was 50%, the trader will receive $150 from the broker. Traders lose all their money if their bet is proven wrong.
Binary Options have a number of pros when compared to other financial instruments. It is quite easy to enter the market through binary options. Traders experience better control over their profits and losses.
There is also sufficient training material available online to learn how to choose the right options. Trading is simple, and there is a low chance of loss if the trader is professional. The amount of profit or loss is pre-determined, and even if the traders experience loss, the amount of money lost is known to them, which makes the financial as well as mental loss bearable. This makes risk management easy.
The earnings against binary options are added to the trader’s account immediately. There is no limitation on market and location when you are trading in binary options. Binary options are available almost everywhere globally, and most brokers offer their services across the devices, making it easier to trade even on vacations.
However, there are also some cons of binary options. This financial instrument is relatively new, and laws and regulations are still being developed for them. In some countries, binary options are not regulated, and the risk of exploitation and fraud exists with brokers. For example, one of the rare binary platforms that accepts US traders is reviewed in our Nadex review.
No doubt, Binary Options are an exotic financial option, but we suggest you build a considerable experience before you start risking your money.
If you want to start trading binary options, you need to register yourself on an online trading platform. In the previous section, we guide you on what to look for when choosing a binary options broker. Once you are done with that, you will need to register on the selected platform.
The registration process is different for every broker. If you are good with technology, you shouldn’t face any difficulty registering on any of those platforms. But if you are not well familiar with the computer and the internet, registering yourself on the platform will be difficult.
We will guide you through the process of getting registered as a binary options broker.
You may think that sharing your personal and financial details online is not a good idea. With all the frauds and scams online, you are absolutely right to be skeptical, and this very thing will help your trading online.
Before starting the registration process, please check the status of the regulations and licenses of the platform. Also, check the website security, which you can easily do by searching online. The registration process itself will reveal whether the platform is safe or not to share data.
The binary options brokers are bound by law to gather certain personal and financial information, so you get a pretty good idea about whether or not the broker is regulated just by the look of it.
The first step in creating an online trading account is to decide the type of account traders want, the real account, or the demo account. The next step is to provide your personal information such as name, address, and contact information. We advise you to share real information as brokers are bound by law to verify your account and your account can be blocked if you provide faulty or misleading information.
Personal information can be verified independently by the broker, or they can also ask you to upload your ID or one of the utility bills. Traders often refrain from uploading a scan of bills or ID and do not get registered. This is not the right decision because the broker is legally bound to verify your ID from these documents.
The last but most important part is choosing the payment method for your account. You can choose banks, cards, e-wallets, or crypto-accounts to deposit into or withdraw funds from your broker’s account. If you are interested in crypto currencies make sure to check our bitcoin reviews for more info.
In order to start binary options trading, the first step is to choose a binary options trading service provider, and create a login at the official website. Creating a login ID is usually easy, and you are not expected to go through a long registration process. However, be sure to only go with a service provider who is well-reputed and has a track record of providing reliable trading services.
While there are a few other binary options trading service providers, binary.com is among the most prominent because of its track record of over 21 years. We are using binary.com as an example to discuss how binary login works. At this brokerage firm, creating a login is only a matter of 2 minutes.
When you visit the homepage of binary.com (or any other reliable service provider), you will find a sign up tab. Visit it and simply enter your email ID and other basic information (if promoted), such as your name and date of birth. A confirmation email will be sent to your provided email ID. Once you confirm your email ID by clicking on the provided confirmation link, you are good to go.
Alternatively, you may also be able to sign up using a Facebook profile or Google account, which is even easier and quicker. Remember that registration and creating a login ID is free for most brokers, and you must not be paying any fees at this step. We explained this in detail in our Olymp Trade review. As soon as your registration is completed, you may log in to your account to get an idea of the platforms (or to start trading right away).
Many service providers (including binary.com) provide a range of different trading platforms to suit the needs and preferences of different traders. So, make sure to analyze all the platforms in order to choose the most suitable for you. Binary Bots, MetaTrader 5, and Smart Trader are among the most common ones. However, some firms may also have in-house built platforms that may provide better customization to the traders.
The brokerage firm is likely to have sound data encryption and security features in place. However, you must also remember that all your trades and funds are managed from your login ID, so make sure to keep it secure and not share with anyone.
The exact amount of investment in binary option trading is very much dependent upon your individual circumstances, aspirations, and preferences, such as available funds, the choice of brokerage firm, short term goals (learning vs. earning), and long term goals.
The good news is that, unlike many other markets such as gold trading, you can start investing in binary option trading with a very low amount.
Some traders allow you to start trading with just $5. Even the highest requirement for a minimum deposit is not more than $500 for a majority of traders. Hence, if you are low on funds or do not want to risk big money, then binary option trading investment may be the right course of action for you.
You can always start with very low investment and slowly increase the investment amount as you learn this particular strategy and start earning real profits.
Hopefully, however, we believe you have sufficient availability of funds. Now the question arises about what is the right amount to start binary option trading. We believe that even if you have an abundance of funds, you should start binary trading with $500, especially if you are a beginner in this market.
Because of this, a certain amount of time is always required to master a new skill, and you do not want to spend a huge amount of money without having any real experience and expertise. Once you gain experience and become comfortable, the sky’s the limit. You may invest as much as you desire in order to earn big sums of profits on a regular basis.
Another important question in this regard is related to how much one should invest in a particular trade. Suppose you have $1,000 in your binary option trading account, and you come across an amazing investment opportunity. Should you invest all your money in it?
Well, unless you are 100% sure about it, we do not recommend it. Instead, the rule of the thumb is to invest 5 to 10% of the available balance in one trade. It reduces risk and ensures diversification of investment into different positions.
For a trade you feel very excited about, you may want to invest up to 20% of your available balance. But remember, no more than 20% should ever be invested in a single trade. Investing all of a majority of funds into a single trade is one of the primary reasons why people end up losing their money in binary option trading, and then they blame the trading strategy for their failure.
Every career choice has success stories to present and also failures. If you are looking for easy money and dream about becoming a millionaire in just a few days, you need to clear your head and set your life straight.
Trust me when I say this, there is no easy money. If a binary options broker is offering you high returns and targets your dream of becoming a millionaire to lure you into trading, turn around and run!.
Becoming a millionaire by trading in binary options is definitely possible, but you need to work hard and smart to achieve that. You will encounter success stories and failures every day along the journey, but you must stay focused. You can’t earn a million in just a few trades or in a few months.
Here are a few tips for you to follow if you aspire to become one of the binary options millionaires;
That’s it. Simple and effective. Follow these simple steps and stay in the game. Don’t allow anyone to take advantage of your ambitions. Don’t quit only because you suffer loss in some trades. Success and failures are part of the journey. Even the most successful traders suffered losses. Be persistent and be ready to become the next big thing in binary options trading.
Binary trading can be amazing for most traders, especially for those who do not have the necessary skills or time to manually analyze prevailing market conditions on a daily basis. A binary trade is also very helpful for beginner traders who may have low skills at the start of their trading career.
An interesting aspect of binary trade is that it is not limited to one or a few markets only, as binary trades can be made in virtually every financial market. However, it is also true that binary trading is most popular in the foreign exchange market, and recently it has gained immense popularity in the cryptocurrency market.
But you may use binary trading strategy for other markets, such as stock exchange trading, commodities trading, synthetic indices, and even CFDs, among many other financial markets.
When trading binary, the options are limited to yes or no, and binary trading brokerage firms usually provide these (yes or no) signals with a fair amount of accuracy. With binary trades, it may be easier to exploit various opportunities in the market, especially those opportunities that are time sensitive. As binary trading is more about making predictions of future price movements in the market, the right availability of binary trading signals ensures better control of trades.
There is a common misconception in the market that binary trades are far riskier than other trading strategies, as, if the prediction goes wrong, one may end up losing all the money. However, this may not be the case in reality.
This is due to the fact that most traders are able to limit their losses by simply limiting their stakes. Hence, binary trading acts similarly to other trading strategies when it comes to managing risks and losses.
In order to ensure long term success, it is always useful to keep your long term strategy in mind. Binary trading is not about arbitrary trading decisions inspired by random events in the market. Instead, it is extremely important to have a bigger picture in mind when making binary trades.
Even with binary trading, it may be possible to come up with a range of different trading strategies. So, make sure to know which strategy suits you and serves your long term needs. Following a reliable trading strategy is extremely important for ensuring long term profitability in the binary trading industry.
It is not uncommon for those who trade binary options to have question in relation to their personal trade volume. Some traders go as far as to set specific goals for the number of trades to enter into each day. This approach is fine, so long as the number is reasonable. However, it is important to remember that the markets may yield a larger or smaller number of optimal entry points each day, based upon the events of the day. Consider the following information when making decisions related to volume.
First and foremost, no trader should ever feel compelled to trade just for the sake of maintaining a larger trade volume. There will be times when market conditions are simply not favorable for doing so. There can be periods of several hours, or even an entire day when conditions are not favorable. As discouraging as this may be, it is important to remember that there will also be similar periods during which conditions remain favorable. These better periods can produce considerable profits which will certainly make up for any downtime.
Another important consideration needs to be total account funds. The primary focus when account funds are low should shift to trade quality rather than quantity. Even a small number of profitable trades can help to restore lost funds, while a smaller number of poor trades could deplete an account which is already low on funds. The best advice is to focus only on low-risk opportunities which offer a higher chance of finishing in the money when account funds are low. A larger number of trades can be taken once account funds have been restored to a respectable level.
The provision of short-term expiry times makes it possible to execute a large number of trades each day. However, profit only comes on winning trades, so traders must take care to not get caught up in rapid trading under less than optimal market conditions. A solid strategy for avoiding problems associated with “rapid fire” trading is to use small investment sums for each trade. Many binary options brokers have a $5 minimum in place for these types of investments, which is very reasonable.
The type of instrument which is being used can also make a difference. With some instruments, more detailed analysis will be required, and this can take time. The total amount of trade setups provided by a broker can also have an impact. Most platforms only include a set number of setups each day. Having said that, the overall number should greatly exceed the number of trades that any individual could even hope to complete in a days time. There really is no need for concern in this area unless one is focusing on only specific underlying assets, which will present a limited amount of opportunities each day.
With just a bit of time and experience, traders will naturally know which trades to take and which to avoid. Daily volume with indeed fluctuate up and down, as market conditions dictate. While everyone wishes to earn as much money as possibly, and must be actively trading in order to do so, patience is often the most important key to success when trading binary options.
One of the newest features of the binary options market allows for the ability to close trades before their expiration times. But recent trends have shown that brokers are becoming increasingly open to this feature and the increased account signups that have been seen indicate that traders are equally interested in the increased flexibility that is made available through these features.
But when exactly is the right time to close a trade prior to its contract expiry time? And what are the advantages of ending your trade early? Here, we will look at some of the ways that you can benefit from “early closures” in binary options and find more information in our free online binary option trading course.
Uses of the Option Buyback Function
The function to end an options trade early is referred to as the “option buyback” or the “early closure” feature. Generally, this action is taken in order to capture profits on an “in the money trade” before markets are able to reverse (and erase those profits), or to cut losses in a trade that is not expected to work out favourably before the contract expires.
In recent years, we have seen events (such as the Credit Crisis) which led to extreme volatility in the financial markets. These rapid changes in price can make the outcomes for trades less predictable and this can lead to trades that are profitable one day and unprofitable the next. There are many reasons why situations like this might occur. Some of the most drastic events could come with events like a natural disaster, a surprise central bank decision to change interest rates, a disappointing corporate earnings report or an unexpectedly strong macroeconomic data release can all lead to unpredictable changes in asset prices.
To be sure, this can be a positive (when the change falls in line with your trading direction). But it is nearly impossible to know when this favorable outcome will occur and when the news comes out on the opposing side, losses can be seen. This can be a highly frustrating (and costly) experience, as gains that were seen previously are suddenly wiped away.
In years past, there was nothing binary options traders could do but wait for their trades to expire – we were essentially at the mercy of the market’s moves. Unlike spot markets (like Forex) there were no defensive moves that binary options traders could take to preserve their gains. Now, however, traders are able to close a profitable position (using the early closure function) whenever one of these unexpected events occurs.
In other cases, trades will move in the wrong direction and create losses to a trading account. Here, the early closure function is also useful. When it becomes clear that a trade is unlikely to turn positive before expiry, traders can close a trade early and reduce the amount of losses that would be seen later. For example, if an “out of the money” trade would result in a loss of 85%, closing the option early might result a more favorable outcome – such as a loss of 30% or 50%. These percentages will vary depending on which broker you use, and the market conditions seen when the option is bought back.
Rules to Remember When then Using Early Closure
It should be remembered that the early closure function is not something that should be used to arbitrarily close trades. When trading using market makers, the broker is on the other side of your position. If every trader used this function, losses would occur much less often and the market maker would eventually go out of business (because of all the losses they would absorb). Because of this, there are some rules in place when using this feature:
The relatively new early closure feature at the popular IQ option platform allows trader to protect their profits and prevent against potential losses when unforeseen events shift the market. While there are some trading restrictions for this tool, the added level of trade structuring should be utilized in cases where a trade is unlikely to increase in profitability before the contract expires.
Given the dual nature of the binary options market, it makes sense to have a broader understanding of the general trends that are in place so that we can make the most informed trading decisions and increase our chances of creating profitable trades. When looking at the dominant trends that are in places in the markets, it tends to be a good idea to trade along with the momentum: When most asset prices are rising, CALL options tend to be a better choice. When most asset prices are falling, PUT options tend to be a better choice.
To describe which dominant trend is in place, the trading community will usually use term like Bull Market or Bear Market but it is much less common to see a discussion which characteristics actually make up these economic environments. Here, we will look at the differences between Bull and Bear Markets so that traders can more easily identify the dominant trend in a market and to place binary options trades accordingly.
Bull Markets are typically characterized by a financial environment that is composed of a large number of assets that are increasing in value, or are expected to increase in value. In many cases, the term refers to the stock markets but for those in the trading community, the term is applicable for all asset types. Bull Markets are created by generally optimistic sentiment, rising consumer confidence and the wider expectation that companies will successfully generate profits.
One clear indication of the existence of a Bull Market can be seen in the price of commodities, in the changes in valuation of a national currency, and in the overall performance of the major stock indices. When looking at price activity in all of these various asset classes, it becomes clear that price swings show higher highs and higher lows (the definition of an uptrend). When all of these factors are seen in combination with one another, a Bull Market is in place and CALL options will generally be viewed as favorable when entering into trades.
Psychology and news headlines in the financial media are also instrumental in these cases, as positive momentum tends to be contagious. When market valuations become excessive, and out of line with the price that is truly appropriate, market “bubbles” can be seen, and this is when it becomes prudent to start playing the other direction.
On the flip side of this is the Bear Market, which is typically characterized by a financial environment what a majority of trading assets are decreasing in value, or are expected to decrease in value. Again, this term can be applied to all asset classes and Bear Markets are typically created by pessimistic sentiment, declining consumer confidence and the general expectation that companies will perform weakly in terms of profit generation.
Indications of a Bear Market can be seen all major asset classes (commodities, currencies and stock indices) when it becomes clear that price swings show lower highs and lower lows in a broad sense (which is the definition of a downtrend). The combination of these occurrences create Bear Markets and in these cases, traders tend to prefer PUT options when entering into trades.
Some definitions of a Bear Market suggest that declines of at least 20% must be seen in the major asset classes in order to confirm that a true Bear Market is in place, and a recent example of this could be seen in the outcome of the 2008 Credit Crisis, which had a substantially negative effect on trading markets.
Before we answer this crucial question, there is a need to understand that the binary option is a trading strategy, similar to various other trading strategies. It is not an out-of-the-world scheme to help traders make millions or to scam them. Binary trading is as safe (or as unsafe) as you make it. Yes, it is true that it entirely depends on whether you make binary trading safe for you. So, how is it really possible?
From registering yourself with a binary option trading brokerage firm to making your trades, every step you take will decide how safe binary trading is going to be for you.
As the first major step, you should carefully analyze different brokerage firms, choose one registered with different relevant regulatory authorities, hold relevant licenses for investment activities, and have a verifiable track record. This will ensure that you are not scammed by someone who is using binary trading as a cover for fraudulent activities. Also, make sure that the trading platforms provided by your firm are trusted and reliable, as there could be a danger of a major software/ hardware failure if the platform is not reliable.
Similarly, your lack of skills may also result in you losing your money in the market. Hence, it is always recommended to start investing in a binary options demo account.
Once you gain a reasonable level of expertise, start investing in binary options starting with a low amount. While the minimum deposit requirements may be as low as $5, some traders prefer investing thousands of dollars straightaway with the hope of making big money. Never make this mistake unless you are fully confident in your abilities.
Last but definitely not the least, never bet all your money on a single trade, no matter how amazing the odds may seem. The fact of the matter is that even if you win big once or twice with such an approach, you will likely take a wrong position every once in a while (and end up losing all the available funds). As discussed in an earlier section, investing all money in a single trade or in a single position is one of the biggest reasons why traders (especially amateurs) fail in binary option trading.
Remember, it is easier to blame the firm or the trading strategy than to accept your shortcomings or wrong steps. Never look for shortcuts to earning big profits, and binary options trading will never be unsafe for you.
It is true that some instances of scams and frauds in binary trading have been reported recently. However, it does not mean that the whole binary trading industry is a scam, as you would find instances of scams, frauds, and embezzlement in nearly every industry and business, such as real estate, stocks trading, and even commodities.
As a trader, you can avoid binary trading scams by having a strong fundamental knowledge of the industry and knowing some of the major indicators of scams, as discussed below:
Unrealistic promises and claims that are too good to be true may be among the initial indicators of binary trading scams. Some legit firms, such as binary.com broker, offer up to 90% payout, which is considered to be on the higher side of attainable percentage. On the other hand, some firms claim to have up to 300% payout, which seems very unlikely to happen in the real market.
Similarly, you can avoid scams in the binary trading industry by registering with firms that have active licenses with relevant regulatory authorities. We explained this in more details with Expert Option scam.
Most renowned binary trading firms do have these licenses, and their trades are continuously monitored by the legal and regulatory authorities; hence, eliminating any chances of scams.
But if you find a firm that makes big claims but has no mention of them being regulated, then this is a major indicator of a scam. You must avoid such firms at all costs.
Furthermore, legit binary trading firms usually offer a range of trading platforms, which may include Smart Trader, Meta Trader 5, and some in-house platforms. At the same time, a legit firm is more likely to offer a free demo account for the newly registered traders to try their charts, signals, and platforms before risking real money.
So, make sure to try the free demo account in order to develop a thorough understanding of how the firm operates and the standard of services it offers to its clients.
There is no denying the existence of some scams in the binary trading industry. Some of them, like Bitcoin Revolution app became more popular with the cryptocurrency boom. But it should not hold you back from trading. Instead, it is your duty to perform due diligence of the firm in order to ensure legit trades.
Remember that you must not be held hostage by a few scammers. Your financial future is in your hands, and by doing your homework and choosing the right binary trading firm, you can secure your financial future as well as gain financial prosperity in the long run.