Binary options trading are a binary financial product because only two possible outcomes can be given, so they are also known as all-or-nothing options or digital options. It is a method that allows to invest on virtually any financial instrument (currencies, stocks, raw materials, indices, …) without the need to have the physical property of it.
The binary options are OTC derivatives (over-the-counter) that are not traded on an organized market: they are sold directly by the issuer to the buyer. The term “Binary” comes because there are only two options, up or down, if the prediction is correct, it is called ITM (In The Money), but if the prediction is incorrect, it is called OTM (Out The Money). Let’s talk more about binary options.
The investment in binary options is based on predicting how the price of a certain financial instrument will behave after a period of time, that is, whether it will go up or down. If we correct our prediction (it is said that the binary option has expired “in the money”) we can obtain 100% of the amount that we have invested plus a percentage that we know in advance (for example 85%) and that depends on the conditions of every binary options broker. If we fail in the prediction (the binary option is said to have expired “out the money”), we will generally lose the total amount invested.
The benefits offered by binary options trading is that you can put a trade with 60 seconds of expiration, sometimes this is called “fast trade”, this type of trade is called scalping. Binary options have two sides, when you win an exchange, you will earn between 60% and 92% (in some brokers), but if you lose, you lose the entire trade (100% losses).
Get started with 3 easy steps:
1-Choose a broker from the list below
Choose one of the best binary options brokers
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2-Register a broker account
It’s really easy and it’s free, you can start right now and trade for free in your demo account.
3-Start trading with four easy steps today:
- Select the expiry time – Options can expire anywhere between 30 seconds up to a year.
- Set the size of the trade – Remember 100% of the investment is at risk so consider the trade amount carefully.
- Click Call / Put or Buy / Sell – Will the asset value rise or fall? Some broker label buttons differently.
- Check and confirm the trade – Many brokers give traders a chance to ensure the details are correct before confirming the trade.
Binary Options Demo Account :
You can start with a demo account, each broker that I mentioned has its own binary options demo accounts to start practicing and get more experience to jump to a real account. Do not start with real money first, follow these tips “when you are bored of winning in your demo account then you can then go to a real account
Watch this Video about how to trade Binary Options
Video from the platform IQ Option
Educational Trading Videos
If you want to learn more, learn from the educational videos of IQ Option, specially organized so that you can learn in a simple and understandable way. You can see that the binary options are not as complicated as they seem, the trading is simple not easy, but if you propose and you are constant you can see results by yourself and experience the magic of trading.
How to learn to invest in binary options trading?
Once we have learned how to learn to invest in binary options, we can only begin to invest and start practicing with some binary options strategy, everything that is easy, quickly, tricks, is false, is just a manipulation to our mind that it will cost us dearly when we realize, learning to invest is something that requires effort.
One of the biggest advantages of binary options is that they have very short expiration times, for this reason They became very popular in its premiere. binary options have expiration time from 30 seconds to a year, this means you have a wide range of options to choose regarding the expiration time.
Expiries have three categories:
- Short Term / Turbo – These are normally classed as any expiry under 5 minutes (30 seconds to 5 minutes)
- Normal – These would range from 5 minutes, up to ‘end of day’ expiries which expire when the local market for that asset closes.
- Long term – Any expiry beyond the end of the day would be considered long term.This can take weeks or months. The longest expiry might be one year.
Basics of the trading
Just as you would expect with anyone trading in equities, investors in the Forex or Binary Options market employ strategies to help them invest more successfully. All of these strategies ultimately boil down to one thing: trying to predict which way the currency exchange rates will fluctuate. Predict correctly, up or down, and make a profit while we all know what happens when we are incorrect.
When deciding whether or not to enter or exit a position in the Binary Options market, there are two basic types of analysis from which to choose: fundamental or technical. Investors who base decisions on fundamental analysis will look at interest rates and the overall economic performance of the nations in the currency pair when deciding when to sell and buy positions. Technical investors will look to trade based on price performance and chart patterns—so which is best?
Use of fundamental analysis such as the latest GDP figures may seem like a very logical approach when deciding when to buy or sell a position in the Forex market. After all, we all know that stock prices are affected by economic data so it would stand to reason that the same would hold true for the Forex. However, the Forex market has no central exchange with set hours so trading continues 24 hours per day except when shut down between Friday and Sunday and this makes a big difference between profitability and loss for small investors.
Political and economic changes are the basis of fundamental analysis. These can frequently affect currency prices. Traders that take advantage of fundamental analysis will gather their information from a variety of news sources. They are looking for information about unemployment forecasts, political ideologies, economic policies, inflation and growth rates.
Fundamental analysis will provide you with an overview of currency movements and a broad picture of the economic conditions. Most traders then will combine their fundamental analysis with technical analysis to plot actual entrance and exit points as well as confirming the information provided by their fundamental analysis.
ust like most markets the Binary Options market is controlled by supply and demand. Many economic factors can affect the supply and demand but the two most critical ones are interest rates and the strength of the economy. The over all strength of the economy is affected by changes in the GDP, trade balances and the amount of foreign investment.
This is one of the most important aspects of a good trading system. Even if your market forecasts are accurate, you may still not be profitable in the long run unless you implement proper money management techniques.
Money management refers to how you manage your trading capital. It has to do with how much money you invest on each trade. Also, how much do you expect to make on each trade compared to how much you are risking. Furthermore, you can also use different kinds of orders that allow you to manage your trades automatically like stop loss, limit order and trailing stop.
In my opinion the two more important aspects of money management are position sizing and expectancy. Position sizing refers to the size of your positions. You should not risk more than 1% – 2% per trade.
Support and Resistance
Support and resistance levels are significant levels on the asset chart that the price has a chance of retracing from. Trading on breakouts and trend reversals is a popular method of choosing market entries.
The lines of support and resistance is one of the most used methods when it comes to trading, clearly it is also one of the most effective and precise. If this type of methodology is used with some indicator to complement its prediction, then we will have a very complete operation.
Support and resistance lines on the chart
You can draw these kind of lines on any kind of chart: bar, candlestick, area, or line. But as with other forms of technical analysis, is better to use this with Japanese candlesticks. Support and resistance levels can help operators know when to buy an asset with a falling price and when to consider selling it.
As you can see, support and resistance levels reflect peaks and troughs on the price chart. The supports and resistances are based on the law of supply demand in the market, this Defines when a price is too expensive or too cheap, which is why there are areas of maximum and minimum also called supports and resistances. A support a resistance is nothing more than a human perception of what is going to happen or how far the price can go, because the operators are human it is easy to operate with supports and resistances because they are almost always met.
A moving average is used to determine the intensity and direction of the trend. When the line is more inclined, the current trend is in its predominant state. And the same happens with the opposite tendency. When A moving average is not as pronounced it is an indication that the trend is weaker. An upward curve represents an upward trend, and a downward trend upward (negative).
Many would say that the simplest and easiest thing would be to distinguish the eye of the dominant trend, this can be, but only if you are using a linear or area graphic. When we talk about the Japanese candle chart, the predominant trend is a bit more difficult to identify than a trend using a line chart, especially around the inflection points. The use of a moving average can be very useful to be used as a complement in your own technical analysis.
The regulation of brokers is one of the most important details when choosing a broker if this type of features would not be advisable to operate in a broker. there are many regulatory entities, but the strictest are from the United States and those of Europe providing more rigor when accrediting a broker. regulations exist to avoid investor fraud, what would be the weakest part of the relationship. Before registering in a broker you must first take into account the regulation. The regulators currently include:
- Cyprus Securities and Exchange Commission (CySec) – Cyprus Regulator, often ‘passported’ throughout the EU, under MiFID
- Financial Conduct Authority (FCA) – UK regulator
- Commodity Futures Trading Commission (CFTC) – US regulator
- Australian Securities and Investments Commission (ASIC)
Clearly a regulated broker, gives more confidence to the operators.
Recently the ESMA (European Securities and Markets Authority) bans binary options in Europe, leaving many operators unable to operate.Operators can still operate but only in unregulated corridors, which is not reliable at all. There are people who use a change of geolocation to continue operating, I do not recommend it at all.
ESMA made an exception in the professional operators, leaving only to operate the professional operators with a capital of more than € 500,000. The professionals must have two of this criteria:
- Open 10 or more trades per quarter, of €150 or more.
- Have assets of €500,000 or more
- Have worked for two years in a financial firm and have experience of financial products.
6 Rules of Binary Options Trading
6 rules of Binary Option Trading, that have been approved by a number of full time and successful traders, this will help you a lot on your trading progress
Never risk any more than you can afford to lose, you will lose money, all traders do, make sure you’re not sacrificing anything else important in the process
Never risk any more than 2% of your margin trading account on a simple trade.
For mini account holders, 2% of $300 would be $6 so realistically you would need around $15 so you can make this 5%. As soon as your account size is big enough, make this 2%.
Know your exit point before you enter a trade.
Demo Trade First: Become successful with paper trading when there’s nothing on the line before you open a real account.
Take a breather when your equity has taken a dive.
Don’t let your emotions call the shots: Stay cool, calm and collected. Patience and a clear head will win the game.
If you follow this advice you will be in the right way.
The binary options have a great power of life change in people, high returns, sometimes they are 90%, imagine that you invest $ 1000 and earn 90% of that, that’s $ 900 in a single transaction! that sometimes only lasts no more than 60 seconds, that’s the true power of binary options, why would not someone want to invest in this? It can be difficult at the beginning, but if you practice and invest time I’m sure you’ll get it.
Really the trading is simple not easy, sometimes the people are over informed when instead of that they should only know the basics and use it. Binary options only have two options up or down, no more science.
The good thing about binary options is that they do not have any commission unlike other markets such as Forex or cryptocurrencies. You can operate anywhere and anytime.
Choosing the Right Broker
To choose a good binary options broker you must first read the criticisms of people about it.
Another feature that a broker must have to be reliable is regulation, institutions such as CySEC or FCA are responsible for regulating brokers.
Binary Options Trading Signals
This is the easiest way to start with binary options trading, the only thing you must to do is to follow other person in your trades and wait for profit. I only recommend this to traders who want to support their analysis with professionals.
The operator begins his session by writing things like: EUR / USD Sell 5 min.
Its operation is very simple to understand.
The only disadvantage of being in a signals channel is that since operations are so fast, sometimes it does not give time to place the operation or maybe it is late and ends with a negative result, you must be careful when sending a signal, some channels notifies before the signal has been sent.
One of the best things that the signals of trading offer you, is that you do not have previous knowledge. This is a way to operate with binary options while you learn to trade.
If you want to know more about trading strategies, go to the Strategies section. A strategy must be paramount when trading, the market will owe to all those who do not stand firm, Imagine a ship with holes in the sea, the chances are that the ship will sink, in this same way our trading should not have failures (at least not techniques), it must be concrete and precise, without doubts or obstacles that intervene, sometimes we are the obstacle. The human’s biggest problem when trading is that he has emotions, emotions to money, emotions to ambition, those emotions kill us in the market and inhibit us from being profitable. So in summary we must have a strategy, a plan to which we are attached and never let go, so that in this way we can withstand the adversities in trading.
Whats the difference between Options trading and Binary Options?
The difference between normal Option (also called Vanilla Option) and Binary Option can be understood by taking a look at the payoffs. Payoff refers to profit/loss to buyer/seller of option at different prices of the underlying asset).
In case of vanilla options, the payoff is dependent on the difference between the strike price of the option (contract price at which the asset is bought/sold, should the buyer exercise the option) and the price of underlying asset on one side of the strike price while fixed on the other side.
In case of Binary Option, the payoff is fixed on either side of Strike price (also called as barrier or trigger price). Binary option is an all-or-nothing option that pays the full amount if the underlying asset meets the defined condition on expiration otherwise it expires worthless.
Binary Options are Scam?
One of the reasons why binary options are not scam it is because are based in self knowledge and requires studying of the subject and practice. If binary options trading was a scam, probably will doesn’t exist “profitable traders”, so stop making excuses and start trading in one of the brokers that i mentioned (I recommended IQ Option online trading platform).
Digital Options :
The Digital Options offer a high degree of freedom and potential gains higher than the binary options, whose profitability is predetermined. A trader can modify the amount of potential profit and the risk just by adjusting the strike price. By moving the strike price closer to current price levels, the trader will decrease the potential profits of the operation and at the same time limit the amount that puts at risk. Conversely, the trader may take additional risks by pushing the strike price further away from the current price and hopefully receive more profit.
Watch this quick video explaining Digital Options
The Foreign Exchange market (also referred to as the Forex or FX market) is the largest financial market in the world, with over $1.5 trillion changing hands every day.
Unlike other financial markets that operate at a centralized location (i.e. stock exchange), the worldwide Forex market has no central location. It is a global electronic network of banks, financial institutions and individual traders, all involved in the buying and selling of national currencies. Another major feature of the Forex market is that it operates 24 hours a day, corresponding to the opening and closing of financial centers in countries all across the world, starting each day in Sydney, then Tokyo, London and New York. At any time, in any location, there are buyers and sellers, making the Forex market the most liquid market in the world.
Read more Forex Trading