Binary Option with Example explained

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Binary Option with Example explained

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#1 Trade Example – Fibonacci + Stochastic & RSI and Candlestick Formation

Hello and welcome to my blog post about my Binary Options Price Action strategy I´m using mainly. In the video below I showing a trade using my favorite Broker Pocket Option!

To trade this strategy, you just need Trend lines, the F ibonacci retracement, the Stochastic Indicator, Candlestick Charts, and the RSI Indicator! First, watch this video

Please read this post to learn how my strategy is working and how it can be used in different market conditions!

My Trading Decision explained

As you can see inside the video, a strong downward trend started in the past. I ´ve drawn the Fibonacci Retracement from the starting point to the end point of the first trend move. The Price already reversed and started the price correction (The move against the trend) till he touched the 61st Fibonacci level!

This is the point where the trend move starts again! It would have been a good entry point, but at this time I was not online!

A few minutes later on the price moved up again till the 50% Fibonacci level, showing an extreme in the Stochastic (near or above 80) and in the RSI Indicator (Near or above 70), all three are good signs for a starting downward move in this situation! (In an upward trend, the Stochastic and RSI should be in the opposite extreme, near 20 or 30).

An additional good sign is the candlestick you can see at the same time! Inside an upward move, a long upward shadow and a short downward shadow as well as a small candle body are a sign for a move reversal and a starting downward movement! So all signals are showing a Put signal!

Make sure to look out for my next blog post showing the next trade I´ve done in this market situation! If you want to try this strategy yourself, I recommend to start with a free Demo account ( Click Here ) till you got a feeling for the market and how it moves! Also, read my post about how to choose the best markets for your strategy!

Resources:

If you want to learn more about candlestick patterns and how to use them in your trading, I suggest to get the Candlestick Trading Bible, you can read more about it here!

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Binary Options Review – Can You Make Money With Binary Options?

Binary options have become increasingly popular over the years. Now they are being banned in countless countries. In this binary options review, you will learn the complete truth about binary options. You will learn how they work and why they are getting banned. And don’t worry, I am not a binary option promoter, so this binary options review will be the real objective truth and not some scammy promotional post.

What are Binary Options

Before we get into the interesting stuff, I just want to explain what binary options even are. Binary options aren’t anything new. I actually own a derivative book published in 1989 and already in this book, there is a short paragraph about binary options.

Binary options are a derivative just like futures, vanilla options… This means their price is based on an underlying asset which can be almost anything (e.g. a stock). Just as the name implies, binary options are options. In fact, they are exotic options meaning that they work somewhat different than normal vanilla options.

Binary Options Trading Explained

Binary options are ‘make it or break it’ bets. This means either you win a certain amount of money or you lose a certain amount of money. There is no in between. They are fixed-return options.

Usually, you can’t select a strike price for binary options. So the strike price normally is always the underlying asset’s trading price. The time frame that a binary option is active can vary a lot. But most binary options brokers only offer very short-term binary options with expiration times of a few minutes or similar.

If you are wrong on a binary option position, you lose your entire investment. If you are right, you will achieve a profit. The size of this profit depends on the payout ratio of your broker. A common payout ratio is around 70% which means that you will receive 70% profit on your initial investment if you are right.

Just like with vanilla options, two different types of binary options exist: Call and Put options.

As you can see on the following payoff graphs, a Call option profits if the underlying asset’s price increases, whereas a Put option profits from a decrease in the underlying’s price.

Call Binary Option Payoff Put Binary Option Payoff

Here is an example of a binary option trade:

The underlying asset is XYZ which is trading at $100. You decide to buy a Call binary option meaning that you think that XYZ’s price will go up. You pay $10 for the Call option. The option expires in five minutes and its payout ratio is 70%.

Now there are two possible scenarios:

  1. XYZ’s price increases and the option expires: If this happens, you were right and will make a profit of $7.
  2. XYZ’s price decreases and the option expires: If this happens, you were wrong and thus lose your entire investment of $10.

To recap, to trade a binary option, you will need to choose:

  • An underlying asset
  • A time frame
  • An option type (Call or Put)
  • An investment amount

What Most People don’t tell you about Binary Options…

Now let us get into the interesting part of this binary options review. I will now tell you something that most other websites won’t tell you:

Binary option aren’t legitimate investment products! That’s right! Binary options aren’t legitimate products!

Why? Because they aren’t fair. Just like a game of roulette in a casino isn’t fair, binary options aren’t either.

Let me explain to you why binary options are set up just like gambling products.

The payout ratio of a binary option is always less than your risk. This means you can’t win as much as you can lose. This makes them unfair products.

To understand this better, I want to present you an example of a coin flip game. You probably are aware of the fact that a coin has about a 50% probability of landing on tails and a 50% probability of landing on heads.

So the odds of picking the right side are about 50%.

Now I want to ask you a question: would you play a coin flip game in which you could lose $1 if you pick the wrong side and win $0.5 if you choose the right side?

I hope you wouldn’t because this game is unfair for you. On 10 rounds of this game, the expected outcome would be 5 wins and 5 losses. But if you would lose $1 five times and only win half a Dollar five times, you would be at an overall loss.

Over the long run, you will lose money playing this game.

Binary options work the same way as the just described game. Your wins will always be smaller than your losses. So to make any money with binary options, you would have to have an extraordinary high win rate.

Predicting very short-term price movements is very hard and therefore, it is practically impossible to make any money with binary options.

A binary option with a payout ratio of 70% would mean that you would have to have a win rate of almost 60% just to break even! And that’s without even taking commission costs into account! Even with a win rate of 60%, you wouldn’t make any money.

In addition to this expected negative return, your odds of making any money are even lower due to how binary option brokers execute your binary option positions. Often, brokers will get you into a Call option position above the current underlying asset’s price and into Put option positions below the current underlying’s price. This means that it isn’t even enough to predict the correct direction. The underlying asset has to go all the way above (for Call options) or below (for Put options) the ‘by your broker’ chosen price. This means the odds are even worse than 50/50.

And believe me, using some fancy indicators won’t be enough to make you win and the broker lose.

But doesn’t the broker want you to win?

NO! Binary options are Over-The-Counter (OTC) products which means that the broker is your counterparty. In other words, they take the other side of your trade. That is a huge conflict of interest. The broker is practically trading against you. Therefore, most binary option brokers will go as far as possible to make you lose (and to make them win).

And that is still not everything!

By far the most binary option brokers are based (and regulated) in countries like Cyprus, Cayman Island, Bahamas etc. Regulations from these countries are very sketchy and untrustworthy.

This means there is no guarantee that you will get your money back after depositing it to such a broker!

That is also the reason why there have been countless incidents of people not getting their money. So even if you are extremely lucky and win some money with binary options, you probably won’t be able to withdraw these winnings.

But why have binary options become so popular if they are a blatant scam?

Great question! Binary option brokers have done everything possible to promote their scammy binary options. When I say everything, I mean everything!

Binary option brokers have literally created thousands of fake accounts on countless sites to tell everyone how great binary options are. Just go to any forum (e.g Quora) on the internet and look at threads about binary options. Many questions and most of the answers are from binary option promoters themselves. Due to this, loads of unknowing people have become lured into the trap of binary options.

Furthermore, almost all binary option brokers offer very lucrative affiliate programs. So tons of (greedy) trading sites have been promoting binary options because the binary option brokers have been paying them to do so.

Conclusion – Can you Make Money Trading Binary Options

Once again, binary options are a complete scam and they aren’t legitimate investment products. So if you want to get into trading, binary options aren’t the way to go! In other words, you can’t make money with binary options (unless you are a binary options broker).

I am not even exaggerating when I say that your money would be better off in a casino than with a binary option broker!

If someone is promoting binary options, they are either in bed with the binary option brokers or they have no clue what they are talking about.

Here is a short recap of why binary options aren’t legit:

  • You have an expected negative return
  • Bad executions
  • Conflict of interest
  • The broker is trading against you
  • Sketchy regulations
  • Countless incidents of non-withdrawable money
  • Shady promotional tactics

These facts are also the reason why binary options are getting banned in countless countries. Even the EU has finally recognized that binary options aren’t real investment vehicles. That is why the new ESMA regulations are banning binary options.

One example of a binary option broker is IQOption. They aren’t as scammy as some other binary option brokers, but they still aren’t trustworthy! Make sure to check out my IQOption review/exposé .

Trading is hard enough on its own. You really shouldn’t make it even harder by trading binary options. If you do, you will lose your money! No one except for the binary option broker is making money with binary options!

Besides the fact that binary options brokers are stealing unknowing traders’ money, binary options are also shedding a bad light on the entire trading industry and on normal options.

Normal vanilla options are real investment vehicles that have an actual purpose. Trading real (vanilla) options is a legitimate thing and can be very profitable. Sadly, a lot of newer traders fail to distinguish between real (vanilla) and binary options even though there is a huge difference (namely that binary options are a scam and vanilla options aren’t).

If you want to do yourself a favor and learn more about real vanilla options, make sure to check out my free options trading education .

Hopefully, you enjoyed this binary options review and learned why you should NEVER EVER trade binary options!

Have you ever been scammed by a binary options broker or have you had a similar experience?

Let me know in the comment section below! If you have any questions, please let me know as well.

Also, make sure to share this binary options review so that more people can learn about the dangers of binary options.

19 Replies to “Binary Options Review – Can You Make Money With Binary Options?”

Hi
Its being long time since i thought to go into binary options before. However i never did so as i was not sure what is real and what is just a good scam. Thenks to some of the points you pointed at i feel more confidence about getting started.

You know the funny thing is, when I first started investing in the stock market, someone told me about binary options and I looked into it.

I did a little research and even created an account, but I never put any money in it.

Like you stated, it seems like lately everyone and their mother is “investing” in binary options’ but it’t the affiliate commissions they’re interested in.

Investing in binary options isn’t easy because it leans more towards gambling.

It;s a shame that no one is actually taking the time to teach people about binary options the right way.

Thanks for posting,
Diana

Exactly! You got it.

I have had a go at binary options and it is like you said not far off gambling. Everybody gets different results so you win and some you lose. If you want to go down the route of binary options you are a little safer with a longer term option, any thing from a day to 2 hours, be warned tho the pay out can sometimes be a lot less.

Hello and thank you for this binary options review.

When I was looking into affiliate marketing, I signed up with a guy who was doing binary trading. The way his site was advertised made it seem like he was offering something else, which is why I signed up. When I found out what binary options really are (thank you Google!), I immediately unsubscribed. However, I continued to get emails from this guy.

This is a very good explanation of why binary options are not for the faint of heart, and I am glad that I did not go further with it.

Hey Irma,
Thanks for sharing. I am very glad that you found my article informative.

Hi Louis,
Great post describing how binary options operate.
I am totally agree with your point here, binary options ” make it or break it, massive profits or loosing everything”.
I do the binary trading since 2009, I must admit I lose money more by paying the brokers than do trading.
Making a killing trade is harder than eating by a shark!
I want to try out you recommended iq option here, but I would like to know if they offer any options training?
I’ll bookmark your site and come back for more info.
Thanks.

Hey Maun,
Thanks for sharing your thoughts on Binary Options. I see you are interested in IQ Option. You can check out my full review of IQ Option here.

Hi Louis
Interesting articles in here. I never understood how binary options worked and you have been able to clarify this for me. Im glad I read your article. I see a lot of advertising about bitcom which I presume is the same thing. Am I right with my presumptions?
Ive always steered away from trading as I was once bitten by currency trading – buying Yen at a low and supposedly selling at a high. I need to look more into what you are offering.
Thank you for the knowledge you offer.
Paula

Thanks for the comment Paula. I am very glad to hear that this article helped you. Bitcoin and cryptocurrencies in general have similar issues. Even though they aren’t as useless and scammy products as binary options, many brokers that offer them are very sketchy.

I deeply sympathize with many consequent losses! I was one of the victims of those guys on ICP Trading Group, after waiting endlessly on my profits as promised for many months, I decided to source for other means of unblocking/refunding my shares as soon as I can.
I feel that these people are not human beings, they have no hearts, they are evil and it is absolutely best not to have anything to do with them.

This is a great article, since I’ve actually done Binary Options myself, and turned into a nightmare. Not that I invested so much in it, but everything what you state in this article is true. And it is good that you warn people about it, and in the world of today, making an investment is a big risk anyway. Keep up the good work!

I am sorry to hear that you are a victim of the shady binary options brokers. It is great to see that binary options are finally getting banned in more and more countries so that fewer people will be suffer the same fate as you.

I lost everything thing I had to Gtoptions,after months of searching had to hire a refund professional company to recover my funds. I’m glad I got a refund others weren’t so lucky. Happy to share my experience.

Thanks a lot for sharing! I hope your story helps people avoid binary options (brokers) in the future.

This is a great article. I was also a victim and lost almost all I had worked for. I do not wish the binary option scam on my worst enemy. I went broke for over a year and finding solutions to my situation was the only thing on my mind. I’m glad I did.

Thank you so much for sharing your story about binary options. Hopefully, this will help someone else avoid them. I am very glad to hear that you recovered.

Hi Louis, I’ve just started your options master course and saw this thread going and wanted an opinion on Nadex ( North American Derivatives Exchange). I’ve been trying to learn to trade binary, spread, and more recently a little bit of touch brackets with Nadex. I believe this exchange to be legitimate since they are regulated in the US and are not OTC. However their options contracts/strikes are arranged so that you almost have to day trade..the longest durations being a max of one week. I’ve had some good wins and even more losses:) I believe most of my woes come from trying to trade short term trends, and have concluded that 1) I need more duration time and 2) trading directionally in the short term is not good probability. Would you agree with my assessment? This is why I’m now getting educated in your type of options. Thanks, John

Hi John,
First of all, sorry for the late reply. Secondly, I personally have no experience with Nadex options. Therefore, I can’t really tell you much about them. Nevertheless, I agree with your thoughts on duration. In my opinion, it is extremely hard to predict very short term price moves because as soon as you look at intra-day (option) price moves there is a lot of almost unpredictable noise.
I really hope my education will help.

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Binary Options Examples

The binary options trading and automated trading software allows you to take a true or false view on popular financial instruments with a limited risk. The traders can take their position based on their view on the direction of an asset within a set time frame. That kind of service is offered by different binary options brokers such as IQ Option or Binray Option Robot which offers both automated trading and binary option signals to trade for your self. The traders are allowed to take the position once the market has started but before the closing hours. For instance, as a trader, you can take a position in a 2-minute expiry option once the trade has opened & until 30 seconds to expiry. You have a flexibility of selecting your preferred time frame based on view as almost all the broker provides expiry ranging from 60 seconds to hour whereas some go on to provide expiry ranges up to 6 months. Option robot is something that makes that all for you as you have set the limits how it should trade. How convenient service is that?

While taking the position in the binary options, you can buy the call options if you think that there might be a potential event which may cause considerable upside in the options, or you can buy the put option for the opposite view.

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Binary Options Examples See How Binary Options Behave What Is The Potential Profit What Risk You Are Taking? Best Automated Binary Robot tips.

How to Make Money with Binary Option Robot

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Claim your free binary option robot, get started with three easy steps:

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  • 1. Your Binary Option Robot will analyse the market and decide, which asset (currencies, indices, commodities and stocks), is right to trade at that point in time.

    2. The Binary Option Robot Will Predict the Price Movement

    Your robot will assess a wide-range of factors, and then make a prediction on how the assets price will move, saying: Call (up) if it believes the price will rise and Put (down), if it believes the price will fall.

    3. Decide on how much you want to Invest

    Then you need to decide how much you want to invest in the commodity and when that investment will expire.

    4. Collect your Earnings

    Finally, you collect your earnings (the good part!)

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    Types of Binary Options and Their Examples

    The binary options trading provide a variety of options type mainly in commodities, currencies, stocks, & indices. The widely popular amongst traders are High/Low. One touch, Ladder and Range options types. Within the available option types, the High/Low types are the most popular and simpler to trade. In, this article, we will see examples for each of the options type mentioned above and how to trade them to make money.

    Example 1: High/Low Option Type

    This is one of the simplest binary options types wherein you buy a call or a put based on your belief whether the underlying will close above or below the strike price. The strike price in the binary options is the closing price of the previous period. A “Call” option is selected in case you believe that the asset will close higher than the current strike price at the expiry whereas a “Put” option is selected in case you believe that the asset will close lower than the current strike price at the time of expiry. If your prediction is turned out to be correct, in that case, you are rewarded with the payouts otherwise you lose your investment amount.

    Example:

    Let’s say you decide to trade in the USD/GBP currency pair with an assumption that it will rise above the current price. The pair’s current price is 0.7720 and you believe that the price should be at an elevated level from here after an hour.

    You then login to your broker’s account and confirm that the payout is 80% for this currency pair with a one-hour expiry & at a strike price of 0.7720. After giving due considerations you decide to buy a “Call” options (High) and invest $ 100 in the trade. This is exactly similar to taking a long position in the USD/GBP pair in the forex spot market.

    binary option examples

    The table indicates that the amount of risk taken for the USD/GBP pair is limited to $ 100 only, also, the amount of payout is also limited to 80% only. This is a stark difference to the spot forex trading where in buying call or put options have limited risk but the gains are attached to the difference between strike price and expiry price. It is clear that the binary trading has a limited risk.

    Example 2: One Touch Option Type

    One touch binary options type has a different mechanism when compared with the High/Low options type. In the one-touch options type, the traders are offered the payout when the predicted price reaches or crosses a predetermined price targets. Generally, the target barriers are prerecorded by the broker based on market conditions and historical price movement of an asset. You just have to predict whether the underlying will touch the prices set by the broker or not, and if your prediction turns out to be correct then you are rewarded with the payout. Generally, the payouts are higher compared to the High/Low options type.

    Example:

    Let’s continue with our example of USD/GBP. Instead of entering in the High/Low options, you see that the broker has set 0.7775 as the preset level and you think that before the expiry the level will be crossed. The indicated payout for this one is 100%. You buy the “Touch” option type instead of “No Touch” and invest $ 100.

    binary option examples table 2

    You can also buy a “No Touch” option if you think that the preset limit is very high and the asset price might not touch the limits. In such cases, if the prices do not touch the preset limits than only you are rewarded with the payouts.

    Example3: Ladder Option Type

    The ladder option type is very different compared to both the above option types. Here, the gains are locked once the set prices are reached and the returns keep rising with each of the steps. This allows the investors to have at least some profit even if the prices come back to the original levels.

    Example:

    Let’s say that aftermarket results were very positive for the Facebook stock, and you expect that it will gain substantially today. The current market price of the Facebook stock is $ 150 and you have decided to invest in the Ladder binary options.

    The first thing you have to do is select the expiry and this example we have selected 4-hour expiry time. Once the expiry is selected the brokerage will offer return rates something like below:

    binary option examples table 3

    The above table provides the rough estimations and it is not an actual prediction. If you think that the price will touch 155 before the expiry, then you can buy the call option and at any time during the expiry period, the price of the stock moved to $ 155 then you will receive 200% payout irrespective of whether the price fall after touching the levels. It is similar to one touch option but has an intrinsic difference as this can be traded only during the market hours.

    Example4: Range Option Type

    The range binary options also known as the tunnel bets, are a relatively lesser traded binary options compared to the above three. In this case, you are required to predict that the underlying prices will end up in a preset range at the time of expiry. The prices must trade in the predefined range to make you a winner at the time of expiry and if the prices fail to trade within the range at expiry then you will lose your risked amount.

    Example:

    Let’s continue with our previous example of the Facebook. Let’s assume that the results have come in line with the market expectations and the stock will not have a much movement in either direction and it will gyrate but not change considerably.

    Hence, you decide to invest in the range options and your broker is offering a range of $ 145 to $ 155 for the investment. Given your belief, you decided to enter into a range trade with an expiry of 4 hours & payout of 175%

    binary option examples table 4

    The range and the Ladder option types offer relatively higher payouts. These payouts sometimes range between 300 to 400 percent of the initial investment amount and hence, they are gaining popularity amongst the seasoned players.

    Finally

    The binary options trading has evolved from a simple options types to complex instruments. The high/low option type is one of the simplest forms of the binary trading and for a new trader, we recommend to use this one only. However, seasoned traders can trade into other described options types to gain higher returns.

    The most important thing in the ladder and range options is the understanding of an event and its impact on the underlying. If you fail to estimate them than you might end up at the wrong end of the trade. Hence, we advise our readers to conduct thorough research and analysis before taking the investment decisions.

    Overall, it is clear from the above examples that the binary options trading is relatively simple and straightforward when compared to the actual instrument trading in the exchanges. The simplicity of High/Low options attracts almost all the naïve traders whereas the hard professionals prefer to trade into complex instruments like one touch, range, & ladder to prop up their profits. As always, do your due diligence before entering any trade. Happy Trading!!

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