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How To Start With Binary Options? Step-By-Step Guide
All who want to start their journey with Binary Options always search for ” How to Start with Binary Options?” and your question is totally right and you should have complete knowledge about the thing where you are investing your money. Today in this article we will learn about some question which everyone faces when they start their journey with Binary Options Trading.
Topics Covered in this Article?
Here are some of the questions covered which you will face if you start your journey in Binary Options.
- What is Binary Options?
- How to read Binary Options graph?
- How to put a trade?
If you know all this then you are ready to begin your journey with Binary Options. It is very simple to learn you can find learning tutorials at IQ Options website just Sign Up and you can find all basic tutorials about Binary Options. Also, IQ Options is one of the best Binary Options Broker in the current market you can it’s detail review here.
What is Binary Options Trading?
Binary Options Trading is a “Yes” or “No” trading in which you bet for a certain stock or currency pairs in which you decide that if price will go up after certain period of time then you “Buy” and if you think that it will go down after certain period of time then you put a “Call”. Let us take a live example so you will understand better:
- Let us do Trade on EUR/USD currency in this example current price of a currency pair is $1.06361.
- You can see there is two option either you have to choose EUR/USD price will go UP or will go DOWN. There is also purchase time shown before that you do the trade of any amount you wish to put either $100 or more.
- Once you place the trade of $100 you will see remaining time “Purchase Time” and “Expected Profit” on the upper right corner.
- Once the trade is close the result will be shown whether you have made a profit or not.
You can see that we have won $90 in just 1.5 minutes so it is easy to trade on IQ Options so go for it.
Binary Options Strategies
Why To Use Strategies While Trading Binary Options
There’s no doubt that financial instruments can appear intimidating. When news about the financial markets appears on TV, you’ll often see financial traders sweating over complicated-looking graphs on multiple computer monitors or barking at each other across crowded trading floors. The commentary will describe exotic investment vehicles that can seemingly only be understood by people with PhDs in rocket science. To be clear, there are financial instruments that are very hard for the layperson to understand, but that’s not true of all of them.
Binary options are more popular than some investment vehicles because they are less complicated. There’s a clue in the name, ‘binary,’ because as an investor you’re only having to choose between two options: will the value of an asset go up over time or down? Traders will place a bet on whether the price will increase, which is called a call, or decrease which is called a put. So, in terms of probability, you could look at binary options trading as a bit like gambling on a coin toss.
Now, having said that, binary options trading carries a high level of risk and can cause you to lose all of your funds, and it’s because of this risk that binary options strategies are so important. You can trade safely if you do your research and put effective binary options strategies in place. We’re going to help you spot the market signals that will help you to do just that.
For a start, here are your golden rules:
- don’t invest all your capital at once
- be aware of how your asset is moving before you invest
- never invest more than 10% of your total equity in a placement
Reasons to Use Binary Options Strategies
Although we think binary options strategies are worthwhile, you could just as easily go with gut instinct, flip a coin or consult a horoscope to help you decide what to do. You might even be successful here and there, but long-term this is a surefire way to lose all of your capital. Probability won’t let you win with random behaviour, any more than it will let you win 50 consecutive coin tosses. To win consecutively as a trader you will need binary options strategies, and we are using the plural because you will need more than one.
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Binary Options Strategies – Description and benefits
The main reason to use any trading strategy is that it will stop you from making emotional decisions. As a trader, all of your decisions need to be grounded in logic and rationality. There is very little room for hunches or luck. The other benefit of using binary options strategies is that they allow you to do active ‘field research’, meaning that if you take a defined approach to each investment and document it, and may be it fails, then you can tweak and refine it, and if it succeeds you can use it again and maybe try to improve. The markets are your laboratory where you go about testing your trading strategies, over a set number of trades and a set period of time. When you hit your time limit then you can look back and ask yourself whether your strategy is working, is it making you enough money, could it be improved etc.
Any other approach is going to leave you guessing. If you base your trades on guesswork, then you won’t know why they succeeded or why they failed. Using binary trading strategies will give you something more concrete to base your future adjustments on.
It’s important to know not just why you succeeded or failed, but why you succeeded or failed. Conducting a series of stand-alone trades with nothing to link them is as reckless as hoping for those 50 consecutive heads to come up in a coin toss marathon. When you trade, you shouldn’t just be crossing your fingers each time and being surprised by every outcome. And long term, the law of averages says that the best thing you can hope for is to break even, which is no way to make a living. It may not even be a feasible ambition because to break even you have to win more than you lose, and that seems highly unlikely without binary options strategies.
Money Management Strategies – What They Are and Why You Need One
A lot of people fall into the trap of developing a trading strategy but not a money management strategy. It’s all very well choosing what kind of asset you want to trade and how much risk you want to be exposed to, but you also need to give some thought to money management, because it will help you to build the kind of account balance that will see you through bad periods and help you sustain winning streaks.
Let’s consider the effects of having no money management strategy on someone who gambles a tenth of their balance on a single trade. If the trade doesn’t win, they now have to increase their account balance by 20% just to break even. If three trades in a row go south, then they will need a 30% jump in their account balance to get back to the breakeven point. This is a common scenario that can dig you in deep quite quickly.
Lots of losing streaks are longer than three trades, so you can see how money management strategies play an important role within binary options strategies. Without a good money management strategy, you will undermine your efforts even if you have a good trading strategy in place. Losing streaks will inevitably happen, so you must have a plan to deal with them.
Analysis and Improvement Strategies
There is no Rosetta Stone of binary trading strategies. The only constant with the markets is change, so the best traders need to adapt all the time. You could say they constantly evolve, even when they’ve become highly successful. It’s not like there’s a magic point that they get to where they know everything, and every trade they make is a winner. That day never comes. But they do get to the point where they analyse every trade deeply and thoroughly. If there’s any magic then it lies there.
By analyzing and improving your trading and money management strategies you’ll remove the parts that aren’t working, refine the parts that are and become more profitable over the long term. Even if you’re already making money, but you aren’t trying to constantly improve, who’s to say that you aren’t actually leaving profits on the table?
Types of Binary Options Strategies
There are three common elements to binary options strategies.
- Using signals to guide you
- Deciding how much of your funds to trade
- Constant refinement
To create a successful strategy, you need to understand as much as you can about every aspect of it. Here’s how to do that.
Step 1 – Using signals to guide you
A signal is something that tells you that the price of an asset is about to move one way or another. Asset prices move all the time of course, but what if there was something that could let you know which way it was going to move before it happened? There is, and we call this thing a signal.
Signals can be created using news events and/or technical analysis. Getting signals from news events is probably the more common one among new or inexperienced traders. Things like company announcements, industry announcements, governments releasing inflation figures, these sorts of things can all be viewed as signals that can affect prices.
If you want to develop a working strategy, then you need to think about what news events to expect and when. Most binary options trading platforms will feature economic calendars, so you’ll be informed that in a couple of days’ time a firm’s earnings reports are due. This kind of pre-warning will help to inform your analysis.
The best binary option trading platforms will also let you know what’s expected in that earnings report. This will help you to make decisions about which way the market is going to move before the report comes out.
A news-based approach to trading has the benefit of being fairly easy to learn and understand. It’s not like you need to gain secret knowledge. You’re just taking common knowledge and thinking about its implications for the asset that you’re interested in.
The disadvantage of news-based signals is that they don’t stop markets being unpredictable. For instance, if an earnings report shows that a company has boosted its profits, you might think that that’s a positive result. But that same report might suggest that profits were expected to be higher, or that the company expects to face stiff competition. There are all sorts of unknown quantities that can spook the markets and pull the rug out from under that good news.
Technical analysis gives traders a narrower view than that offered by the news. It focuses on how an asset price moved in the past, with the aim of finding patterns that may offer clues about how the price will move in future. This is an area that can become a rabbit hole of complexity—make no mistake—but the underlying principle is fairly straightforward. You try to work out future behaviour of an asset price based on its past behaviour.
So, the question is, which one of these binary trading strategies should you be using; a news approach or a technical analysis approach? Well, everyone is different, with different strengths and weaknesses, so the best advice we can give to you is to try them both and see which one works best for you. Either of them can bring you success if they gel with you.
Now, you may be wondering how much that little experiment is going to cost you. What if you’re terrible at using the analytical approach and it ends up costing you a fortune? Well, there’s no need for concern. Most decent brokers will be able to offer you a demo account to practice on. You’ll have full access to the trading platform, you won’t be using real money. You’ll get the chance to trade in binary options with zero risks. Sure, you won’t make any money with your demo account, but you won’t lose any either. Instead, you will have an ideal testbed on which to see how your strategies play out.
The last thing to say about signals and strategies is to concentrate on the short-term. Some investment strategies try to predict asset price shifts over long periods of time, even up to a decade. In binary options trading, you’re not really interested in this kind of information. You’re more concerned with what the price will do in the next two minutes, or hour or day.
Step 2 – Deciding how much of your funds to trade with
Money management strategies vary in their complexity. A simple one will have you investing the same amount for every trade, but it’s risky and doesn’t take your overall level of profitability into account or how much capital you have at your disposal. So, we only mention this because you might hear it mentioned and we want you to avoid it.
Another one that you may hear about is the Martingale money management strategy. The idea behind this approach is to recover from your losses as quickly as possible by increasing the size of your trades after each loss. For instance, you could set an amount of money that you will trade with, and if you experience a loss then you double it. If it’s successful then you aren’t just back to where you started, you’re ahead.
It shouldn’t be too hard to see that there is a problem with this strategy. Namely, if you experience a losing streak that won’t quit then the Martingale strategy would have you increasing your investment on every following trade. So, if you had a run of 11 straight losses, number 12 would be a gamble that was 2,048 times bigger than that first trade. Unless you’re a billionaire, it’s going to be hard to keep that kind of optimistic speculation going.
It all comes down to how good you are at making predictions and how good you are at ending losing streaks. You need to keep in mind that there are no certainties in binary options trading. Even surefire trades that you would stake your life on can end up losing, and losses can easily turn into streaks, even if you’re the best trader in the world because at the end of the day nobody has a crystal ball. That’s why the Martingale money management system is not for everyone. It does have its place, but it needs to be employed with caution, so it may not suit beginners.
A percentage-based system doesn’t come with as much risk, so it’s the one that the majority of traders usually prefer, especially binary options trading newbies. It’s a fairly simple concept. The amount of money you put into a trade is based on the amount of money you have in your trading account. It’s kind of the opposite of the doubling down approach that the Martingale strategy uses because after each losing trade your subsequent trades will be for lower amounts. But if you win, your following wagers will be for greater amounts, because your account balance will have gone up.
This conservative approach is designed to preserve as much of your capital as possible so that you can trade for as long as possible, and it gives you the best possible chance of clawing your way back from successive defeats and capitalizing on your successes.
The only variable for you to consider is what percentage of your balance to use. Typically, a trader who is not risk-averse will probably go for around 5%, while everyone else will probably prefer something nearer to 2%.
As an example, let’s assume you feel comfortable with 5% of your balance being invested in a trade. A $500 account balance gives you a $25 trade. If your balance dropped to $300, your trades would now be only $15. If your balance rose to $800, each trade would be $40.
With this strategy, you will only be gambling with what you can sustain. It’s a measured approach that adapts to your current situation and prevents you from throwing good money after bad when you eventually stumble into a rut of successive losing trades, and it won’t let you become overconfident if you win a few either. For these reasons, it’s one of the binary options strategies that’s hard to fault.
Step 3 – Constant refinement
Diaries aren’t just for moody teenagers. They are also essential for developing you into a better trader. It doesn’t matter whether you have a little black book or an Excel spreadsheet. Whatever works for you. The important thing is to record every trade that you make so you can build up a body of ‘evidence’. In time you’ll have a detailed history of what works and what doesn’t, and that will help to ensure that the trades you make in future are successful more often.
A diary is like a silent partner for beginning traders. It allows you to look back at trades and give yourself good advice. Try placing trades based on both technical analysis and news events signals but record them separately in your diary so you can see which one works the best for you. When you’re involved in the day-to-day business of trading, you may not realize exactly how you’re approaching it, but your diary will always tell you the truth. So, for instance, you might think that technical analysis suits you best because you’re getting twice the profits that you’re making with signals. But your diary will tell you that you’re actually spending twice as much time studying technical analysis, so it’s an unfair comparison. Maybe you’re getting greater returns per hour of invested time looking for news events signals. Only your diary can tell you.
A trading diary also delivers the kind of granular detail that is essential to fine-tuning any of your binary options strategies. This is important when you get to a decent level of competence and are only looking to improve by small amounts—icing the cake so to speak. But you can only do this if you understand the details of what you’re doing well enough to tweak them.
Don’t forget to use your trading diary to check every aspect of your trading strategy, including money management, your choice of assets, and the size of each trade.
When you get in to the detail, consider noting which days of the week are best and which times of day are best for the best results. Do you perform better with some brokers and some trading platforms? Make a note of it; it’s all-important.
Having said all that, try not to succumb to information overload. Although you’re recording everything you don’t have to change everything at the same time when you’re trying to refine your approach. If you do that it’s hard to know which aspect of the change worked. If you change broker and then asset class and then trade amount all at the same time and you have a run of successful trades, how will you know which one of those three things that you changed contributed to those successes? It is far better to change one thing at a time, then you will know that it was responsible for the change.
Binary Options Trading Strategy Examples
Let’s take a more detailed look at some binary options strategies. The ones listed below are some of the most frequently used, but there are plenty of others available as well. As you learn more, you’ll no doubt come across traders who split, combine and adapt their binary options trading strategies to suit their own goals. You’ll probably be tempted to try this kind of thing yourself, but it’s important when you start out to learn the basics and save the customized approach for later. Whichever one you choose, don’t forget to combine them with a money management strategy too.
Example 1 – Trading the Trends
Asset prices usually move in line with a trend. You’ll often see a zigzag of ups and downs that are actually all part of a larger upward or downward trend. When you understand the shape of the trend you begin to see that the zigzag movements can be predictable in certain situations, and when you can predict those movements you have an opportunity to execute profitable binary options trades.
To put it simply you have a couple of main options: you can gamble on the overall trend or on each of those zigzags. Trading the overall trend means looking at the big picture. You’re not interested in trying to capitalise on the minor ups and downs of an asset price. Instead, you are looking at a shift in price over the longer term.
Trading on swings in price requires that you place more trades, which is inherently riskier but potentially more rewarding.
Upward trend – New highs and new lows will usually be higher than past highs and lows in an upward trend.
Downward trend – New highs and new lows will usually be lower than past highs and lows in a downward trend.
Of course, you shouldn’t lose sight of the fact that you are free to use both approaches to trading. It’s a free country!
One of the most frequently used ways of trading trends is with High / Low options. Every binary options trading platform will offer this kind of trade. With a high option, you’re betting that the price will go up and with a low option you’re betting that the price will go down. The only variable is the period of time during which you think this will happen.
A riskier, but potentially more profitable variation of this is called a one-touch option. Instead of just betting on whether the price will go higher or lower, you’re predicting whether it will hit a specified number called the target price.
Example 2 – Trading on News Events
This is a fairly popular type of trading strategy. You will use the news as your source of intelligence. When a company reports greater profits or a new and exciting product then the theory states that generally, this will cause more people to want to own shares in that company and this demand will push up their price. The opposite is true if the company announces bad news of some sort. In both cases, binary options traders are in a position to make money if they can anticipate the direction of the next shift in the share price.
The downside of this type of approach is that it is not clear cut. When you trade on the basis of news events you place your fortune in the hands of fate.
So, it’s a good thing that there are other strategies that you can take to increase your chances of successfully trading binary options. Here are three of them.
Boundary options – when you’re certain that an asset price will change but you can’t be quite sure which way it’s going to go then a boundary option can be really useful. With it, you set two target prices, one of which is below the current price and one of which is above. The difference between them is called the price channel. If the asset price passes either of them then you win. If it only moves inside the channel then you lose.
Trading the breakout – The breakout represents a window of opportunity. It’s the time, anywhere from 30 seconds to several minutes after a piece of news about an asset goes public. It’s the perfect opportunity to use a high/low option because it’s here that traders will try to limit their losses or alter their positions for profit, and so it’s here that you’re likely to see significant fluctuations. You’ll sometimes hear breakout trading being called the 60-second option because the timeframe is literally that short.
Intelligent High / Low trades – it seems counterintuitive, but sometimes good news may result in falling prices in the markets. That’s because even though the news may appear to be good on the surface, such as a rise in manufacturing productivity, if the markets were expecting a greater rise then the news comes as a disappointment which they will then adjust for. If you can predict when such things will happen then high/low trades can help you to profit from them.
Example 3 – Using Candlestick Formations
As a new trader, you might find this strategy the most difficult to understand, but the good news is that once you do it is going to be the simplest one to put into practice and profit from.
When you look at a typical graph of an asset price then you’ll be looking at an oversimplification that features a before and after. If you want to know more (and you do) then look to candlesticks to fill in the details.
Candlesticks appear on an asset’s chart over time. The bottom of the Candlestick indicates the lowest price it reached during a particular time period and the top indicates the highest price it hit. In the middle you will also see the opening and closing price, so a candlestick gives you an easy to digest view of the price range fluctuations for that asset in that particular time period.
Now the way to use candlesticks in trading is to recognize different formations of them. Once you can do this you can better understand which way the price will go next.
For instance, if you see a candlestick with a gap then that means the asset price jumped significantly higher or lower. Gaps are unusual because prices usually move in a much more gradual fashion, hitting the majority of price points on the way. When one appears during a period of low trading volume then it’s telling you that there is likely to be a quick correction.
This can happen just before a market closes for the day when there aren’t many traders left placing trades. The gap can be produced in this situation by large trades, but that doesn’t mean that the asset is strong. Maybe the gap wouldn’t have appeared if more trading had been going on, so knowing this you can estimate the gap in the price of this asset and use that information to plan your trades.
If gaps appear when trading activity is high, but the price is not moving much then this can indicate that there may be a new breakout, or surge in that direction. Again, use this information to your advantage when you trade.
If a gap appears when trading volume is normal and there’s a trend in one direction, it might suggest that the trend is accelerating. Good intelligence to have for your next trade.
Developing a Binary Options Strategy Without Risking Money
If you’ve taken all of the advice in this article on board then you’ll no doubt be wanting to test your new binary options strategies, but you still might be reluctant to get your feet wet when you are aware of how easy it is to lose money. You don’t want to blow all the money in your trading account on testing out your theories, do you?
That’s where a binary options demo account comes in useful. Every half-decent broker will let you use their trading platform demo fashion, gambling nothing more than numbers on a screen instead of money from your account. It’s probably the best way there is to start testing (and recording in your diary, naturally) your binary options strategies, without losing your shirt.
One of the beauties of binary options trading is that there is virtually no limit to the kinds of assets that can trade in. Trade on those assets that are most familiar to you such as euro-dollar exchange rates. Consistently trading a single asset will help you to gain that all-important familiarity with it to help you predict changes more easily. There are two types of strategies explained below that can be of great benefit in binary options trading.
1. Trend Strategy
This is a popular strategy, and it is also called the bull-bear strategy. To implement it you’ll need to keep an eye on the rising, declining and the flat trend line of the traded asset. If you see a flat trend line and think that the asset price is about to climb, use the No Touch Option.
If the trend line shows that the asset is going to go up, choose CALL.
If the trend line shows a decline in the asset price, choose PUT.
This method works just like the CALL/PUT option but in this instance, you decide on a price that the asset mustn’t hit during the time period you specify. So, save Facebook’s share price is $490 and the trading platform says the No Touch price is $495. If it doesn’t hit $495 during the time of the trade, then you win.
2. Pinocchio strategy
Use this strategy when you expect the asset price to fall or rise dramatically. Choose ‘call’ if you think it’s going to go up or ‘put’ if you think it’s going to go down. This one is best tested on a demo account before you go live.
3. Straddle Strategy
This approach is best used when the market is volatile and when you’re expecting significant news about a particular asset to break. This is a strategy that’s much respected throughout the world of trading. It lets you avoid choosing between CALL and PUT; you put them both on the selected asset instead.
The overall plan is to use PUT when the asset’s value has gone up, but there is a suspicion that it will go down again soon. As soon as the decline starts, put the CALL option on it, because you expect it to rebound soon. You can also use this strategy in the other direction, by placing CALL on a low-priced asset and PUT on a rising asset value. This boosts your chances of success by covering you in both directions. The straddle strategy is a favourite of traders when the market or asset is tending to fluctuate.
4. Risk Reversal Strategy
This is one of the most popular binary options strategies because it’s designed to reduce the amount of risk involved with trading and boost the likelihood of securing a profitable trade. With this approach, you place CALL and PUT options on an asset at the same time. This can really help when assets are volatile.
5. Hedging Strategy
This is another one of those binary options strategies where you place both call and put positions, with strike prices that overlap. The thinking is that at least one of them will pay out. You can make more than if you just select one option, and if you lose then it will still be a lot less than the straight loss you would suffer from just one option. It’s a useful tool to add to your trading bag of tricks.
6. Fundamental Analysis
Binary options strategies almost always require that you have knowledge of the underlying assets that you are effectively gambling on. The theory with fundamental analysis is that you really go to town on understanding the business whose share movements you are interested in understanding. To do this you need to get to grips with things like their earnings reports and financial statements.
As a trader, this review helps you to understand how the company has been performing and how its stock reacts to particular market news. If you know well enough what kind of shape the company is in and what kind of events have caused its share price to fluctuate, then you’ll be much better placed to predict and therefore profit from future changes.
We hope that this guide has been useful in preparing you to take your first steps with creating your own binary options strategies.
Binary Options Guides
It can be confusing to decide how to start trading online. One can choose among forex, crypto, CFDs or binary brokers from all over the world. Also, traders can’t only click and make profit, as they need to learn more about financial analysis and trading strategies. In this guide, we will try to present you with most common dilemmas and questions that are bothering not only new traders who are only starting, but also more experienced traders. The point of this binary options and forex guide is to get a sense of what the trading is about and to encounter some basic terms one uses when trading.
Also, an useful resource is our Forex trading basics guide and our online trading academy with more than 150 articles – from basic terminology to advanced trading strategies and patterns.
First, it is important to understand the basic differences between different types of online trading.
What is Forex Trading?
Forex trading is somewhat different than binary trading, even though traders don’t have to own the underlying asset. Forex trading is based on currency pairs (for example, EURUSD – see how to trade this pair) and traders can buy or sell the desired amount of currency contracts and use leverage to move larger amounts of money. Also, traders have different risk management tools like stop loss and take profit at their disposal.
What is Binary Options Trading?
Binary options are a special type of financial instrument that allows traders to know possible payout in advance. At the same time, traders never own the asset in order to trade based on it. They are placing a trade based on their prediction of the price movement and not based on buying or selling the actual asset. European market oversight agency ESMA decided to temporarily ban binary options (PDF) distribution and sales to retail investors for 3 months in 2020 since they felt this instrument design might present too big a risk for small traders.
What is CFDs Trading?
CFDs trading is very similar to forex trading, but the underlying asset is different. Contracts for difference are based on bonds, stocks, commodities etc. Most modern brokers offer forex and CFDs trading at the same time. We have also explained CFDs in our trading guide on forex.
What is Cryptocurrencies Trading?
Cryptocurrencies trading is the latest trend, based on digital coins or tokens that appeared on the market some 10 years ago. Traders can trade them as CFDs and forex contracts with regulated brokers (the safest option) or via crypto exchanges (riskier option). We have written a comprehensive guide for cryptocurrencies trading you should read. Also make sure to check out how to take advantage of Bitcoin CFDs, the first and most popular cryptocurrency to date.
Binary Options Guide for Dummies
The idea behind binary options is indeed one of simplicity, however, there are some general rules one has to know in order to be able to run the trading platform and become successful. Pushing Up/Down or Put/call will not be helpful unless tied to a serious understanding of the market.
Online Trading Dictionary – Options Trading for Beginners
Expiration Date: The time that the option expires.
Settlement Value: The value of the option on expiration.
Underlying Market Price: The actual real-time market price of the contract.
Bid: The premium price that traders pay for an opening to sell a contract or closing a buy order.
Ask: The premium price that traders pay for an opening to buy a position. This is essentially anticipating that the underlying market price will go up. It is the price paid by a trader who has an open position to sell and wants to close it out.
Spread: The difference between the bid and ask.
Bid size/Offer size: This reflects the number of positions being bought or sold.
Commission fee: The trader will pay a commission fee per transaction – more common in CFDs and forex trading, binary options do not require comissions.
Set-and-let: When you take a position and do not trade in the same market until the time frame expires and the bet is settled.
ROI: Return on Investment
Sell: The action used in forex and CFDs trading when traders believe the price won’t move in their favor. The opposite is “Buy”
High: if you believe the price of an underlying asset will rise, you click “High” in the trading platform
Low: if you believe the price will fall in the future, use this price direction to indicate which way the binary option should move.
Strike Price and the Underlying Market Price – what is the relation?
All beginners should understand these basic terms, whether they are binary options beginners or only starting in forex and CFDs.
The strike price is the price in the moment when the trader places the trading order. This is the price at which the option or CFD are executed. In case of binary options, if you expect the price of the underlying asset to rise, the price of the asset at the moment of expiry of the option must be higher than the strike price. This is called “in the money”. See how to decide the strike price with simple trend lines.
In case you were wrong, and the price is lower than the strike price – the option closed out of the money and you lost your investment.
Underlying market price is the price you are watching after the trade has been placed and, as explained, its relation to the strike price determines the outcome.
With binary options the returns in case of successful prediction can be high and it helps that they are fixed, but understand that in case of the unsuccessful trade, all money wagered is lost. Its different with CFDs, there the amount one wins or loses depends on the difference between the strike price and the market price at the time when the trade is closed. This is why these are called “contracts for difference” after all.
What are Fixed Price Options and No Touch Options?
The fixed price options are used for trading out the assets at a specific strike price. This means that the trade is being placed in the moment when the underlying market price reaches certain level which becomes the strike price for the option.
No-Touch Options are one of the most popular binary options and are considered to be somewhat riskier as traders will have to predict not just the direction of the price but the possible range it will (not) reach. This options type is extremely useful for traders who believe that the underlying asset price will increase over the range-bound during a specific time frame as they will end up making a lot of money if they are right.
Can I Make Money with Binary Options or Forex?
Binary options trading should not be taken as a risk-free way of trading online no matter what some brokers might say. There is always some risk linked to the process, but it does not mean that one cannot reduce the risk by employing smart strategies or trading responsibly.
Some of our other articles on recognising danger to your money and properly trading online:
If traders think the price of gold is going to rise, then they place what is called a call binary option. For this reason, they would need to select the assets they have, in this case being the gold. The next phase would be determined by what trend the asset is going to show i.e. up or down. The last phase is that they determine the amount they are going to invest in it. If things go as planned with the price of gold, they stand to earn up to 100% returns, sometimes even more. If the trade goes sour – they lose the invested capital.
On the other hand, if they feel that the price for the gold is going to decline, then they place what is called a put option. If the same happens as before, they will yet stand to earn even from the falling prices. The entire process can take place in minutes as well hours depending upon the expiry time they chose. But as a trader and an investor, one should exercise caution in all the steps taking in this regard, as they can also end up losing all their investment.
Binary Trading with Robots and Signals
Another way of increasing your returns can be trading with binary robots and signals. Binary robots are special software that use complicated algorithms to find profitable trades (commonly known as signals). Depending on the adjustments and trading settings, it can also place the trade instead of the trader.
Signals are trading alerts that contain all necessary information about a trade that has a high profitability potential. For example, traders get a notification that contains the underlying asset, trade direction, expiry time etc. All they have to do is trade it! They can trade it automatically or manually. Learn more about signals.
Just a few years ago, binary robots and binary signals were two separate types of services, but more and more often we see different types of trading and trading services integrated on the same trading platform. Of course, before using any signals or robot trading service, make sure to check the reviews available on FFB.
Top Myths about Binary Options Trading
What is the real truth behind binary options trading? Is it all a scam? Is it really that easy? Will we all become millionaires in the blink of an eye? The truth about binary options trading is sometimes as complicated as the myths that surround it.
Here, we will debunk some of the most popular myths!
Myth no. 1: Binary Options Trading is Gambling
To people uninvolved in binary trading, logic is simple: you make an account, deposit money and make a bet whether the selected option will go up or down. This logic couldn’t be further from the truth. Experienced traders agree in one: in its possible to trade binary options and treat them like gambling, but it won’t take you far. Read more about the difference of binary options and gambling
The truth about binary options no. 1: even though some treat it like a gambling game, there is so much more to it. Relying solemnly on luck is not a solution for traders who wish to be profitable and trade in a reliable way.
Myth no. 2: Binary Options are Fast Money
Many brokers use this technique to attract traders by promising them high returns in short time. Sometimes the general atmosphere is such that it is really easy to believe that all trader has to do is make a deposit, and platform will do all by itself and make him a millionaire.
The truth about binary options no. 2: Binary options require serious engagement and knowledge of financial analysis in order to be profitable. Testimonials and advertisements that use “get rich quick” language can be considered a scam and false advertising, as they are empty promises.
Myth no.3: Binary Options Trading causes addiction
Some claim that binary options trading, just like gambling, can cause addiction. The adrenalin of short-term trading may influence some traders, but not all.
The truth about binary options no. 5: Contrary to that popular belief, binary trading experts always warn that trades should be executed only after thorough analysis. Such trading behavior significantly reduces the risks and lowers the chances for emotional or forced trading. Never invest more than you can afford to lose!
How to Choose a Binary Options Broker
Apart from ensuring a higher rate of return, most of the experts also value safety. Many brokers do offer more than 100 % of returns, but that is not objective return rate. Serious brokers offer reasonable rates and not those that sound too good to be true. The best brokers have user-friendly platforms, great customer service and a variety of trading options.
Online Trading Broker Terms & Conditions
Terms & Conditions always offer more detailed information than the website and are usually located at the bottom. If some things are still not understandable after reading T&C, better don’t deposit, but contact customer service for additional questions.
Broker Trading Accounts and Bonuses
In order to start trading, traders often choose an account type and make a minimum deposit. Account types may vary: some brokers offer five account types, other only one or two (like Nadex) and each account requires different deposit amount. Minimal deposit is the minimal amount broker accepts as a deposit when opening an account or adding additional funds to your account.
The bonus is additional amount offered by the broker to motivate the trader. Unfortunately, some scam brokers use the bonus to blackmail the traders when they want to withdraw their money. Although it is completely legal to request a certain turnover before allowing bonus withdrawal, it is not legal to add bonus without trader’s approval. Also, bonuses are not allowed with CySEC regulated brokers anymore.
The Demo Account
Demo account is probably the best way to experience binary options trading. It is a special account type that enables you trading with fictional money in order to learn how to place trades and get accustomed to the interface. Traders win no money, and they lose no money.
Trading Assets and Trading Options
Traders can choose whether they’ll trade high/low, one touch, ladder, pairs, 60 seconds, long- term, range options any many more.
The expiry times of binary options may vary from short-term (15 sec, 30 sec, 60 sec, 2 min, 5 min) to long-term (end of the day, end of the week, end of the month, 30 days or more).
The underlying assets are currencies, commodities, indices, stocks and cryptos. There are also bonds, ETFs which are more common with CFDs brokers.
Customer Support and Education
Every successful binary options trader will tell one thing to inexperienced traders: never underestimate the power of knowledge in binary options. Many good brokers offer educational materials. Customer service nowadays is usually available in many different ways. Depending on the broker, traders can contact them via phone, email, live chat or skype.
Forex and Options Trading – Deposit & Withdrawal
The minimum investment is the minimum amount that can be placed in one trade while depositing is adding funds to the account. Withdrawal is a process of taking money from the trading account to banking account. There is usually a limit for minimum and maximum withdrawal.There are many ways to deposit and withdraw money: bank wire, credit card, debit card, e-wallets…
Bank wire is one of the most popular ways of depositing. The most renowned banks, like HSBC, allow depositing and withdrawing from their clients’ accounts. The bank ensures all transfers are safe as do most binary options brokers. For many traders, HSBC will surely offer premium service that also covers binary trading.
Make sure to upload your documents as brokers require them to verify your identity and stop potential money laundering schemes.
Today, most serious brokers are registered with at least one of many regulating bodies. The most popular regulatory body is CySEC as it covers the territory not only of the Republic of Cyprus but the European Union as well. The EU is a great market so it’s no wonder that most of the brokers are licensed by CySEC. Read more about binary options regulators here.
Learn about the CYSEC investor compensation fund to see how you can get some of your money back if the broker becomes insolvent.
You can also file a complaint with the regulator in case you think you have been scammed. However, the best way to get your money back is to use MyChargeback.
Every country has its own regulator as well. Regulated brokers are obliged to respect the laws enforced by the country of registration which is a great help in case anything goes wrong, as traders have not only customers service to ask for help, but a state body as well.
Binary Options USA
Global binary options are mostly tied to brokers that operate on a different platform than the one that is allowed by the US authorities. US binary options traders can use any regulated binary exchange. This is not a bad thing, as regulated market means that customer is more protected than on many other local markets.
For binary options trading USA that is compliant to all possible versions of the rules enforced there, there is NADEX, based in Chicago, that does offer binary options trading according to US rules and regulations. You can read our NADEX review here.
What is Social Trading & Copy Trading?
Social and copy trading are new possibilities in online trading that enable traders to follow others and place trades in the same way as they do.
Copy trading can be seen as copy/paste option on a personal computer. Trader selects a peer to follow, and trades, according to their affinities and settings on the platform are directly copied. The trader can choose which peer to follow and see their trades. If the trader finds the trade promissin, then he copies it, and if not – the trade is skipped, and trades some other time. Most copy trading systems automatically copy all the trades with preset spects from selected traders one follows.
Just like any type of investment, social trading is only reliable as the platform that provides it and the traders you follow. Besides selecting a reliable platform, traders must select reliable trader to follow as well. Sometimes, losing is inevitable, but there are still many traders who understand the market and price movement and who do the great analysis before placing trades. This is a type of trader one should follow.
What is important to mention is that in most cases, copied and social trades often have a limit when it comes to investing, which means traders can place only a certain percent of their funds. This rule is existing because, trader didn’t make a projection by himself, but is simply following another trader.
Cryptocurrencies Trading Basics
Cryptocurrencies, as implied by their name are a type of digital currency that uses encryption protocols for securing, verifying and sending transactions. They achieve it by using a technology called the blockchain which resembles a public ledger that chronologically registers and validates the details of every transaction. Tokens, on the other hand, are more like a digital commodity than a currency.
Crypto trading can take place in several ways. Learn more about crypto trading.
Trading Cryptocurrencies Like Bitcoin with IQoption
IQ Option’s platform is both advanced and intuitive. It provides quotes in real time, gives the ability to trade with fiat currencies on Forex and Options as well as Cryptocurrencies on CFDs. One of the benefits of Cryptocurrency CFD trading with IQ Option is the volatility of these assets, they provide a perfect opportunity to open and close short positions throughout the day, and invest in long positions, given the current bullish trend of the crypto assets. Another great advantage of this platform is the low investment threshold – only $1. Considering the growing interest in a sophisticated, decentralized exchange, it looks like an interesting platform with promising, great additions to come soon. You can try trading cryptocurrencies now, with a free demo account.
How to Stay Safe while Trading Online?
Binary Options Certificates Scams
When deciding on a broker, traders usually visit their websites, and then they see it: a line of aligned seals signaling the broker won an award for being “the best broker”, having “the best options”, being “100% secure”, or perhaps, “top broker”. Another worrying trend we noticed is brokers displaying their “regulated certificate”, even when they are not regulated by any regulatory body. In the case of doubt, always read Terms and Conditions. Regulated brokers usually state there which body regulates them, together with their regulating number. The regulating number can easily be proofed on regulatory bodies websites. For brokers who claim to be regulated by CySEC and other institutions, do it here. You can see an example of a false regulation seal to the right.
Binary Options Certificate Scam – Example
We noticed that one of the brokers that is on our Blacklist displays such elements on its web page. All one needs to do is scroll, and right on the bottom of the CapitalOption page, three “awards” can be found.
- “100% money back guaranteed”,
- “100% quality” and
- “Certified, secure, authentic”,
Sounds pretty good, right? Unfortunately, these awards and certificates make no sense as they are all fake.
Bonus Terms and Conditions in Binary Options
Bonus rules are provided by good and bad brokers alike, so the pure existence of rules is not providing any insurance at all. The difference is that good brokers have reasonable conditions while scam brokers leave to many information open to misinterpretations or don’t have such rules at all.
The formula for calculating the trading volume is mostly explained in bonus terms and conditions.
For example, the trader makes $250 deposit, and the broker is willing to add 100% bonus with a required turnover of x20.
This means that trader has $500 available for trading, but not for immediate withdrawal. The withdrawal can happen only in case a required trading volume has been reached. In this case, the trader can withdraw bonus profit and deposit, only after the total volume of the trades placed reached $ 5,250
Deposit + Bonus x 20 = required volume
$250 + $250 x 20 = $5,250
When the trader has reached the volume, the amount (bonus profit and deposit) can be withdrawn.
Here are some examples of how brokers manipulate with bonuses to prevent you from withdrawing.
Binary Options Bonus Scams
LBinary: Unauthorized bonuses – The trader lost $10,000 in a single night, as the broker traded in her name without prior approval, and even added an unauthorized bonus. No matter how much she tried to convince her account manager and customer support to stop, it was impossible. There was no written proof of her accepting anything, and the broker simply took advantage of the customer.
MyOption: Impossible withdrawals – In this case, the trader got a bonus without knowing what the terms of bonuses are, and every attempt to contact the broker was futile.The trader was told that bonus can be canceled at any moment, and the deposit is withdrawn fully, but the reality was much different.
Very often, a bonus is used as a way to incentivise the trader to deposit, and this is not surprising as bonuses are usually perceived as extra money that always comes in handy. According to CySEC, no regulated broker is allowed to offer bonuses. This protected many traders, but not those who are trading with unregulated brokers.
Sometimes account managers put additional pressure on traders with promotions that are potentially against the trader’s interest. Account manager and brokerage staff have a tendency to do all the convincing part via phone call, as it is harder to track what is going on, especially when it comes to scam brokers. For this reason, always insist on written correspondence via email.
Binary Options in Israel
After making conditions for registering binary options business even stricter, Israeli Securities Authority (ISA), under the leadership of prof. Shmuel Hauser has decided to make illegal all advertising and service providing in binary options industry towards Israeli citizens. The new legislation has created an unfriendly business environment so it can be expected that all brokers who are offering regulated binary options will have to stop offering such services. This means that Israeli traders will be forced to trade binary options with unregulated companies, and all that dependable on how rigorous ISA will be when it comes to prosecution of unregulated brokers.
Forex Trading in Israel
However, this ban doesn’t mean that it is impossible to experience online trading in Israel. You can still trade forex with regulated forex brokers. Forex is another popular type of online trading based on currency pair contracts that allows traders even more control and customisation possibilities than binary trading.
For example, forex trade can be closed at any moment, and you don’t have to wait for the expiry time to run out. As always, make sure to find a solid Israeli forex broker. We suggest you try trading with Plus500 (80.6% of retail CFD accounts lose money), where a trader with an account can trade CFDs on Forex, Stocks, Commodities, Options and Indices”.
Binary Options in South Africa
Binary options trading became very popular in South Africa in the very beginning, almost 10 years ago, but South African government still didn’t manage to completely regulate all aspects of this type of financial trading. All aspects of investing and finances, except banking, are regulated by the Financial Services Board (FSB). One of the most interesting aspects of binary options trading in South Africa is that companies in South Africa are not allowed to offer binary trading services to South African traders. This is another reason why South Africans have to trade with offshore brokers.
Traders who want more diversity or to trade with multiple brokers should select binary options broker regulated by other important regulators like CySEC.
Forex in South Africa
Still, traders can still find a regulated forex broker and trade with popular forex brands. This makes forex trading the preferred choice by South African traders.
Most popular brokers in South Africa are Plus500 (80.6% of retail CFD accounts lose money) and CMTrading (FSB Reg no.: 38782), that offers incredible trading accounts, risk free-trades and leverage up to 1:200.
Binary Options in Japan
Binary Options in Japan are legal and regulated by Financial Futures Association of Japan (FFAJ), that not only regulates the market but also publishes reports on the binary market. As most regulatory bodies in the world are only regulation-oriented and don’t care much about the market results, this case is another proof of well-known Japanese efficiency. Just like most other regulatory bodies, FFAJ publishes reports on the scam and unregulated brokers as well.
Binary Options in Lebanon
Binary options are becoming increasingly popular in Lebanon. Also, we mentioned that it is always better to trade with a regulated broker than with unregulated. Regulated brokers are, generally speaking, safer and more reliable as they keep funds in separate accounts and allow traders an additional level of transparency and security.
In Lebanon, the main regulator for binary options is Banque du Liban, or the Central Bank. One of the main roles of Banque du Liban is providing licenses to interested brokerage houses. However, like many other regulators, Banque du Liban does little to really regulate binary options. Binary options in Lebanon are mostly based on brokers that are regulated offshore by other popular regulators such as FMA or CySEC. Traders should always check whether or not the broker has a valid license. The license number can usually be found in the footer of the website, but don’t hesitate to contact the regulator as well, as some scams publish random numbers they claim to be their license number.
How do I trade binary options?
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How to Trade Nadex Binary Options in 6 Steps
- 1. Log on to Nadex platform. Sign up is simple and free, the minimum deposit is low at $250. Some US and most non-US applicants will need to verify their identity or residential address by sending in the required documents. This is meant to protect user’s account and to comply with AML/KYC rules.
- 2.Choose an asset. Use the Asset Finder tool in the left sidebar window. Assets are listed by asset class, asset and expiry.
- 3. Choose expiry. After clicking on your chosen asset class and asset expiry information will appear, click on your target expiry to.
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