Learn to manage your money and assets in binary options trading

Best Binary Options Brokers 2020:
  • BINARIUM
    BINARIUM

    The Best Binary Options Broker 2020!
    Perfect For Beginners and Middle-Leveled Traders!
    Free Education.
    Free Demo Account.
    Get Your Sign-Up Bonus Now!

  • BINOMO
    BINOMO

    Recommended Only For Experienced Traders!

Is It Possible To Make Money Trading Binary Options?

Trading binary options online has become possible in 2008. It was a new way to make fast profits online for financial speculators. Trading binary option is open and available to anybody over 18 (one should check local government regulation before trading BO).

Binary options allows the user to speculate and place trades, which are essentially bets, on the direction of financial assets from a basket of currencies, stocks, commodities and indices. In binary options your losses can never exceed your deposits and your return is clearly defined at entry.

It is no secret that trading on the world’s financial markets by buying and selling positions has made many millionaires. It is also a fact that the markets bankrupted many more. The line between winning and losing can be very subtle. While trading may not be for everyone, the unprecedented ease of access to financial trading online has certainly made a lot of people happy about new possibilities.

Is it really possible to make money? If so, how much?

The big question is can you really make money trading binary options? Short answer is yes, but it’s not that simple. Whether you make money or lose money really depends on a number of factors including your risk management, trading strategy, the options that you choose when you enter the trades, your broker fees, your trading psychology, etc. There are simply too many factors to consider but of course it is possible to win and make money, but it’s not as easy as binary options advertising has us believe.

Brokers will often entice people with all types of bonuses and ads that suggest making money trading binary options is very easy. Although the actual act of trading binary options is easier than Forex it is not easier to win and make money consistently in binary options.

Here is a mathematical formula to calculate break even ratio in binary options:

  • B – Break even ratio – (shows how many times you need to win to break even)
  • I – In the money ratio – (shows broker payout for winning trades)
  • Ot – Out of the money ratio – (shows your losses for losing trades)

Using the above formula you can calculate the break even ratio assuming a set of fixed parameters. Assume your broker pays you 90% for wins and takes 100% for losses.

B = 100% / 90% (in the money) + 100% (out of money)
B = 100 / 190
B = 0.5263

What this means is that in the case of a payout rate of 90% and 0% rebates on losses you will have to accurately predict 52.63% of your investments in order not to break even. This break even calculation can change quite significantly with different options. A 90% payout is very generous and rarely seen in binary options.

Let’s look at the numbers and for the purpose of further illustration let’s assume that we are dealing with a trader who has a trading strategy with 75% of wins. (There are numerous signal providers that achieve those levels.) 75% of wins is quite high for most standards. He also uses a binary options broker who offers only 70% of profit on each winning trade.

In one month he takes 52 trades and on each trade he puts $100. His total investment will be $5200. It averages out to about 2 trades per trading day. Let’s also assume that each trade has a payout of 70% and a return of 0%, as is the case with many binary brokers.

When we divide the total sum of his investment of $5200 between the 75% of winning and 25% of losing trades we split the working capital between $3900 which was spent on the winning trades and $1300 spent on the losing trades. Now let’s take the $3900, the 75% of his total trading capital, and add 70% of return payout on the winning trades which will produce $2730 of profit. His losing trades, the 25% of total trading capital, cost him $1300.

Best Binary Options Brokers 2020:
  • BINARIUM
    BINARIUM

    The Best Binary Options Broker 2020!
    Perfect For Beginners and Middle-Leveled Traders!
    Free Education.
    Free Demo Account.
    Get Your Sign-Up Bonus Now!

  • BINOMO
    BINOMO

    Recommended Only For Experienced Traders!

*The end result is wrong, it is $6630 which makes it 27.5% increase

So now that we know how much profit was made, let’s take those numbers and put them into the mentioned breakeven ratio formula to see how many times he actually needed to win in order not to lose any money at all.

This financial calculation is quite modest because it assumes a return of only 70% on wins where many brokers offer payouts over 80% and some brokers also offer returns on losses, only about 5-10%, but this will change the numbers significantly.

In addition, there are a few binary options signal providers who consistently achieve higher percentage of wins than 75%, which would also drastically improve profits as well.

So, only for the purpose of further illustration of what would happen if the overall wins were 80% and the return payout also 80% we’ll continue with our calculation. In this case $4160 is our winning capital, namely the 80%, and the remaining $1040, the 20%, is the losing capital. The winning capital of $4160 generates $3328 of profit (80% of payout for wining trades) and the losing capital of $1040 is simply lost, we’ll also use 0 return for losses in this calculation. So, out of 52 trades for $100 each the profit is $3328 and loss of $1040. Remember, that’s only in one month of trading.

As you can see the difference in earnings is huge between the first and the second example. A 24 percent per month as opposed to 2.5 percent per month is a world of difference. This is why it is so important to understand your risk exposure in binary options. Let’s see how many times he needed to win to break even:

Professional traders understand that and seek options and ways to keep the odds in their favor. For example trading with brokers that offer 85%-95% on wins and some return on losses. In addition there are ways to trade binary options to receive even higher payouts, as high as 200%.

Of course were profits can be made in a such a quick way there is inevitably going to be more risks involved. You can make money trading binary options online, there is no doubt about that, but you can also lose money. Following a reliable binary options signals or strategy or a professional trader in live sessions can really help you succeed in trading binary options online. It could be the difference between winning and losing.

How to Start Investing in Binary Options

Damyan Diamandiev
Contributor, Benzinga

Invest With TD Ameritrade – Now Commission Free

Invest With TD Ameritrade – Now Commission Free

Open an account with Benzinga’s best online broker, TD Ameritrade. $0 commissions on online stock, ETF, and option trades plus award-winning platform and customer service.

If you’re looking for a simple way to trade and invest in financial assets, why not consider binary options? They’re easy to understand and preferred among newbies, so you’ve pretty much already got a head start in the right direction. Benzinga will help launch you the rest of the way.

Table of contents [ Hide ]

What is Binary Options Trading?

Binary traders profit from price fluctuation just like other traders, but binary options have a preliminary stated risk and profit potential. That’s why this type of contract is called a “binary” option. You get one of the two possible outcomes: suffer the risk or profit from the reward.

In binary trading, you bet if the price will be higher or lower after a certain time passes: the expiration. If you’re right, you win. If you’re wrong, you lose. When you lose, you lose the amount you’ve bet in the trade. When you win, you win around 80% of the amount you’ve bet (this depends on the broker as well).

Let’s say you believe the price of the EUR/USD will be higher in one minute and you bet $10. If you’re correct, you’ll profit around $8, depending on the broker. If you’re wrong, you lose your $10.

There’s some specific terminology wrapped with binary options. Can you sell an option? No, but you can buy a “put” option.

This is how it works:

Call Option

You buy a call option when you expect the price to increase. This means you enter a deal where you bet that the market will increase in price.

Put Option

You buy a put option when you expect the price to drop. This means you enter a deal where you bet that the price will go down.

Calls and Puts

It’s easy to understand the difference between “buy” and “sell,” and which corresponds to bullish and bearish markets. However, it might be tricky to remember the difference between calls and puts. Here’s an easy way to remember:

Imagine a phone is on a table. When you want to “call” you need to lift the phone “up,” an increase. When you want to “put” it down, it needs to go downward, or “drop.”

How To Start Trading Binary Options

Step 1: Build your strategy

Test different approaches and check which one is profitable for you. You can also combine different indicators to build your strategy. Some indicators could be:

  • Price levels
  • Trend
  • Candle patterns
  • Chart patterns
  • Moving average indicators
  • Fibonacci levels
  • On-chart indicators
  • Area indicators

These are not the only indicators available; there are many more and each of them works in a different way. Match signals from different indicators to reduce the chance of getting a bad signal and incline the scales in your favor.

Step 2: Calculate the returns

Say that your broker will give you 80% return if you guess the right price direction. You risk 100% of the invested amount, a return of 8:10. How successful should your strategy be and where is your break-even point?

Say that you do 100 trades by investing $10 in each. This means that you’ve invested a total amount of $1,000. Your strategy has a 55% success rate, meaning that you will get an approximation of 55 successful trades out of 100.

If you guess correctly, you’ll win $8. If you guess incorrectly, you’ll lose $10. Since you’ll get around 55 winners, this means you will make 55 x $8 = $440. Since you’ll get around 45 losers, then you will lose 45 x $10 = $450.

A profit of $440 – $450 (loss) = -$10 per 100 trades with this strategy, which isn’t ideal.

Here’s another test with the same brokerage conditions: 80% return on a successful guess. Let’s say our strategy has a proven record of 70% success rate. This means we’ll have 70 winners and 30 losers after 100 trades:

70 x $8 = $560 (profit)

30 x $10 = $300 (loss)

Net profit = $260

Step 3: Money management strategy

Don’t forget to factor in luck. If you deposit $100 in your account and you invest $20 in each trade, you’ll likely fail. The reason for this is that you will be able to handle only five losing trades in a row, which is very likely to happen.

It’s safe to have money for at least 100 trades. What is the chance to get 100 losing trades in a row? It’s just like flipping a coin and getting 100 heads in a row: pretty unlikely.

Step 4: Choose your binary options trading broker

Pay attention to some important rules when you choose a broker. There are scam brokers who will not let you withdraw your money, so research in advance. Good brokers:

  • Are regulated and conform to the laws of a country.
  • Have existed for a while. Scam brokers get caught and typically close after a year or two.
  • Have good reviews online. What are people saying about the broker? Can you withdraw your winnings?
  • Offer a variety of trading assets. You don’t want to have only five currency pairs available for trading.
  • Have a friendly interface.
  • Include a rich set of trading indicators. These indicators will assist in your analysis and help you build a successful strategy.

Step 5: Create and fund your trading account

This is the easiest step as long as you have the money! Follow your broker rules for creating an account. You’ll need to identify yourself and to confirm your account, then deposit the amount you are willing to start with.

Make sure you conform to the money management rules we already discussed. If you’re willing to invest $10 in a single trade, this means you’ll need to deposit at least $1,000. This way, you’ll have enough money to conduct 100 trades and you’ll be able to handle an eventual downswing.

Step 6: Execute your first trade

Now you’re ready to go! If you’ve deposited $1,000 in your account, then it is safer to invest only 1% per trade, or $10.

  • Change the investment per trade to $10.
  • Choose the expiration time of the binary option.
  • Do your analysis and apply your strategy.
  • Click “call” if your analysis shows that the price will go up or “put” if you believe that the price will go down.
  • Wait until the binary option expires.
  • Track results.
  • Repeat.

Final Thoughts

Binary options are an innovative and easy way to invest in the financial markets. Rules are simple (that’s why many traders prefer this type of trading) and there is a limited risk per trade, based on the amount you invest.

You’ll still need to conform to the well-known trading rules if you want to be successful. Build a strong strategy, calculate the amounts, manage your bank well and be smart, and you’ll increase your chances of success. A demo account is always a helpful test before jumping in with real money.

Trading binary options. What to expect in 2020. Binary option trading experience

Learning to make a profit from trading binary options

Most of those who have ever been interested in binary options had an interest or a direct relationship to the Forex market or the stock market. Why the binary options market has become so popular. Its main advantage is the so-called simplicity. But this simplicity can not guarantee profit to everyone who wants to. For a person interested in binary options trading, a person sometimes takes the form of a game of chance. In this case, for most people, losing money will be quite a frequent occurrence.

  • To avoid unpleasant consequences in trading binary options you need to clearly understand the principle of their work. Let us single out several main principles:
  • Selection of the underlying asset. Actually, there are a lot of assets. That there may include: shares of different types, the index of equity instruments, currency pairs (USD / EUR – the most common), or raw materials, which in the course of trading acquires the form of goods. Brokers of binary options provide for trading a little more than 100 of the most popular underlying assets.
  • Forecasting the price level of the selected underlying asset. At this stage, when the underlying asset is already selected, you need to determine where its price will go. To do this, you can use absolutely any toolkit for analysis. It can depend on your chosen trading strategy for binary options.
  • We choose a time interval. For beginners, trading on turbo options (which last 1-3 minutes) is not recommended. As a rule, brokers of binary options provide access to various types of options. Bidding for some species can last up to several months.
  • The moment of the conclusion of the transaction: we make the forecast and we wait for the moment of the termination of our transaction. If at the end, your forecast will be correct, you will receive a profit from your investment in the amount specified by your broker. In case of an erroneous forecast, you will lose the invested money. There are brokers of binary options that insure such risk from a certain amount of the transaction. In this case, if the forecast is incorrect, the money will not be lost.

As you can see, trading in binary options is accompanied by a risk of losing your investment. This should be well remembered when making any trading transactions on your trading account.

Binary options are very lucrative. But a high level of risk is an integral part of this type of profit. Most traders are attracted by a transparent risk management system. Other traders attract the opportunity to get a quick result on their trade transaction. In 60 seconds they will be able to learn the result.

So, why binary options have become such a popular form of trading. High risks and the possibility of obtaining high profits are accompanied by many unique opportunities. You will not find them on the stock market or on the Forex market. We have 4 basic features that distinguish binary options trading among others:

Diversification of asset types

There is a desire to trade different types of assets. Want to use hedging of different assets at the right time. You can not just do it in classical trading on the stock market. For each type of asset you will need to open a separate account. The amount of capital investment will also be large. Since you will need to confirm your intention to enter the market of trade a certain asset. And this is not yet a complete list for conducting this kind of trade in the usual market. There are still many other factors that will put a significant restriction on your trading.

All trading assets on one trading account

A feature of trading binary options is the ability to combine different types of assets on a trading account. You can use the shares of the largest companies, raw materials, precious metals as a basis for trading in binary options, all on a single trading platform. At the same time you will not need to own these assets, and the level of capital for operations will be much lower. For the risk management it will be very convenient, so it will not be necessary to calculate everything separately. Manage your profit and risk will be much more convenient.

Clear trade model

The binary options trading model was developed taking into account the orientation towards simplicity and accessibility. This feature makes binary options a universal platform for making trades for both beginners and experienced traders. The binary option trading model is easy to use. In order to make a deal, in most cases, you will need to choose the direction “to increase” or “downgrade.” Select expiration time. Now we can wait for the result.

To develop such a platform, brokers of binary options had to work hard. It took a long time to create a really understandable platform and improve it from the moment the first brokers of binary options appeared. Now the trader will not have to worry about the margin or the leverage, the stop loss levels and the take profit. In most brokers, everything is fairly transparent and clear. All you need to open a transaction is a choice of the underlying asset, its analysis, the choice of the direction of the price movement and the expiry date of the option. Everything is ready, now you do not need to spend time managing an open transaction, experiencing additional difficulties with managing an open transaction.

Tired of waiting

A feature of binary options and their varieties is the possibility of obtaining fast results. This gives an additional opportunity to diversify risks and complement their long-term transactions. This kind of binary options allows instant entry and exit from the transaction. The minimum expiration time is 60 seconds. “Turbo” options are far from suitable for each trader. But in the hands of a professional, they can become a very effective tool for making a profit.

Say no to hidden risks

All traders who dealt with binary options know that the level of risk is high here. On the brokerage sites everywhere there is a warning about a possible loss of investment. The main factor in trading binary options is the absence of hidden risks. Each trader can personally personally assess all risks in advance. It is much easier to make a decision in this case, since it will be much easier to diversify the risks. The trader does not have to look back and overestimate the risks several times. The platform itself has already taken care of this.

What we have as the result

Trading binary options is a good way of making a profit. In it you can note:

  1. Fixed Forecasted Income
  2. Availability of different types of options available for trading
  3. Transparent risk management system
  4. Ability to conduct fast transactions
  5. The ability to manage assets without significant investment

Can you trade fake money to learn in binary options trading ?

Wiki User
February 02, 2020 6:51PM

Yes you can , and it is recommended that you will start trading

with fake money, you will learn slowly how to trade , after you

will gain enough confidence , you will than can move to real money.

You must clarify with broker regarding such trade options with

Broker must be able to provide you this facility. Trading with

fake money will gain you good experience before you start with

Best Binary Options Brokers 2020:
  • BINARIUM
    BINARIUM

    The Best Binary Options Broker 2020!
    Perfect For Beginners and Middle-Leveled Traders!
    Free Education.
    Free Demo Account.
    Get Your Sign-Up Bonus Now!

  • BINOMO
    BINOMO

    Recommended Only For Experienced Traders!

Like this post? Please share to your friends:
Binary Options Brokers, Signals and Strategies
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: