Everything You Need To Know About Binary Trading Options
Despite the growing nature of binary option as a good investment opportunity, it still remains relatively unknown. This trend will not continue for long as there is the tendency for the popularity of bitcoin trading option to rise. Why such optimism? The business is devoid of any complexity, although it has its own risks. It is also rewarding, a fact that investors in the business know from inception. That raises the question: what is a binary trading option?
Simply put, binary trading is a business investment where different “binary” options are traded. In the event of a successful trading, the trader will get a fixed return. The trader stands the risk of losing all his investment if the business fails.
You can trade any asset through binary trading. This includes some commodities such as stocks, oil, foreign exchange, or indices. These are some of the options you can trade via binary trading.
Why is it called binary option?
This is because the business transaction adopts the simple “yes/no” or “up/down” principle where you have just two options to choose from. In this case, your options are whether an exchange rate will rise or drop or if a stock will appreciate or depreciate in value. This is the real definition of the “binary” involved in the business. That said, the only question is now when the binary option will become effective. The time frame is usually undefined. It could be within a short period of time (which can be 30 seconds) or some months or a year.
This makes binary options a very simple trading idea, although the risks can be very high. The same can be said of the reward too. A successful transaction can fetch a trader a return on investment that can range from 70% to 95%. This return will be paid within a couple of minutes after the transaction has been settled. That is the beauty of the reward. The consequence of failed transaction can be high too; a failed transaction will lead to loss of full investment of the trader. It is either you get all in the transaction or you get nothing. No wonder they are called fixed return options or digital options for this very reason.
The strength of binary option lies in its simplicity. This gives it the benefit of being used as an investment option that can be used to drive your finances.
Binary options have different trading strategies you can use. Each of the trading options is designed to address a specific need in the binary trading.
Binary options trading strategies
To be a successful binary options trader, you must know the best trading strategies that will help you to minimize your risks and increase your rewards. The success of binary options depends on the effectiveness of your strategies and how you use them to make profits regularly.
You need an effective method that will guarantee you more win than loss if you want to trade binary options successfully. The method must also give you a payout that exceeds your losses. But the number of wins may not adequately take care of losses; you need a strategy that will promise you more than that. You need a strategy that will drastically reduce your chances of losing in the business.
The principle behind sports betting is used here also. The principle is expectancy. In sports betting, the players expect the outcome of a bet to match their expectation to assure them a win. A binary options trader expects the result of the trade to correspond with his or her predictions. This is where the services of a reliable trading strategy are needed to help the trader identify circumstances and trends that are often repeated which can lead to making profitable expectancy. For instance, you can make your prediction like this:
If the value of an asset has fallen for three successive times, you can predict the outcome of the next trading by opening a call option. That’s how simple it can be although you can sometimes have more complex strategies. Nevertheless, the simplest options seem to bring the best result.
Types of trading strategies
There is a wide range of trading techniques you can use to know a binary option strategy. These are just two of them:1. Charting and technical analysis:
This strategy usually comes first when binary options strategies are discussed. This involves analyzing some technical indicators such as graphs and others. The pricing chart contains many patterns and trends that can be used as effective binary trading strategies. You can use the technical analysis to gain a useful insight that will help you make the right trading decision that will increase your chances of making a successful transaction.2. Fundamental
In any trading or investment, one of the prerequisites is to analyze the fundamentals. Binary trading is a bit different from other investments or trading because it has a very short time scales that are not conducive to using the fundamentals as a means of directing price in the direction expected for success. Does this render the study of the fundamentals as useless and a waste of time? No. from this study, you can still find some useful binary trades which can be a potential factor in making successful trades. To increase the efficiency of this strategy, quite a good number of brokers now set an expiry period of one or two months for this trading strategy.
What are the benefits of having a good trading strategy? Let’s discuss these.
The benefits of a good trading strategy
Some of the most difficult decisions that most traders face are the choice of a trading platform and the right time to trade. With a good trading strategy, these problems can easily be overcome. Since trading relies much on timing, a good binary trading strategy will lessen the amount of guessing a trader has to do, especially new traders who may have decision-making at the entry and exit points challenging.
Good strategies also offer the following benefits:
- They encourage discipline.
- Money management becomes easier.
- It enhances the chances of a trader to make accurate predictions.
- It makes making profit a lot easier than if done without a reliable strategy.
- Newbie traders will benefit from good strategies if they can use them to build their own trading strategies. The constant analysis they do will afford them the opportunity to master the art of trading give them the necessary experience to identify unrealistic riches offered by someone with a crazy trading strategy. It will also guide them against using expensive software to trade. Without a good knowledge of trading strategies, they will fall prey to these problems.
How to trade binary options
Trading binary options is not a rock science. Remember, its simplicity is one of the major strengths of this business opportunity. You can trade binary options online through brokers. ; You can use mobile devices or dedicated websites to trade in binary options.
There are different trading platforms but with common features. It is typical of a broker to offer you demo accounts to give you an idea of how trading on your platform will feel like.
Regardless of the device or broker you use, follow these simple and short steps to start trading in binary options:
- Select an asset you want to trade such as Facebook Share price, gold price, Pounds/Dollar exchange rate and other assets of your choice.
- Identify the expiry time of the option, i.e. when the option will end. You can choose from 30 seconds to a year since the time varies.
- After doing all these, determine the size of the investment or trade. You need to be cautious here. Since you can lose all your investment due to a single prediction error, take your time and appraise your trading power before you stake a claim.
- Put your money where your money is. Predict either the fall or rise of the traded asset.
- Confirm the trade. Some brokers will confirm the trade for you by showing you a confirmation screen for the confirmation of the details.
These are the steps that all brokers use to help individuals trade in binary options. As you progress and garner more experience, you can introduce some complexity to your trading process. However, you can still leverage the simplicity of this business idea to manage its risk because binary options trade prides itself as being simple.
What are put option and call option?
These are the terms used in the binary options trading world to replace buying an option or selling one. A call is usually opened when a trader has the belief that an asset will experience a rise in value while putting a trade signifies the belief that there will be a fall in the value of an asset.
Some traders use different terms for these options. Some use Up and Down for the ease of use and clarification. No broker will leave you in darkness regards his or her trading terminologies.
What are option signals?
Some brokers send alerts to traders intimating the traders to a particular trade which the broker believes cannot fail but be profitable. Brokers have a wide range of communication methods for sending such option signals. They may use SMS, email or via a live website.
Sometimes, such signals may lead to trading disaster. This does not imply that all brokers are bad. There are a few bad eggs in the ranks of the brokers. However, it is advisable to learn the ropes of binary options than relying on signals for trading as compensation for lack of the required knowledge to make safe trading.
One might ask: do options signals work? To be candid, they sometimes work but they don’t usually work in isolation. Some experienced brokers give some useful tips when delivering binary options signals to traders. It is now left to the trader to determine whether a signal is good or not. This can only be done successfully if the trader has some basic binary options training. So, it is important to learn binary options to detect the real value of a signal.
Are binary options gambling?
There is no clear-cut answer to this question that worries potential traders. Binary options can be used in the scam way a conventional investment as a gamble. Nevertheless, experienced and wise investors will depend on their experience and strategies to avoid gambling with their money.
Come to think of it, nearly all investments have some element of gambling attached to them. A stockbroker who buys shares for a quoted company with the expectation that the share will rise is taking a risk. The investor is quite aware of financial disasters that could turn his investment into a loss. Does that discourage him? No. while the investor is aware of the risks, he still hangs his hope that the share will rise in value. That is gambling too.
Since it can be argued that traditional trading has some elements of gambling, it cannot be ruled out in binary options trading. You can also base your trading on expected value too. This will help you identify the boundary between investing and gambling.
Therefore, the question of whether trading in binary options is gambling or not depends on the trading method of each trader.
How not to gamble with binary options
Gambling with binary options is not wrong if you are aware of the fact that you are gambling, and with the money you can afford to lose. Even if you are not gambling with it, legal trading should be done with the money that you can move on if you lose, the money you can afford to lose. Because of the quick and exciting nature of binary options, it has some fun ways to make speculations about the market. These speculations add to the beauty of trading in the options. If you realize that the user interfaces of some platforms are designed like that of a casino. With high competitions, flashing lights, graphs, and pulsing price, you are not very far from the truth if you consider this as gambling.
If you don’t want to get entangled in the use of binary options for gambling, you can apply these useful suggestions:
- Use genuine assets: During the weekends, some brokers have the unhealthy habit of using randomly-generated numbers and present them as assets. This may be jeopardizing your chances of winning a transaction, which is a pure gamble. Even the indices that are known as “volatility indices” are not all that great too as they are not a product of official index but are generated by a computer too. If you are trading with these computer-generated numbers, there is no technical analysis that can be of help there. No research can bail you out of the crisis you are heading towards. Random numbers will not help you to increase the possibility of achieving the expected value because it is an old gambling principle. If you rely on this suggestion by a broker, you are blindly trading, and that may cost you your investment.
- Use an effective strategy: It has already been established that the success of a trading depends on the use of effective strategies. There are tons of strategies that people have found very effective. That is good for the business. If you have not known an effective strategy that works for you and has no reliable management plan to help you manage your risks, you are taking a big risk as you may not find any positive while trading. At the minimum, your strategy should work out fine for a trade but should be versatile enough to handle different trades.
- Understand positive expectations: It is important that you determine the long-term success rate of a trade, whether it will be profitable in the long run or not. There are two ways to a trade, you either win or lose. What will be the outcome of the trade in the long run? Will it be profitable? The outcome of a particular trade in the long term is determined by the percentage of successful trades and the payout. For instance, if winning 60% r your trades is what you need to make money using your payout for judgment, you should go for a strategy that will ensure wins 70% of the time. That will be a good one in the long term.
This underlines the fact that the status of binary options as a gambling tool or not is determined by the trader. A particular trader may decide to gamble his or trade without taking proper precautions while another trader may decide not to trade blindly. The outcome for each player will be different because they use their trading for different purposes, as a gambling tool for the former and an investment tool for the latter.
How to find the best broker
There are a good number of ways to use binary options trading. You can also trade a wide variety of assets across a wide market. Since your options are wide, it makes sense to find a broker that will give you the best platform to trade on. You need a broker that will fine tune your skills and turn you into a successful trader. What am I saying here? Now, think of this.
Some brokers in the binary trading world focus on foreign exchange (forex) binaries. Others specialize in other commodities and can offer just a few forex markets. Added to that is the possibility of varied payouts or returns between classes of the same asset. This variation may be as high as 25%. This highlight the importance of choosing a reliable broker will be crucial while opening a binary account and how beneficial it will turn out to be to the success of your investment.
Some investors may turn a blind eye to some accounts of binary trading if there are limits on the investment. Some brokers place a limit of £1 on investors while some brokers allow investors to invest as much as £200,000 if they have the financial power and the motivation to invest such a huge amount of money in a single trade. One other factor that an investor needs to consider when looking for the right platform is his or her trading needs. You must identify your trading needs in order to make the right decision when choosing a platform.
These are challenges that inexperienced traders face from time to time. But, if you have an experienced and trustworthy broker he will take care of the challenges and save you the difficult task of doing it on your own. To help you out, some brokers will offer you a demo trading account. You can use this offer to test the waters and decide whether there are investment scales and the right markets for them. It is when they derive the right satisfaction from a particular trading account that they invest in it.
When you are trying to find the best broker, consider comparing brokers by using these points:
- Minimum deposit.
- Asset lists.
- Exchange or over the counter traded
- Trading platform.
- Bonus details.
- Expiry times.
- Range of available options.
- Maximum trade/minimum trade.
- Minimum deposit.
Individual traders have what is of importance to them. So, the best broker for you may not be viewed as such by another trader. Nevertheless, any trader can still use these points to appraise a broker and see how he rates before committing himself or herself to the broker.
Are binary options a scam?
There is a growing concern about traders and onlookers on whether these options are a scam or not. The truth is that binary options are far from being a scam. They are genuine investment opportunities that should be explored by all and sundry. However, there are some unscrupulous elements in the business. These are the brokers that paint binary options in a bad light because they operate untrustworthy signals for unwary traders.
As such, it will be judgmental to write off this legal business opportunity as a scam based on the activities of a few bad eggs in the profession. The effects of the bad eggs cannot be ignored. That is way regulatory laws and principles are put in place to monitor the activities of brokers with the objective of ridding the business of negative impression. The business needs to be cleaned up.
You can avoid becoming a prey of these scammers if you follow these guidelines:
- Avoid marketing that promises quick money: If you see any marketing that promises you of getting rich quick, it is a red flag warning you to keep your money in your pocket. We have said it over and over again that binary options trading has high rewards and risk. This differentiates it from the principle of getting rich quick and should not be viewed as such. If you meet any operator or broker that assures you of error-free trading that will guarantee a huge profit, be at alert. He is definitely a scam.
- Avoid cold calls: These are unsolicited calls made via the telephone or email to sell a product to you. This is outside the ethic of binary options trading. A trustworthy broker will never be caught dead in this practice. If you receive cold calls, you are dealing with an untrustworthy broker and you need to tread with extreme caution if a broker makes unsolicited contact with you. Cold calls can also be done in person.
- Account managers: if any account manager offers to trade on your behalf, it is a bad signal. A common trend among account managers who offer to trade on behalf of a client is encouraging such client to over trade. And trading beyond your means may spell doom for your investment. Traders are encouraged to rebuff the advances of any account who offers himself for trading for any client.
- Bonus terms and conditions: Terms and conditions are always attached when taking a bonus. Read the terms and conditions very well to have a full understanding of what it contains. Some terms will require you to type an initial deposit until you meet the turnover requirements. Nobody can lay claim to the initial deposit because it still remains yours. If you are dealing with an honest broker, he will not try to take the money before you make any trading. If any broker makes this attempt, he is fraudulent and should be avoided. Some brokers even put the interests of the trader into consideration when dealing with traders. Some of them will offer to cancel the bonus if they realize that the trader does not like it for any reason. So, you must be ready to study your broker and make your decision accordingly.
- You must know your broker: This is a very important step to take if you don’t want to be scammed while trading binary options. Some operators are fond of forcing brokers on their traders, regardless of the preferences of the trader. Do not be coerced into dealing with a strange broker. You must know your broker very well before you proceed with trading with the broker.
- Price manipulation: The terms of some brokers include the promise of price manipulation which is supposed to be in the interest of the trader. These brokers set their own prices that are different from what is obtainable in the actual market. If you have to deal with a broker who also doubles as a counter party to another trade, making a profit through such a trade is very difficult. Under such condition, you are trading against the broker. The rule is one of you must lose for the other to gain. I don’t see how a broker will lose since he will determine the closing prices.
This is the reason why making an in-depth research before you commit yourself to a trader speaks volume of wisdom. If a broker promises you anything outside the trading world, reject such an offer. If you don’t you may be playing yourself into the hands of scammers. Your full investment will be at risk.
In addition to the above, there are some vital pieces of information to look for when reviewing the official website of a broker. While some official websites contain genuine reviews, some are not. If you want to identify trustworthy websites and reviews, check if the website promotes other services that are scams. You can ask these few questions to get a real assessment of the site:
- Does the website have too much robot ads?
- Do they make their risk disclosure clear enough?
- Does it promise high returns?
- Is there a way of contacting the site owners or the site?
Asking these questions will give you an insight into the activities and trustworthiness of a broker. A site that is not listed by the Financial Conduct Authority should not worth your time and investment. They lack credibility and adequate protection for traders. If a site contains brands that are regulated by the FCA, it is a green light that the site is credible. Some of the information you will find on such a site include the risky nature of binary options, reputable individuals who operate such binary options should be listed on the site. If such doesn’t exist on the site, its credibility has a big question mark on it.
There is a note of warning, though. Some brokers have registered with the FCA and flaunt this on their website. Note that being registered is quite different from being regulated. A website that offers binary options alone will not be regulated. To qualify for regulation, a website must offer other trading ideas apart from binary trading.
If you take to these signs, you should find it relatively easy to detect a scamming broker and a real one. If you have been presented with a broker that has one of the negative attributes discussed above, kindly take your trading to somewhere else. Failure to heed this advice will lead to the loss of all your investment.
Who regulates binary options?
To assure potential buyers of the credibility of binary options trading, it is regulated by a good number of regulatory bodies. These are some of the bodies that regulate this business opportunity in some countries. These regulatory bodies are saddled with the responsibility of ensuring that the rules and regulations governing binary trading are strictly obeyed. They also issue warnings to defaulting brokers who violates their regulations. In the case of a repeated offender, revoking of the erring broker may be the next punishment for the defaulter. :
- CySec: This is the regulatory body with the responsibility of regulating the activities of most brokers in Israel and Cyprus.
- Financial Conduct Authority: This is the official regulatory body in the United Kingdom. This gives traders access to good protection from predatory brokers. Some brokers register with the FCA to improve their credibility. But as earlier mentioned, there is a clear distinction between registration and regulation.
- CFTC: CTFC approved just two regulatory bodies in the United States. These are CBOE and Nadex. Other regulatory bodies in the US are Isle of man GSC and Malta Gaming Authority. Binary options trading are known as Fixed Return Options in the United States. You can purchase these options in the US through Nadex, Cboe, or the American Stock Exchange. It is illegal in the US to trade in binary options in the US from any source outside these three sources.
How do brokers benefit from this regulation?
Before the introduction of regulation for binary options in 2012, it was an unregulated business opportunity. This led to cycles of abuses that led to the negative reputation it had then. The situation is not the same today. There are regulated brokers to guide traders in making successful trading on their chosen platform.
Due to the conformity to the regulations, especially in the area of financial services, traders are assured of regulated trading that will protect them from abuse and scam. The overall result is an excellent return on investment for investors who dare to make intelligent trading decisions and choices.
Binary options demo accounts
The best way for someone who is new to the concept of binary trading is to leverage demo accounts. The demo account offers these new traders the opportunity to learn the trading process, learn how some trading strategies work, or find how a trade works. All these are done without committing their investment, thus protecting them from losing their investment. This makes demo accounts the best way for a newbie to learn the ropes without fear of losing out completely from trading.
Some brokers offer potential traders demo accounts to find a soft landing place and guidance to ease the training and trading processes.Benefits of demo accounts
- It gives you the right platform to learn how to trade and how to use the right platform.
- Access to demo accounts from different brokers will afford you the opportunity to compare different payouts for a variety of assets.
- You can use them to learn trading strategies without exposing yourself t any risk.
- The educational material and charting tools will be of great benefit in helping you to discover additional features that will enhance your chances.
- You can shop around by testing many brokers using their demo accounts. YOU can use the knowledge from these accounts to find the broker that meets your needs.
- Money management is an important skill you must possess if you must succeed in the business. You can find the right platform, trading size, or a particular asset that will fine tune your money management skills.
Trustworthy brokers will not demand a deposit from you to open and use a demo account. They trade their business on their experience and confidence garnered over the years. This allows potential traders to use their demo accounts without making any payment.
If you are interested in binary options trading, chances are you will find such traders who will give you the tools to learn the art of binary trading without costing you a dime.
The basic requirement for using a demo account is just to sign up on the website of the broker. As a form of confirmation, you will be required to supply your email address before you can proceed with using the demo account for training. F you consider the benefits of the demo accounts, you will consider it something you have to give a try.
At the moment, Ayrex offers access to its demo account without signing up. As a user, you have free access to the platform and use it for your training. The negative side of this is that you will lose the trading history or result of the demo the very moment you leave the site.
If you can explore the benefits of these demo accounts, you will learn trading skills without stress. The experience you learn during the training will be valuable in subsequent trades you make later.
These are just some of the basic facts you need to know about binary options trading. If you are new to it, you can use the information here as a guideline to put you through without making the same mistake that others make. Know your broker, take advantage of demo accounts, know the risks involved, and put everything you have learned in practice. This will impact your success in the business beyond measure.
If you are already in the business but are facing some challenges, use this write up to assess your condition and identify your problem and the solution to it. If you can do this, your risks will be reduced and your rewards will be high. Take time to learn how to trade binary options and you will have a simple investment tool that will give you awesome return on investment.