Binary Options Trading: How to trade Binary options successfully?
Binary options trading is one of the easiest ways to trade. This market is very popular due to its simplicity to understand and the high-profit potential, which makes it a very attractive market for traders from all over the world. In this article, we will explain in detail what binary options are, as well as explain their advantages and disadvantages compared to trading other financial derivatives. We will also explain how to get started in binary options trading and teach you some basic strategies that you can easily apply in this market. Do not hesitate to have a look at our list of the best brokers, in this table you can easily compare the best brokers to trade binary options.
What are binary options?
Binary options are a type of financial derivative. A derivative is a contract that derives its value from the performance of an underlying asset. In binary options, the underlying asset is a financial product, such as stocks, currencies, ETF, commodities, or cryptocurrencies. Binary options are traded based on the expiry date and strike price. The expiry date is the date at which the binary option expires. The strike price is the price at which the binary option can expire. If a trader believes that the price of the underlying asset is going to move above the strike price, he or she will make a “call” trade. If a trader believes that the price of the underlying asset is going to move below the strike price, he or she will make a “put” trade. Binary options allow you to bet on the price movement of the underlying asset, without actually buying or selling the underlying asset.
They are called binary options because this type of option and endowed with 2 payment possibilities that answer a proposition by yes or by no: will an underlying asset be above a certain price at a certain time?: For a correct prediction you receive a fixed amount, if your prediction is not correct you receive nothing. In binary options, there are only 2 possibilities for each trade carried out, either you receive a fixed sum of money if your investment is correct, or you lose your entire trade.
Binary options have two possible outcomes:
1. The asset’s price is above the strike price at expiration
2. The asset’s price is at or below the strike price at expiration
If a trader believes that the price of the underlying asset is going to move above the strike price, he or she will make a “call” trade.
If a trader believes that the price of the underlying asset is going to move below the strike price, he or she will make a “put” trade.
Let’s take an example: A trader is anticipating the price of gold to rise. He buys a “call” option with a strike price of $1,200 and an expiration of March 31. Gold is at $1,170. The trader wins his investment of $100. He’ll get his $100 investment back plus the $100 payout for a total of $200. If the trader is wrong, and the price of gold is below the strike price at expiration, he will lose his $100 investment.
The simplicity that comes from binary options, and the high potential return on investment make it one of the easiest markets to understand and one of the most attractive for beginners and professional traders.
While this market may seem simple, traders need to make sure they understand how these new financial derivatives work. They must also know what are the advantages and disadvantages of binary options, and also what are the serious brokers with which you can trade binary options in the best conditions.
What is binary options trading?
Binary options trading is a form of trading that has a high risk / high reward. This high degree of return is what makes them so alluring to traders. Let’s examine what those returns are. Binary options are a type of options contract in which the payout (or return) is all or nothing. The trader either wins or loses his investment. This does not affect the broker (who takes a commission, or “spread” for facilitating the deal).
Binary options trading involves three elements:
1. An underlying asset
2. An option strike price
3. A time frame (expiration date)
This setup differs slightly from the traditional call/put option. Instead of the call/put option, the binary option is a type of all-or-nothing option. A binary option has a strike price. The strike price is the level at which the trade is “in the money”. If a trader predicts that the price of a given asset will rise, he will buy a “call” option. If a trader predicts that the price of a given asset will fall, he will buy a “put” option.
The expiration time of a binary option is chosen by the trader and can be from a period of 60 seconds to several hours.
Pros and Cons of Binary options trading:
- Better returns than average.
- Risks are capped.
- Payouts are known before making an investment.
- Derivative-based can be volatile
- Gains are capped.
- The choice of underlying assets can be limited.
Where to Trade Binary Options
Binary options trading is becoming increasingly popular. It is no wonder that this type of investment is becoming more and more popular among traders. The simplicity of trading binaries, its accessibility, and the opportunity to earn significant amounts of money very quickly are the reasons why traders are choosing to trade binary options. Binary options trading, like any form of trading, is speculative and requires special knowledge or skill. However, with practice on a demo account, a novice trader can learn the ins and outs of this business and trade successfully using binary options. Experienced traders also choose this type of trading. But before you start trading binary options, you need to know where to place your trades..
Broker for binary option trading
You cannot trade binary options without a broker and not all brokers offer binary options, so here is a list of the best brokers that offer the possibility of trading binary options to their clients. These brokers generally offer the possibility of opening a demo account to practice trading without deposit or associated risk.
Today, there are hundreds of binary options brokers, and choosing one can be a difficult task. For a beginner, it is important to find a broker who provides the necessary assistance. Some brokers can also tell about the trading rules and strategies, and also provide educational materials for those who want to learn more about binary options trading. When choosing a broker, the trader should consider such aspects as the size of the minimum deposit, minimum trade size, availability of bonuses, availability of a free demo account, and regulation of the broker.
To help you choose your broker, you can go to our article about the best brokers for binary options trading.
With binary options, you can trade different markets with different levels of risk. You can use your knowledge of an asset’s price to potentially predict future price changes in that asset. Before trading binary options, you need to select a binary options trading platform. Most binary options platforms offer a free demo account, which can be used to practice trading.
How to trade binary options?
If you want to learn binary options trading, here is a short basic guide that explains how to trade binary options. You can apply this tutorial on a binary options demo account allowing you to practice binary options trading without the risk of losing money.
Binary Options let traders profit from price fluctuations in multiple global markets but it’s important to understand the risks and rewards of these financial derivatives.
Here is a tutorial that explains step by step how to trade binary options.
1. Open an account with a binary options broker.
The first step to trading binary options is to open an account with a binary options broker, Binary Brokers are indispensable intermediaries that give access to this market with a trading platform.
2. Deposit money into your account.
The second step is to deposit some money which will be our starting capital to trade binary options. You can skip this step if you trade on a demo account, the demo account allows you to trade binary options without deposit and without risk of loss.
3. Select a trading asset, for example, EUR/USD, Gold, or Oil.
The third step is to select an underlying asset to trade with binary options. Binary options can be traded on a wide range of underlying assets such as stocks, Forex currency pairs, ETFs, commodities as well as more exotic assets such as Bitcoin and cryptocurrencies.
4. Select an expiry time.
The fourth step is to choose the Expiry Date of the option. This expiration can be over a period of 60 seconds to several hours. Some traders are more comfortable trading short-term, allowing them to take hundreds of trades per day while others prefer options with longer expiry times.
5. Make a prediction that the price of the asset will rise or fall.
The fifth step is to click on the “Call” button if you think the asset price will be higher than the asset price on the expiration date. Or click the “Put” button if you think the asset you are speculating with will be priced lower on the option’s expiration date.
6. Track the asset price during the expiry time.
You can then watch the evolution of the price until the expiration date, this can allow you to take decisions to limitate the loss if the market evolves against you. Some traders open a reverse position to try to limit their loss when the market is not in their favor.
7. Await the expiry time to end.
Wait for the option to expire
When the option expires, you will receive a notification on your screen indicating the results of your trade and the reward/loss obtained. This information is generally indicated and available on your trading platform.
There are many different types of binary options. The most popular include:
High/low options: These options allow you to predict whether an asset’s price will rise or fall. These options can be traded based on the expiry date and strike price.
Ladder options: These options can be traded based on expiry date and ladder. Ladder options allow you to predict if an asset’s price will rise or fall within a range of prices.
Touch/no-touch options: These options allow you to predict whether an asset’s price will touch or not touch a strike price.
Range options: These options allow you to predict whether an asset’s price will reach outside of a predetermined range.
One-touch options: These options allow you to predict whether an asset’s price will reach a predetermined price at least once before expiry.
Binary options trading can be a lucrative way to make money in the financial market, however, trading these derivatives also carries the risk of losing capital. It is always best to practice binary options trading on a demo account and only invest a small amount of money that you can afford to lose.