Binary Options is arguably the most profitable way to make money. Why? It’s very simple, you only need to correctly identify if the price of a selected financial instrument (currency pair, oil, gold, shares) will go up or down over a certain time.
What are Binary Options?
Binary Options is a type of options, the basic principle of which is the determining direction of price movement of an asset. You should predict the future movement based on the current information, news, market sentiment and technical analysis indicators. It is not complicated at all. All you have to do is to find some reliable sources that can advise you about the future trends.
With binary options you will get a fixed income only if the price movement option matches your prediction. However, you lose the entire trade if the price movement does not match your prediction. With only two outcomes – a winning trade and a losing trade it’s why this type of trading has the “binary” term included (binary is about a form of two elements). As mentioned above, as an option you can choose from all kinds of currency pairs, shares, stock market indices, commodities and even crypto-currencies.
What can you trade with Binary Options?
There are a great number of financial instruments that you can choose from and here are the main categories:
Currency Pairs – this financial instrument represent a pair of two currencies having a particular value between them. As examples you can note EUR/USD, AUD/USD, EUR/GBP, and so on.
Commodities – is an asset class that describes the raw materials and resources provided in the usual manner and available for exchange. Examples include: metals such as aluminum, silver or gold; foods such as wheat, rice, sugar, salt, coffee beans and soya beans; energy raw materials such as oil, coal, natural gas and electricity.
Indices – A stock index is very important the financial world – it consists of the top shares from a particular exchange. For example, FTSE 100 is about the largest 100 companies traded on the London Stock Exchange. Other examples include: Dow Jones, Nasdaq, S&P, DAX, CAC, Nikkei, etc.
Stocks – the stock is a share in the ownership of a company. If you acquire more shares, your ownership stake in the company turns to be greater. In fact shares, equity, or stock, means the same thing. You can consider the shares of Coca Cola, Apple, Facebook, Toyota, and so on. When trading with binaries though you will not actually hold ownership of that share, instead you will be speculating on the price movement of that share.
Is Binary Options Gambling?
As mentioned binary options are very simple and can generate a profit even for traders who are not so experienced. Many people call it “financial betting,” and for those who don’t have a clue about the markets and are only trying their luck, it is partly true. But this type of activity is not about gambling. Why? Indeed, there are many similarities, yet binary options are different because it is more about anticipation in the transaction rather than prediction. In betting, in most situations the investor hopes for luck and cannot predict the outcome, while with binary options you can analyze prices, violitility in the market, opinions of experienced traders and most often make the right choice based on the natural course of things . If you have knowledge about markets and about certain assets, indices and currency pairs, you have all the opportunities you need to become a winner and make big profits with your favorite financial instruments. You can also increase your chances of winning a few times over by selecting a concrete trading strategy. At the moment there are many sources and strategies available to you, through videos, ebooks and specialized sites that can help you gain the necessary experience and have a professional outlook and attitude to bring to your trading. Those who continue to look at options as simple binary bets, are making a big mistake and will waste their time and money, becoming continually more skeptical about the profit opportunities using this financial instrument.
With binary options you should listen to professional analysts and only by doing so can you generate an income. For example, if all the analysts are saying that because of the problems the European Union is facing the Euro will certainly fall in the coming week. In that case, you can go to the trading platform and buy Put option as it is the option on lowering.
Benefits of Trading Binary Options:
- Risk management – which is about knowing how much you can lose in case of failure. Trading binary options involves using a predefined profit and minimal risk. Some brokers offer you risk management tools too on their platforms like “Buy Me Out”.
- You are not buying an asset, but a contract, easily surpassing high price barriers.
- You can generate high income – the amount of profit does not depend on the price difference, but the change of direction of investment. Revenue of 71-85% can be achieved by changing only a single point. The probability of getting a big profit increases considerably!
- The work is easy and fun – you’ll need less information to work with shares or currency pairs and you should not learn complicated schemes or spend time analyzing the information. This kind of activity will be understood intuitively – even for a beginner! In this trade type, you should rely only on the direction in which asset prices can move.
- You have the possibility to hedge – Binary Options trading is usually in agreement with most Forex trading strategies and methods. Trading operations can be performed more often. Long and short positions are an easy way of hedging.
- Trading is very convenient and comfortable – a good trading platform will allow you to trade binary options on international markets at home with a simple click of a button.
- You can trade nonstop – Binary Options is available every day for 24 hours without stops at weekends and is available even on holidays!
- You can get a very quick profit – based on short term trading, you can make more transactions per day, thereby obtaining greater profits. To do this, you can gather all the necessary information from ordinary news.
- Continuous Trading – you can close the position at any time since the price flow is continuous.
- You can use any basic financial tools – you can choose only one of them, or you can choose several and feel like a professional trader. Binary Options trading offers all these possibilities.
- There are no commissions or spreads – as a rule, short-term trading comes with fees which often absorb an important part of the profits. Binary options are free of such taxes.
- Trading without risk! – Many brokers offer the opportunity to test your skills by trading binary options on a demo account, perfecting your abilities in this way. By doing it, you will be able to develop your own trading strategies without any risk of losing real money
How to trade Binary Options?
- First of all, you should decide on the asset, commodity or currency pair you like to place your trades on. Next, if you have selected oil for example, you should think about the price movement: will it go up or down? There are only two options. If you feel the Strike Price will go up, you will place a Call option, if you feel it will go down, you will place a Put option. It is as simple as that! Remember that the Strike price is determined the moment you purchase the option.
- Another important step it to choose a Binary Options broker to place your trades with. For this, you can go online and read some reviews of the best brokers and platforms available for you. Look for regulation, assets, account types, payouts, and so on.
- Once you are on the platform and have planned the trading process, choose an Expiry Time. This is the portion of time after which you will find out if you saw profits or losses. You will find that you can place trades which last for just one minute or can place much longer term trades which will expire in one month.
- Some brokers may offer the Early Exit possibility, which you can use. It means that you can close the trade earlier than the Exit Price so that you minimize the risks and have profits.
- If you can handle all the trading process very well, you can improve yourself. Learn some strategies, use some technical analysis tools and learn to manage your risks!
Market Analysis – Technical and Fundamental
As a binary options trader, your job is essentially to analyze the market, and predict future movements. However, without taking the time to analyze the market, trading is nothing more than guessing. And while you’re likely to be right 50% of the time if you guess; to turn a profit in binary options, you’ll need your predictions to be correct at least 55% of the time. Nonetheless, this isn’t difficult to do with a little bit of analysis. While there are several different data points successful traders will analyze, they all fall into one of two main categories; technical and fundamental. Here’s how it works…
Technical Market Analysis – Technical analysis is the process of analyzing trends in quantifiable data surrounding an asset. The idea of technical analysis revolves around the fact that the market moves in trends. Therefore, by analyzing past price trends, support and resistance levels, and other points of technical data, it’s possible to accurately predict where the asset is headed next. With that said, the technical analyst relies heavily on charts and graphs. Another thing to keep in mind about technical analysis is that it works best when making short term predictions. So, if you’re looking to make long term trades, you’ll want to learn more about fundamental analysis first. Click to learn more about Technical Analysis
Fundamental Market Analysis – Fundamental analysis is the process of analyzing the overall health and perceived future value of an asset. So, the fundamental analyst relies very little on charts and graphs. Instead, the fundamental market analyst will look for factors that indicate strength or weakness over the long run. These factors include the effectiveness of current management, future products in development, recent product releases, and more.Click to learn more about Fundamental Analysis
Another thing to keep in mind is that while both technical and fundamental analysis can be effective on their own; the most successful binary options traders tend to pay attention to them both. So, if you’re new to binary options, it’s well worth taking the time to get to know the intricate details of both fundamental and technical market analysis.
As you start to trade, and become successful in doing so, you’re going to notice a key fact about trading binary options; different assets will move in different ways. The bottom line is that if you’re trading Apple stock on one screen and Oil on the other, chances are, your trades are going to be completely different. That’s because the factors that make Apple stock climb, could cause declines in the value of oil. With that said the most successful binary options traders tend to choose a hand full of assets to trade. That’s because this gives the trader the opportunity to get to know the asset on a very detailed level. As a result, when trends start to happen, the trader is likely going to be familiar with that specific type of movement in that specific asset; leading to more accurate predictions with regard to where the asset is likely to go next.
Binary Options strategies
Binary Options strategies include special sets of actions and steps that will guide you in a precise way to make profits when trading. Without a good strategy you may get confused about so many assets, expiry time options, and most importantly, the price forecast. Having a predetermined set of actions that works the same for similar situations will help you to boost profits. Here are 3 strategy examples:
Trade the news – it is a fundamental method of earning. The main concept is that you should start trading only when news arrives. Under the news there can be mentions of important economic and political events, data, statistics, reports, and so on. Particular attention should be given to news related to fluctuations in interest rates as it usually leads to price spikes.
On the economic calendar, there are 3 types of news: with a weak, medium and strong influence. Weak news cannot have a strong impact on the market so it is better to neglect that and focus on the rest.
Trend trading – this is one of the most simple and popular strategies which is great for both beginner and professional traders. The main idea is to watch a consolidated trend and purchase options based on it. For example if it goes up, you buy Call options, if it is a downtrend, you go for a Put option.
Trading on patterns – in many situations, the price of an asset forms different types of patterns, like double tops and bottoms, triple tops and bottoms, head and shoulders, triangles, and more. This price behavior is repetitive and you can gain profits by following these on the chart and trying to predict based on them. Click to learn more about binary options trading strategies
Trading Forex with Binary Options
Because of the way they are structured, binary options is an ideal vehicle for investing in the volatile forex market. This is because the binary options trader does not have to worry about his trade being closed prematurely due to the trade getting stopped out. In addition, he does not have to deal with the stress of having to come up with additional capital in order to prevent his trade being closed due to a margin call. A margin call is when a trader’s trading account balance drops below the broker’s margin requirement level. With forex binary options, trades are conducted without margin and hence there is no worry of having to deal with a margin call.
And since the trader can only lose what he originally paid for the premium of his option contract, he can manage his trading risks better. Even then as mentioned earlier, most binary options brokers offer traders a rebate on trades that closed out of the money. And this rebate is as high as 15% in most cases. A select few binary options brokers also give traders the option of adjusting the risk/reward ratio of their trades. In these cases, the rebate can go up to as high as 25%!
Because of the availability of several types of options contracts, binary options traders can use these option contracts to their advantage and trade in particularly any kind of market conditions. For example if a market is ranging, the trader can use Range options to profit from a situation where prices are relatively stagnant.
The wide range of binary options contracts that are available to the binary options trader also give him a distinct advantage over the spot forex trader in the kind of trading scenario which traders can trade with relative safety and with minimum risks. For example in situations where the market is frisky and the prices are just testing the support and resistance levels without breaching them, the binary option trader can actually use one touch options to his benefit here. For the spot forex trader, he can only trade in one direction and when we have a market which is rather volatile and skittish, the end result is usually losses for the spot forex trader.
At the end of the day, while spot forex traders stand to earn higher profits, the risks which they are confronted with are also much higher. For the binary options trader, while the trading risks are lowered significantly, he still stands to earn a reasonable return on his limited investment. In other words, forex binary options is perfect for beginner traders who wants to get their feet wet and may be thinking of trading spot forex in the future. Click to learn more about Forex binary options
What are Binary Options Signals?
Binary options signals refer to particular notifications that trigger alerts to get you to start trading specific assets and choose a price movement at a specific time. Generally, these are provided by specialized services that claim to offer precise predictions. However, you should know that these signals don’t always coincide with reality! There is a particular probability, so make sure to use your intuition in case you are using Binary Options signals. It is a great tool for beginners, since they can learn by trading.
How to choose a Binary Options broker?
There will be a moment when you have to choose a broker or a platform that you will be able to trade on. You must know right from the start that there is no such thing as an ideal broker. Each trading platform provides certain set of tools with its specifics. That is why many successful traders often trade with a few brokers simultaneously, choosing different combinations of trading, and thus complementing the drawbacks of the first with the benefits of the second.
However, choosing a broker should be done very seriously. You should keep in mind that it will totally influence the success of your future as a binary options trader.
Please make sure to deal with regulated Binary Options brokers. Right now, more than 20 brokers are regulated by CySEC, which is a Cyprus regulator. Cyprus is a member of the EU, and the CySEC license is accepted by all EU countries. Also, many official brokers are FCA registered (UK) which also adds to their credibility.
As for other tools and possibilities, here is a brief list of what you need to pay attention to:
- Customer service;
- Technical support;
- Interface of the trading platform;
- Security of your data;
As you can see, Binary Options are a simple and clear method to generate real profits. The method has been tried and tested over many years and its about creating real opportunities for increasing your balance. If the Forex market, for example, is very complicated for you and you do not want to risk large sums in investment, Binary Options is a great alternative. If you are a beginner, it is better to start with a demo account. In this way you won’t be risking anything, yet gaining real experience.