Investment is an excellent option for people who have money lying around. By investing in profitable platforms, your money can grow at a significant rate. There are many investment platforms in the market. There are low-risk low return and high-risk, high profit as well. If you are willing to bear high risk for making a higher profit at a small-scale, binary options trading can be an excellent pick for you. Let’s get to know more about binary options.
What is Binary Options?
The principles of “binary” come down to the proposition of yes or no. A trader either gets a reward or loss all depending on the side picked before expiration. If the money is on the right side of the strike price by the time of expiration, a trader gets rewarded. If otherwise, the trader loses his investment, bearing loss. It’s basically all or nothing. These are some preliminary ideas about binary options trading. In this article, you will get to know everything you need to know about binary options trading.
How Does Binary Options Work?
Trading binary options is straightforward – deciding whether the value of an investment will be above or below a specified amount in a specified time limit. An example will help you to understand this better.
Let’s say, “X” is a share. The trade is about whether the price of “X” will exceed 50$ or not within 1st April 2020. If you are a trader and you might think that the price will exceed 50$, you might be willing to invest 100$. If the price of “X” does go above 50$ before the expiry time, which is 1st April 2020, you will be rewarded according to the payout terms of the trading platform. As an example, if the payout is 65%, you will be rewarded with 65$ profit as you invested 100$. However, if the trade goes against your favor and the price does not go above 50$, you will lose your investment, which is 100$.
Binary options Vs CFD Trading
CFD trading has the most resemblance to binary trading options. However, they are not totally the same. There are some crucial differences which make binary trading options unique. The main difference is regarding the risk. CFD trading comes with unlimited risk, and on the other hand, binary options come with limited risk.
The price of an asset can grow or even reduce significantly in a short time. In CFD trading, you will have to bear the total risk. But in binary options trading, you are limited to the amount you invested. If you put 100$ in a trade and if trade goes against you, you will not lose more than 100$. And even if the price skyrockets, you are limited to your investment and gain a fixed profit according to the payout terms. So, in the case of binary options trading, your income and loss are both limited.
Binary options vs forex trading
The risk factor of CFD trading is somewhat the same when it comes to forex trading. Forex trading allows traders to set their target whereas, in binary options trading, traders need to place a trade by guessing whether the value of the asset will exceed the target value or not.
Binary Option Types
All of the binary options trades are based on a binary result (yes or no). There are various types of binary options trades that offers much flexibility.
- Up/Down: It is also known as High/Low. This is the most common and known form of binary trading. All you need is to make a guess whether it will be high or low.
- In/Out, Range or Boundary: In this type of binary options trade, there is a “high” and a “low” value, which are the boundaries. A trader needs to predict whether the price reaches the boundary, exceeds it, or stays beneath.
- Touch/No Touch: In this type of trade, there are set points. The trade deals on whether the trade will touch the point or not. And suppose the price of the share touches the point before expiration. In that case, the trade will immediately stop, and the trader will be rewarded. But in the case of other types of binary options trade, the trade lasts till the expiration.
- Ladder: This is pretty much similar to the Up/Down trade. The only distinct difference is that there are many price levels like a ladder. Traders will be rewarded by guessing upon that. In this type of trade, only one side is likely to be available, which is either up or down.
Binary Options Trading Guide
Binary options trading is relatively easy if you know how to do it properly. Now, let’s dive into the steps of how to trade binary options.
Step 1: Pick a Broker
This is the first and foremost decision you will be making towards binary options trade. There are many brokers in the market right now, and picking the right one to trade with can be a challenging task.
- Compare: If you want to filter out some of the best brokers out there, you can compare their offerings and features by compiling or searching for a binary options brokers list.
- Cost: If you are likely to trade a huge amount regularly, the transaction fees and the commission can become a pain. Pick the broker that offers the lowest fees.
- Deposit Flexibility: Many brokers have a binary options minimum deposit rule. Now, if you want to trade with a small amount, the minimal deposit might be an issue. So, pick a broker with the lowest deposit requirement.
- Asset Type: Many binary options brokers deal with different types of assets, like currencies or commodities like oil, gold, etc. If you want to trade on a specific type of asset, pick the trader that offers your desired asset trade.
- Reliability: This is very important because you don’t want to get scammed. And there are too many scam websites out there. If you wish to conduct legitimate binary options trading, make sure that the broker is legit by checking reviews.
- Customer Support: Any problem can occur anytime related to monetary issues. So, make sure the broker you pick has 24/7 support.
- Compatibility: Compatibility is a big factor because you might want to access your trading platform through any device like android, iOS and windows. Payment compatibility is also essential. Suppose you want a PayPal binary options broker. In that case, you need to make sure whether the broker supports PayPal transactions or not.
- Demo Accounts: If you want to learn binary options trading without risking your capital, demo accounts can come in handy. By using a demo account, you will gain experience in trading with real money without any risk.
Step 2: Pick the Asset
As mentioned above, binary options trading is based on many assets all the way from currencies to commodities like gold, oil, and gas. You need to pick an asset if you want to start trading. In this case, pick the asset that you have ample expertise on. As an example, if you understand the pricing of the oil, opt for oil.
Step 3: Select an Expiry Time
Selecting an expiry time is crucial because binary options trade is based on this. The trade will stop immediately after the trade time expires. If you are a short-term trader, you can select short expiry times like a minute or two. But make sure to balance the expiry time with the price chart accordingly for accuracy.
Step 4: Choose the Investment Size
Size matters in this regard because the risk is dependent on it. This is because either you will make a profit or lose it entirely. The bigger the investment, the bigger the possibility. Take your future investments into consideration and pick the investment size. It is not recommended to treat binary options like a gamble and make absurd investments.
Step 5: Pick the Trade Type
From the different types of binary options trade, you need to pick your preferred trading method in this stage. Pick the one you feel the most comfortable to trade with. But before picking one, it’s better to consider the risk factors of every type of trade to pick the right one.
Step 6: Confirm Trade
This is the last step towards the trade. There will be a confirmation window after dealing with all the proceedings. After you confirm the trade, there’s no going back. After the confirmation, it all comes down to the trade expiration – you will either be left with profit or loss.
If you want to make a trade efficiently and earn profits, following a trading strategy is essential for binary options. Let’s get to know the best strategy for trading binary options.
Predict with Precision
Though binary options trading is about making predictions, it doesn’t necessarily mean you need to make blind guesses. By following the right strategy, you will be able to make accurate predictions most of the time.
- Charts, Patterns, and Indicators: The trading history chart might look like gibberish. But it bears a significant value. There are line charts, candle charts, and many other figures. These charts have patterns and make an indication of the future price of the asset. If you conduct research on these charts, you will be able to make a very accurate guess about the asset’s future price. Though you won’t be able to master reading charts overnight, it will be totally worth it.
- News: Analyzing news is an excellent source of making accurate predictions. Company announcements and financial reports of companies float around in different news sources. There can be a lot of news that can impact the market, dictating which is the best time to make a trade. You can study these properly and make your future trade moves according to that. In that case, you can gain a significant amount of profit by finding the best time to trade binary options.
Determining the Trade Amount
This is the part many beginner traders are uncertain about. By following the strategies mentioned below, traders will be able to rapidly determine how much to trade.
- Percentile Strategy: This is a prevalent and popular strategy among traders. By following this strategy, you can specify the amount that you ought to risk. For example, you have 20,000$ in your account and the risk percentage is 1% – you can go for 200$. You can set a higher percentage if you can afford a bigger risk. By following this strategy, you will not lose more than you want to.
- Martingale strategy: This is a strategy to overcome losses. As an example, suppose you lost 100$ in your recent trade. Make the amount double in the next trade. So, if you win, you will be able to make up for your losses. You can do this again and again till you make up for the loss. The main problem with this strategy is that if you are on a losing streak, there’s a chance that you end up being broke. So, trade carefully.
Binary options trading Philippines
If you are looking for a Philippines or Pinoy binary options trade, there are things that you should know before. Binary options trading is not legal in the Philippines. But binary options trading is not impossible there. In fact, many people make binary options trades through European sites. You can check out the binary options Philippines forum if you want to know more about it.
Is Binary options Legit?
The legitimacy of Binary options totally depends on the trading platform itself. To ensure that a site is legit, it is recommended to conduct adequate research on the site.
How to Win Binary Options Every Time?
It is quite not possible to win binary options every time. But it is possible to win most of the time by following the right strategy and predicting correctly before trading.
What is OTC in Binary options?
OTC in binary options refers to Exotic options that conduct trade in the Over The Counter (OTC) market.
How to Predict Binary Options Correctly?
To predict binary options correctly, reading and following the patterns of the chart is necessary.
Binary options is a great and lucrative investment opportunity if it’s done correctly. Though you cannot earn a lot of money overnight, once you become experienced in this field, you will earn a handful.