Investment opportunities are constantly expanding. Today there are several directions for earning money based on financial investments. One of them is a binary option (hereinafter BO).
What are binary options?
The essence of conducting operations on binary options is to correctly predict the price movement of an asset. It may seem to many that this is a fairly simple process, but do not underestimate it. There are a number of nuances that are important to pay attention to. Therefore, before starting to work with options, it is worth considering what this term is in general and how to use it correctly in order to make a profit.
In even simpler terms, a binary option is a transaction in which an investor bets on a fall or rise in price over a certain period of time. Each transaction has its own expiration time (validity time).
- Whether the bet worked or not will become clear after this period.
- On average, at the time of closing a deal, with a correct forecast, you can get up to 90% of the profit, while predicting how many points the price will change will not be necessary.
- It is enough to correctly indicate the fact of growth or decline.
an example of a binary transaction with numbers in relation to the figure below:
- Broker – Quotex
- asset – EUR/USD
- percentage of profitability – 88%
- bet – 100 rubles
- forecast – “up” (green line)
- expiration time (transaction duration) – 1 minute
- after 1 minute, we made a profit of 88r, since the price was higher than the one at which the transaction was opened. Our forecast came true and we get 100 + 88% = 188, of which the profit is 88 rubles.
To make money trading binary options, you do not need special knowledge, experience and a deposit of several thousand dollars. That is, all this matters, but not at the start. You can start small. From simple trading on a demo account, a minimum deposit and social trading with learning the intricacies along the way. Over time, you can rise higher and achieve more:
- increase the amount of the deposit;
- get access to the Trading Room with personal signals;
- work with several types of assets at once;
- create and test your own strategies, etc.
Professional options traders claim that the difference between the opportunities for pros and beginners is negligible. Both have access to information about changes in the world, signals, the economic calendar and analytics. The only question is how effectively to use all this.
In general, the binary options system is simple and clear enough that even a teenager can handle it. It is enough for a trader to follow the news in order to predict changes in the price of assets (the level of importance is noted in the economic calendar). This is the minimum that even an inexperienced investor is capable of.
History of appearance
They were first officially recognized in 2008. It happened in the US stock market. Over time, the popularity of this tool has constantly grown, and as a result, today it is one of the most popular ways to make financial transactions.
However, not all experts are ready to attribute options to full-fledged exchange transactions (they are not considered binary). And this is a completely adequate opinion, since the process of working in this area is more like ordinary rates than complex investment operations. In this regard, the potential risks increase significantly. It is for this reason that some of the largest search engines have come to the conclusion to ban binary option advertising on their resources.
But despite this, the popularity of this tool is steadily growing due to the fact that it is much easier to work in the field of binary options than in other investment areas.
Who uses what and why
In fact, a binary option is almost the same exchange option only in a simplified version. In the case of standard stock options, we are talking about buying or selling a commodity at a certain point in time at a predetermined price. With binary options, everything is a little different – there is no need to conclude a deal in the actual version, you just need to declare changes in price movement.
- Available investment amounts.
The threshold for entering an options trade on some options broker platforms is as low as $5-10, which significantly expands the number of potential users. In addition, with investments in the amount of 300-500 dollars, you can count on really large profits. That is, this method has a significant advantage over alternative methods, since in other options for exchange activities, investments of a given volume are not even considered due to their insignificance.
- Fast result.
As a rule, the term for conducting transactions in the binary option market is about 1-2 minutes. This time interval is typical only for this direction, because on the same Forex this indicator will be much higher. Accordingly, due to the increased intensity of ongoing operations, the turnover of funds also increases, which can ultimately lead to potentially high profits. Naturally, a negative result is also possible – that is, these circumstances will cause an increase in losses.
Binary options are the simplest type of exchange activity, which makes their use more accessible to a wide range of people. In order to start working in this area, it is not necessary to know all the specifics of technical and fundamental analysis. But this is very important when trading on Forex, because there is absolutely nothing to do there without serious knowledge. That is, when working with binary options, you can not only immediately enter a deal and get a result, but also save time that would have to be spent on learning the basics of analytics.
It is worth emphasizing once again that binary trading is a fairly simple activity that can bring quick results.
However, you need to understand that in the conditions of such operations, not only profits, but also losses can be large. Accordingly, you still cannot do without a competent approach to options.
This is exactly what those who show a special interest in binary options trading do.
- First of all, these are investors who are attracted by quick profitability and modesty of financial injections. Perhaps this is the largest group of BO users.
- Brokers are also fans of this method. This is already a consequence of growing demand from investors.
- The goal of the broker is to make a profit, regardless of the target activity. Therefore, due to the increasing popularity of binary options among investors, this indicator is also growing among brokers.
- Well, another group that you should not forget about is scammers. Every day the number of scammers in the field of BO is growing almost exponentially, which significantly increases the potential risks of this type of activity.
In this regard, many financial regulators extremely strictly regulate operations with binary options. And in countries such as Israel and Belgium, they are completely prohibited.
Regardless of the type of transaction being concluded, everything on the binaries is subject to the same principle, which is to choose one of the two proposed options for changing the price movement. In this regard, the trading platforms on which operations are carried out are developed in a rather simplified form with a simple and understandable interface.
To purchase a binary option, you must do the following:
- Select a trading asset.
- We put down the expiration time (the deadline for closing the transaction).
- Set the bet amount.
- We determine the direction of price movement – growth or fall.
Most often, the first three parameters will be set automatically or remain by default after the last trades. That is, in order to purchase a binary option, it remains only to press one of the two buttons – CALL or PUT, which means “up” or “down”.
But still, first of all, you need to be extremely careful about choosing an asset on options. It will be the main component that affects the size of potential profit or loss. All available assets can be viewed on the broker’s platform in a special window.
If an option is a deal on certain conditions, then assets are directly what the investor works with. These are real exchange assets, but the trader does not buy them, but the conditions for price changes. When an investor opens a trade, he is not buying stocks, oil or gold. This requires a license and a deposit of several tens of thousands of dollars or euros. He just tries to predict a fall or rise in price at the time specified by the terms of the transaction. That is why binary options trading is so easy and profitable even for those who know little about trading and do not spend time on in-depth market analysis.
In the list of binary options assets:
- raw materials;
- stock indices.
You can work with several assets at the same time, but traders without experience should focus on the simplest ones for analysis – securities and currencies.
Making money on option trading is real!
You can make money on binary options, on forecasts of rising and falling prices of assets in the market. This way of earning is not new and it works, and it is really possible to get the first profit in 1-5 minutes, without particularly delving into the intricacies of the terminal and the market. A trader does not need to buy assets low and sell high, as it works on stock exchanges. The whole point comes down to the correct forecast in a set period of time.
For example, a trader learned from the news that Microsoft has planned to release a new product line. The projected profit is in the billions, which means that the company’s shares will definitely rise in price. To make money, you need to invest in Microsoft stocks.
Technical and fundamental analysis is the basis of correct forecasts. Of course, you can not analyze anything and rely on intuition, superficial knowledge, but the probability of a successful transaction on binaries in such cases is noticeably reduced. Therefore, it is still necessary to analyze, and in several directions at once. Fundamental analysis is the study of events in the world that can affect the value of assets:
- climate change;
- economic events;
- cataclysms, etc.
A professional binary options trader should keep his finger on the pulse and be the first to know about all the most important things.
Types of option contracts
BOs are divided into several types. This determines the popularity of these operations. Despite the common basic concept, they still have several differences. To correctly choose the type of BO, you should carefully consider all their features.
- Classic is the most common option, which is the most popular. Sometimes it is simply called Call/Put or “Up/Down”, which directly betrays its characteristic feature.
- One Touch or One touch – this type of BO has one distinguishing feature. It lies in the fact that the investor can designate the result of the predicted price movement at any time before the end of the expiration.
- No Touch or No touch – the reverse action is performed here. Specifies the value that must not be reached before the end of the set time interval.
There are also types of options – Boundary and Range, which provide for the formation of a specific price corridor. It is within its limits that the price of the asset at the end of the expiration period should be located.
At the moment, brokers have abandoned all additional types, leaving only Classic, in order to further simplify trading for beginners.
Investment attractiveness of binars
This is a very important point in options, which is recommended to pay attention to in order to understand how great the potential of binary options is.
Considering that options trading is quite simple and fast, the demand for such activities is very high among novice financiers. But this does not mean at all that such operations do not attract more professional market participants.
Many large investors prefer binary option trading precisely because of the quick returns. At the same time, they are well aware of how great the risks are, but the possibility of obtaining high profits in a short time compensates for the likelihood of potential losses.
The potential of binary trading
Despite the fact that today this activity is quite popular, it is impossible to say with certainty how long the binary option will remain relevant. Here it is worth paying attention to the fact that the attitude towards these operations on the part of the authorities and society is rather negative. But it cannot be ruled out that the number of participants in options transactions is steadily growing. Therefore, an early cancellation of such transactions is unlikely.
There can be only two possible scenarios for the development of events.
- The first seems to be the most acceptable for bidders. In this case, we mean the establishment of full legislative regulation of operations with binaries. This will allow establishing regulations and exercising control on the basis of uniform parameters.
- In another case, if sub-legislation is not established, most likely, over time, binary options will be subject to much more stringent limits and subsequently, the number of transactions will decrease significantly. Ultimately, these circumstances will lead to the depreciation of this type of activity, like binary options trading, and, consequently, to its potential disappearance.
Choosing a reliable broker
One of the first steps that you will have to take before starting binary options trading is to choose a worthy intermediary – the best platform for binary options. In this case, the Internet platform acts as a broker, through which transactions will be implemented.
The primary task of an options broker is to monitor market participants. He must conduct a detailed analysis and exclude those who have unscrupulous intentions. Next, you need to find a platform with the most favorable conditions for conducting transactions. The main thing is that security be guaranteed in advance, otherwise no favorable conditions will be able to provide the expected result.
In this regard, when choosing an options broker, you should pay attention to the following points:
- Experience. The longer the broker works in the field of investment operations, the higher his experience and skills. Accordingly, working with such a broker will be as reliable as possible. But it is better not to consider companies with little experience, even if they have a large number of positive reviews.
- Legality. Legally operating companies are required to have a complete set of permits. With regards to firms operating in the territory of the Russian Federation, they must necessarily have a license from the Central Bank, as the main financial regulator. Not all companies adhere to the established rules. More often they work without the necessary documents, which as a result can significantly increase potential risks.
- Service quality. All provided opportunities should be at the highest possible level. This applies to both the work of the platform itself and the competencies of existing specialists.
- Options for cooperation. Here it is important to pay attention to several points at once:
– the size of the minimum transaction
– bonus programs and other rewards;
– commission fees;
– minimum deposit;
– deposit/withdrawal of funds;
– range of effective trading instruments;
– available expiration intervals.
Among the many brokerage companies, it is worth paying attention to three organizations that have already earned the appreciation of a large number of investors. The most trusted binary brokers include:
- This company is a leader among similar firms.
- In addition, Binarium was the first who began to carry out transactions with “binars” on the Russian market.
- The trading conditions of this broker are the most loyal and accessible to a wide range of investors.
- The minimum deposit amount on the platform is only 60 rubles
- The trading terminal is equipped with innovative technologies that provide enhanced opportunities for efficient trading.
- In addition, Binarium offers high-quality training systems for beginner financiers
- The ability to conduct test operations on a demo account.
- This company has been in the options business for almost five years.
- Despite such a short experience, she already has a large number of loyal customers.
- The popularity of this broker is determined by a convenient trading platform, adequate terms of cooperation, as well as a wide range of trading instruments.
3 – Quotex.
- This is a fairly new company, but with great investment potential.
- Over the years of her work, she was able to prove that she was ready to become a reliable intermediary between the trader and the exchanges.
- The trading conditions they offer attract an increasing number of clients, which speaks of their undeniable professionalism.
The best indicators for binary trading
In order for the forecast of changes in the price movement on binary options to be as accurate as possible, a qualitative analysis of market indicators should be carried out. The best way to do this is with the use of technical indicators, which are used both in operations with binaries and in other investment operations. The most effective indicators at the moment are:
- Moving averages. This indicator uses several detailed algorithms to calculate the average. As a result, you can calculate the trends that will form in a specific period of time.
- Bollinger lines. In this case, a corridor with upper and lower boundaries is formed, in which the predicted price deviation will appear.
- RSI. The relative strength index determines the intensity of the momentum that will affect the change in price movement.
- CCI. It evaluates the change in price movement in a specified time period. It is most often used to identify a possible overheating of the market and establish a probable trend reversal.
- Parabolic SAR. Forms a certain moment at which a change in the current trend begins. The more such signals are received, the more reliable the price movement forecast will look.
It is important to note here that the use of these, or any other indicators, does not imply their calculation by the trader himself. These instruments will be located on the broker’s trading platform, and the investor will only have to track them in a timely manner and correctly interpret and buy/sell binary options.
You can see the full list of all current indicators here.
The process of making money on binary trading
Many recklessly believe that the simplicity of binary trading will allow any trader, even a beginner, to easily get the desired profit. However, this approach is completely wrong. In order for operations with options to be highly effective, it is necessary to pay attention to the following points:
- Japanese candles. This is one of the most popular analytics methods. It includes processing a large amount of information and building the result in the form of graphic candles. This process is relatively complex, so for the correct use of candles in predicting changes in the price of an asset, it is necessary to familiarize yourself with the theoretical part of this topic in detail.
- Actual news. This is a very important point that directly affects the growth or fall in the price of an asset. At the same time, the essence of the news can be completely different – from important political statements to the publication of new prices for consumer goods. The most important thing when using news is its timeliness. To do this, it is better to use a specialized economic calendar that allows you to track the news of the direction that is most interesting.
- Working with timeframes This method is also very popular. Its essence lies in the fact that at a certain time interval the formed price of an asset is transformed, turning into a graphic image of Japanese candlesticks or other patterns. Next, the displayed information is analyzed, and on the basis of it, a decision is made to purchase the option.
- Trading strategy. Today you can find a huge number of trading strategies that are used in the options market. It is likely that many of them can be quite effective. But here it is worth understanding that there can be no universal strategy, since market conditions are constantly changing. It is wiser to study several types of popular strategies and, based on them, create a completely new algorithm that meets exactly the needs that will be of interest to the trader.
In order to improve your professional level, it is advisable to familiarize yourself with specialized literature. A recommended list of useful books is available on our website.
Advantages of binary options
Among the advantages of options trading, there are three indisputable facts:
- Profit and loss have an actual size. Unlike other stock trading, options trading implies a specific result. That is, it is possible and impossible to predict whether you will have a profit or loss, but you can determine the size of these indicators in advance. It is significantly safer than other trades. Since in the case of opening a long transaction, there is no likelihood of large losses in the event of influencing factors without the knowledge of the investor.
- Profitability does not depend on major changes in price movement. There is no need to wait for the right moment when the price movement reaches one level or another. In this case, the main goal of the trader will be a qualitative forecast. Even if the price difference is only a few points, there is a chance that the investor will expect a high profit.
- Cultivate discipline. Many experts confirm that novice traders are highly emotional. When making the first transactions, they behave extremely actively. As soon as they see a minus or plus for the operation, they immediately rush to close the deal, fearing some unpleasant consequences and rejoicing at the result that they have. In the field of options, things are completely different. The participant knows in advance what amount of profit or loss he can expect. So he does not need to make any unnecessary gestures. It is enough just to withstand the set time and find out the result.
What are the advantages of binaries?
Three of them are the main ones:
Disadvantages of binaries
There are also some downsides to options trading. These include the following:
- Miscalculations in time. It is time that is the main component of options. Even when using various tools of technical and fundamental analysis, the time point at which the price should be will have to be “guessed”. In this regard, there is a high probability of predicting this indicator incorrectly.
- Short trading times. Most brokers offer transactions within one day session. In such circumstances, there is no way to use the auxiliary tools of fundamental analysis, since they are designed for a longer time.
- There is no actual acquisition of assets. Even if a trader is ready to make very large investments, he will still own absolutely nothing. He can only count on the potential profit from the bet in the deal.
In addition, it is very important to consider that the main disadvantage of using binary options is a huge number of scams.
Pitfalls when working in binary trading
The apparent ease of using options should not be misleading. It is important to understand here that it is extremely difficult to make a qualitative forecast of changes in the price movement of one asset, or even more so the ratio of two. If we regard such operations as a lottery and start just guessing that as a result it will not be possible to avoid negative consequences.
Therefore, if you choose to trade BO, you should definitely set yourself up for a serious systematic approach. First, you need to carefully familiarize yourself with the current market situation, analyze the latest financial changes, and calculate the possibility of potential profit and risks.
Any reasonable person will agree that making high profits cannot be synonymous with simplicity. To make good money, you need to work hard. Perhaps options trading is much easier than any other exchange activity. But this only contributes to the rapid completion of transactions, and does not guarantee profit.
Choosing Between Binary Options and Forex
Which is better Options or Forex is a question that many traders ask themselves. It is unlikely to find an exact answer. To choose one of the two, you should be guided by the following differences:
- binary options are very simple. Here it is worth noting both the technical component and the number of commission fees, which are much lower than in other exchange transactions.
- Also, when trading BO, the investor has the opportunity to work with a wide range of assets. Forex cannot provide such conditions.
- Working with BO excludes the possibility of using leverage. This certainly reduces the risks, but also significantly reduces the opportunities.
- The entry threshold in the BO trading market is much lower than in Forex. Therefore, it will be much easier for novice traders with small deposit funds to start their activity in the field of options.
- The complexity of the forecast in BO trading is much higher than in Forex. This is due to the fact that the number of available trading instruments for qualitative analysis is very limited. Forex is much more functional in this regard.
What is Binary Options – Guessing Game?
The essence of the trading process in this situation has many similar moments with the game of roulette itself, where players place certain bets on whether black or red will fall out.
For example, opening positions is carried out only in two directions, or rather up or down. Thus, guessing is going on in terms of increasing or, on the contrary, lowering the level of quotations immediately after the deal is opened. Against this background, this is precisely the name of options. There is even a concept that occurs as “zero” and is used when the cost at the time of expiration has again fallen to the mark that was the starting point.
In addition, there is an additional opportunity to choose the rate indicator. In this case, the benefits of options are much larger compared to. In the case when income is achieved, the gain is in the range of 70 to 90% of the investment amount. In case of loss, the amount of losses is limited according to the rules of money management in the range from 1 to 2%.
The very situation on the market, expressed in the value of the chart moving randomly and absolutely chaotically on the structure, resembles that small ball that jumps from sector to sector when the roulette wheel starts.
In this case, there is no way to understand which color it will stop at. As for the conduct of the trading process based on binary options, the situation here is much more complicated, the period for which this or that transaction is actually concluded can vary in time from several minutes to several days. It is not enough to simply decide on the planets of that now, it is most correct to bet on the growth or fall of the market situation. In addition, you must also select a time interval. This can be roughly compared with the ability to predict future events. Most often this can be attributed to the transaction, which is concluded for a long period of time.
At first glance, it may seem that there are really a lot of similar moments and they are obvious, but professional traders, for their part, in no case put an equal sign between the gameplay on the stock exchange, as well as game roulette.
We give a forecast of the market movement – it’s real!
We continue to study what binary options are.
Unlike the well-known roulette, in which the whole essence of the work is most likely on the theory of probability, and not on analysis and calculations, a profitable game in the conditions of the currency exchange implies the creation of a forecast of future changes in value.
In this case, on the basis of the informational data of statistics, as well as the history of quotations, it is possible to make calculations of the future nature of the market. It is quite natural that the indicator of accuracy that exists is relative. But even in view of this, it can be called the main positive feature, which significantly increases the chance of success.
Luck can be the main advantage in the plan.
In this case, it is impossible to determine the trend, as it is possible to do in the case of the quotes chart, where you can determine the main movement of the value. If we talk about a professional game in the conditions of a financial exchange, then here the moment of luck is not perceived as something really serious. That category of traders who managed to make a profit without having any experience behind them and relying only on their luck ended up in deep disappointment.
What about reviews?
- All those negative reviews regarding BO that can be found on the net today are often written by those traders who could not really take place in this field of activity.
- Most likely, such people are driven to trade by the desire to easily and quickly earn income without making any effort. No one really wants to gain knowledge in terms of the successful conduct of the gaming process on options and at the same time not lose their hard-earned money.
- The main reason for the collapse most often becomes a rather unserious attitude to the game itself for real money in such an unpredictable financial market.
Professional attitude to the game on the stock exchange
If you treat BO as a type of networking, then in the end you can really get a systematic income and, moreover, this income will be of a large size.
At the same time, the profitability potential itself will be several times greater than in the usual types of receiving money online. Turning to the “game” section posted on the stock exchange, you can get acquainted with the many real stories of those people who have not worked in their lives.
A professional attitude to making a profit and working with options itself involves a large-scale consideration of all the fundamental moments of the financial market, as well as the nature of value. As for the BOs themselves, here basically deals are made for a short period of time; for them, the most relevant is the technical analysis of the market situation, as well as online trends.
Mastering trading tools means learning the basics of playing the game, as well as making a profit in the options market. Only in this way is it possible to turn a game that has an unknown result into an activity that will bring the desired income.
Binary options are work.
So what are binary options… Yes… It’s work… In order to gain the skills of a profitable game in the conditions of an exchange on the network, a trader needs to make every effort:
Get acquainted in detail with the foreign exchange market, its main features, rules, trends.
Systematically monitor the exchange rate of the world currency, the world economy. This will allow you to predict future changes.
Learn to qualitatively analyze charts, price trends, predict.
The nature of quotes.
Create an effective trading strategy
Learn the psychology of trading in the stock exchange, control your own emotions.
If there is a desire, then you can learn all the necessary basics of knowledge on options and at the same time not have any education in the field of economics and finance. In addition, brokerage companies provide the opportunity to play in the conditions of the exchange, using a practice account online. Here’s a real question as to whether it makes sense to put your own money at risk when you can trade for free.
There are ratings of top binary options. These options companies offer their clients the opportunity to learn how to trade for free and use a practice account. Reliable brokerage companies have a direct interest in making a profit for a trader. It is worth taking the time to read existing client reviews and find a good partner who will provide learning and earning opportunities.
What to read more about – “What are binary options”
To disclose the topic of binary options, and all the same binary option, we advise you to read more articles on our website. You can find them in the menu.
How to trade correctly – an article for beginner traders
- Earnings on option trading
- A detailed article on whether it is possible to make money on binary trading at all?
- An article on how to properly carry out binary trading and earn consistently.
- An article about the fact that binary trading is not a scam and earnings are quite real.
- It is easy to understand how a beginner can join this area without spending much money.
- An article dedicated to signals and whether they should be used in trading.
- How and where is the best way to withdraw your earned funds in the process of trading.
- The whole truth about binaries and other information regarding – What are binary options.
- What is the difference between binary trading and Forex trading.
- What are OTC quotes and how to use them in trading.
So, the bottom line is about what binary options are. BOs appeared in the investment sphere not so long ago, but have already managed to become quite popular. The ease of use of BO allows even novice traders to try their hand at this area. With the right analytics and with a competent strategy, you can achieve good results. But the risks cannot be completely ruled out, of course. We hope you join the ranks of traders with us! Binary options are not scary, but exciting!