Let’s figure out together how you can and should trade binary options correctly and profitably, the principles of options and the very concept of binary trading. The development of electronic technologies opens up a wide field of activity for earning money. In simple words, binary options as a trading asset allow almost everyone who wants to try their hand at online trading to make money. Trading in financial markets is complex and requires some preparation. Work in such markets must be carried out with the maximum concentration of knowledge and experience. Concluding transactions with binary options does not require special preparation; here the process of opening transactions is much simpler, and the percentage of profitability is much higher than making transactions on classical financial markets.
The principle of making a profit in binary trading
How to trade binary options? Not difficult… Let’s start by defining the concept of a binary option – this is an exchange contract used for a trader to make money as a result of the price movement of an asset (currency, cryptocurrency, raw materials, shares) on the global financial market.
The profitability of a transaction is determined not by the price of the selected asset itself, but by the correct forecast indicated by the trader in the transaction he opens. To make a profit, the trader must indicate the direction of the price movement immediately before the closing time of this transaction.
That is, the trader selects a certain period of time (for example, 30 minutes), after this interval the price of the selected one should be higher (lower) than the price at the beginning of the interval. If this forecast is correct, your money will be returned to the deposit with an increase of 60..90% (each binary options broker sets this percentage independently). An incorrect forecast means losing your funds on this order. Forex traders often use binary options trading as insurance trades. Such symbiosis means almost break-even trading, and certainly minimizes risks.
How much can you earn
Experts say that today this is one of the most preferred ways to make money online. This is explained by the ease of making transactions – it is enough to correctly guess the direction of the asset price. Essentially up or down. The profit on one transaction will be up to 90%. In principle, no other asset has such a return.
The closing time for this type of transaction is from one minute. Compare, you can get interest from a bank account for 6 or 12 months. Making a deal on Forex takes a lot of time searching for an entry into the market, and then also waiting and searching for the time to close the order. Trading binary options gives you the opportunity to choose the time to check your forecast.
Determining this forecast is the key to making money with an instrument such as a binary option. Correct calculation of the general direction of the asset price will allow you to make profitable transactions. Without such an understanding, working with binary options comes down to a regular game. This way you can also earn money quite quickly, but the risks increase many times over. Therefore, you will have to study the basics of the market in any case, only then will this work begin to bring in a stable and high income.
Trading terminal for work
This is a program that allows a trader to trade “binaries”. The comfort of a trader’s work depends on the convenience and simplicity of this program. High-quality trading terminals must have:
- presence of a large screen with quotes, everything is clearly visible and simple
- there must be at least two ways to provide charts (line and candlestick)
- the terminal must have built-in technical analysis tools, this will help the trader create his own trading strategies
- the profitability threshold for one option reaches 85..90%
- availability of correct work with charts, i.e. view their history to test strategies and analytical research, the ability to increase and decrease, and the like.
How to trade without a PC
A trader can trade without a personal computer. Almost all brokers have mobile trading terminals. Their functionality is the same as on PC. All you need is a stable Internet and trade is guaranteed. The presence of mobile gadgets will allow a trader to work anywhere at any time.
Dictionary of a trader trading “binaries” step by step
- An asset is a trading instrument offered on the broker’s platform for making a forecast. There may be currency pairs, business indices, raw materials or groups of goods, shares of international companies.
- Put option – a transaction that involves reducing the price of the selected asset. Predicted by the trader if such a fall is expected
- Call option – making a transaction that involves increasing the price of the selected asset. Predicted by the trader if such growth is expected.
- Expiration – the duration of an open order. The order result will be fixed upon expiration of the time interval selected by the trader.
- Timeframe – displaying on a chart the movement of an asset’s price on a given time interval
- Deposit is the amount of money you have in your account
Why do you need a broker?
To start trading, a trader needs to make a deposit and start trading on the terminal. These services are provided by the broker.
Choosing a broker
Traders, especially beginners starting their work with such an asset, are recommended to start with small deposits. Open orders with a minimum amount. Try to go through verification on the broker’s website and then withdraw this deposit. And only after that start working with a large deposit and expensive orders. In this area of activity, fraud has simply blossomed in all its colors. It will be very disappointing to trust such scammers, open a large account and lose everything in a matter of days. Choose a broker where professionals trade options.
Differences in Forex trading and binary trading
These differences are very significant. The fact is that when opening an order on the Forex market, a trader must wait for the price to move in the direction he wants by a certain number of pips and only after that choose the moment to close the order. Such a wait can be quite long, and if there is high volatility in the market, the transaction may even go into negative territory due to the Stop Loss. When trading binary options, everything is much simpler – there is no need to wait for how many pips the asset price will change. It is important to predict only the correct direction of movement; a change of just one point is enough. This is quite enough to make a profit from this order. In addition, the price of the order does not change, the trader knows exactly how much he is risking and knows exactly the expiration time of the order. This is not the case in the Forex market; if loss limits are not set, you can lose your entire deposit in one unprofitable trade. And yet, it’s up to you to decide which is better, Forex or binary options.
The most important nuances and tips in trading “binaries”
So, there are quite a lot of them, so we will keep it short and clear.
1 – Reliable terminal
Start by choosing the best binary options platform you can trust. Visit forums and review sites, read what they write about the work of companies, analyze websites, the functionality of broker terminals, and be sure to read the user agreement. A reliable broker is the mainstay of successful trading. You cannot become a successful trader by entrusting your deposit to scammers. Trading binary options with a reliable broker and a good terminal is a pleasure!
2 – Don’t rush!
We found a broker – good. When to start? Certainly not right away. We recommend that you do not start at all until you understand the principles of trading, study the materials offered for training, and draw up a trading plan. Remember that knowledge is your foundation and until you have experience, the only thing you can rely on. Replenish your knowledge base and don’t rush anywhere. The market has worked and will continue to work tomorrow.
3 – Trade yourself!
Another tip for those who like to shift responsibility to others. Try to ignore tempting offers to entrust the deposit to someone more experienced. The so-called trust management will not lead to anything you dream of.
The goal of the vast majority of trading “gurus” is to make money from you. 9 times out of 10 you won’t get what you spend. In addition, dubious PAMM accounts will not solve the problem of lack of experience. You will simply mark time, regularly losing money for no apparent reason and for what reason.
4 – Demo account to start
A virtual account with fake money is not what you need to develop in trading. However, if you have never traded and have no idea how everything works, you can start with the demo version. The main thing is not to stay on the account for too long. All you need is to gain some experience and understand the principles. As soon as everything becomes clear with this, proceed to the real deposit.
5 – Emotions and psychology
They say that beginners are lucky. It is possible that you are exactly the kind of beginner who will experience early success before you have the experience and necessary knowledge for balanced trading based on analysis. Be aware of the dangers of premature success. For the fragile and vulnerable psyche of a trader, it will have dire consequences. Evaluate the first results without unnecessary emotions, perceive them as practical experience, nothing more. Learn from experienced traders how to follow simple trading rules:
- the rate is no more than 1-5% of the total deposit amount;
- taboo on martingale tactics;
- risk management as basic instructions for trading;
- minimum of emotions;
- no excitement.
Analyze the results of transactions and try to control not only actions, but also emotions.
6 – Trading Journal and Discipline
Feel free to write down everything that happens to you while trading, before or after, in a trading journal. Professional athletes behave approximately the same way. They write down emotions, actions, thoughts, and results of actions in a diary in order to analyze everything that happens to them during training and competitions.
In trading, a trading journal will become the anchor of trading discipline. You will learn to control everything that happens in your head and around you. But most importantly, the recordings will teach you to analyze actions and draw the right conclusions. You will be able to track such important details as:
- successful time for trading;
- the effectiveness of choosing a particular asset;
- factors influencing the growth or decline of profits.
Gradually you will learn to act according to one scheme and follow the rules of trader discipline. It will become normal for you to end trading after a series of losing trades, stick to your trading plan, and avoid trading during periods of emotional instability. Discipline comes first.
7 – Deposit size and management
Caution for a novice trader is the same norm as having a demo account instead of a real one. But this does not mean that you need to start trading with a deposit of 5-10 dollars and here’s why. According to the rules of risk management, the bet size should not exceed 5% of the deposit amount. The minimum amount of 5-10 dollars is not enough even for 20 transactions necessary to understand the principle of the terminal’s operation and strategy.
A limited budget is the path to losing your deposit. To prevent this from happening, experts recommend starting with at least $100. This is a comfortable amount for trading at the initial stage and making your first income.
8 – Learn and develop
You can always copy other people’s tactics, schemes and algorithms, or you can gradually gain experience and try to analyze the market. Charts, indicators, oscillators, and economic calendar are just part of the list of useful and important auxiliary tools for a trader. Learn to work with them from the first day of your decision to enter the market. Over time, persistence and patience will yield results.
9 – From simple to complex
And yet, experts in the field of binary trading recommend remaining consistent and not giving in to excitement. You need to be careful when trading binary options. Progress from simple to complex is the right path to the intended goal.
You need to start by learning the basics of trading and mastering the rules of risk management. The next step is technical analysis and trading discipline. At the final stage, you will have to master fundamental analysis and trading techniques. The pinnacle of mastery will be the invention of your own effective strategy, taking into account the peculiarities of personal trading.
10 – Understanding graphs
The forex currency market consists of a chart of currency pairs. You need to learn to clearly understand what a chart is, as this is the basis of trading. Every successful trader started with the basics of understanding charts. By this we mean that you should have an understanding of:
- what is a candlestick and a candlestick chart,
- what are bars,
- line graph
- heiken ashi candles
- how candle bars are formed and so on
11 – Using Indicators
Indicators… A cool option for trading in any terminal, any broker. What is an indicator? This is a kind of tool that allows you to analyze the price chart and gives certain signals to the trader for making transactions. Indicators also allow you to determine trend changes, find support and resistance lines, and much more. First, you need to familiarize yourself with the most basic and common indicators. Then move on to more complex ones if necessary. There is no need to install standard indicators in the broker’s trading terminal; they are already there. There are several types of indicators:
- trend – for working during trend movement
- oscillators – for flat price movement
- volume indicators
Read more about what an indicator is in our section.
It’s also possible without indicators
For those who do not want to use or do not want to use indicators, there is a Price Action system. It involves trading purely based on chart analysis without using indicators. It is carried out by searching for certain patterns, levels and other “nuances” on the chart. Any platform is suitable for it, since indicators are not needed, but you just need a chart in front of your eyes.
12 – Selecting time frame and expiration
A timeframe is the time (duration) of one candle, or it is also called a time range… If you trade on low timeframes – this is from 1 to 5 minutes, then all your transactions will last approximately 1-15 minutes. And if you want to trade rarely or hold a deal for a long time, using a long expiration, then you need to choose a larger time frame for convenience, for example, from 15 minutes to 4 hours… or even days.
As for the expiration (duration) of a transaction, the faster it is, the more transactions can be carried out during the day. The main thing is that your strategy allows this. Otherwise, carelessness may cost you the loss of your deposit.
13 – Applying Strategies
An important point is the presence of a trading strategy. You can have your own or a ready-made strategy in “arms”. You can, of course, simply guess the direction of price movement and earn money, but using a strategy you can significantly increase the percentage of profitable trades, and this will directly increase your earnings. We have many strategies on our website, you can familiarize yourself with them.
You can take any strategy and, based on it, come up with your own, make edits and changes, and successfully apply it in binary options trading. But we want to warn you – before using any strategy on a real account, check it either on a demo account, or simply on your favorite chart, visually, without opening trades. And only after making sure that it works properly, start using it!
14 – Taking into account volumes
This is not an entirely obligatory point, but it needs to be said about it; there are volume indicators that display transaction volumes and show how involved traders are in transactions. By analyzing this, you can also predict price movements when, for example, traders buy and volumes grow. Or when traders sell and volumes decrease. But this is for more professional traders. At the initial stage, you may not take into account trading volumes.
15 – Trading methods that don’t work
There are also methods in binary options trading that are either controversial from the point of view of profitability of use, or are completely not recommended for use. Briefly it is:
- Paid Sinhalese
at the initial stage they only speed up the withdrawal of deposits. A beginner must first master all the nuances of trading and only then can he use “dubious methods,” but this is still dangerous.
Is this a scam or a way to earn income?
Trading in the financial market will not allow anyone to become financially independent overnight. This is a long and careful job. But this work can bring a stable and high income over time. Binaries will help you with this. Trading binary options is not difficult and profitable.
On the territory of the Russian Federation and CIS countries, the activities of BOs are not limited in any way at the legislative level. The government of the Russian Federation is in the process of developing such a bill. It will take a long time before it comes into force.
Correct options trading
Despite all the apparent simplicity and clarity, working with binary options requires theoretical training. Minimum set of rules for successful trading:
- have a complete understanding of what a binary option is, work with demo accounts, test your knowledge
- There is no need to make the largest possible deposit. Get started with minimal investment.
- choosing a broker is an informed decision. Choose the most reliable broker with an impeccable reputation.
- a real broker will never beg a trader for the opportunity to trade for him.
- when trading begins to generate income, even if small, try to withdraw part of the profit to your accounts.
- You need to decide for yourself that the loss of money invested in binary trading will not be critical for your budget.
These rules will help a novice trader work clearly and in a balanced manner. This approach will help minimize losses in case of failure, and, on the contrary, bring the maximum possible income to your budget. These are important rules for a beginner in binaries.
Working with binary options offers a wide range of advantages – you are your own boss, the ability to work anytime and anywhere. Earnings here are unlimited. Think of this opportunity as learning something new and then you can gain financial independence. Online trading is becoming a very, very popular way of making money.
It is also important that each trader can build his trading tactics in accordance with his character and temperament. Strategies can be aggressive or calm, the risk can be very low or very high – everyone will find their own trading style. A set of technical analysis tools, indicators, oscillators, the availability of trading channels and the developments of more experienced traders will help with this. Trading can be carried out in the presence of a trend or in a flat, on the release of economic news and in complete calm. Try, improve and it will definitely bear fruit. Trading binary options is actually not difficult, but trading options profitably is already more difficult, but we are confident that you will reach the top of binary trading.