Binary Options Basics

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Binary Options Basics

Are you new to Binary Options trading? Then you need all the help and information on Binary Options basics! We will show you where to go to help you get started with options trading, one step at a time.

Just as in real life, it takes a lot of dedication and motivation to succeed in binary options trading. The training services we recommend are designed to educate our visitors regardless of whether they are novice beginners or experienced veterans. The topics include some of the latest developments in the field of option trading and bring you up to date with information you can use to hone your trading.

The training has been designed to show you exactly how to trade.

But to start, here are some of the Binary Options basics.

What are Binary Options?

Binary Options are perhaps the simplest financial trading instruments that you can find in the market. The options are “binary” because the trade can either be in the money or out of it, all you are required to do is predict whether the price of the asset increase or stay below a predetermined value when the contract expires. If your prediction ends up coming true then you are awarded the full amount stipulated in the contract, and if it does not then you win nothing.

Unlike the stock markets where the amount you can make depends upon the value of the underlying asset, the returns in binary options trading are fixed and non-negotiable.

Binary options have become a very popular form of trading in Europe because of their simplicity and also because you are not required to invest thousands of dollars in order to get started. All you have to do is signup with a broker and start trading, most will only require you to deposit between 100 to 500 dollars and many of them give attractive signup bonuses.

They are also becoming ever more popular in the USA. They used to originally only be the realm of Large investment banks that used them as an OTC (Over The Counter) instrument.

How Do Binary Options Work?

Depending on the broker you sign-up with you have a number of different asset classes you can trade using binary options; these include commodities, stocks, indices and currencies. When you buy a trade, you place a Call Option and when you are selling a trade you place a Put Option. The contract can last from 1 minute to 30 days and once again, the length of the contract will depend upon the broker(s) you sign-up with.

Before you can get started, you will have to sign-up with a broker who is basically an intermediary who provides you with a platform through which you can place your trades. You will be required to deposit a minimum amount with the broker and it will be from this amount that your trades will be placed.

What is a Binary Options Broker?

A broker is a service provider who has access to the financial market. These intermediaries have all the tools needed to help you trade and provide you with the assets and the options. Most brokers are situated in Europe and many have their head offices in Cyprus, mostly because of better regulation and tax structures.

A broker also has the required software which helps you to place your trades, these platforms have many different features and come with advanced charting and reporting features that can help traders place more informed trades.

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Types of Binary Options

While the basic Up/Down Binary Options are provided by almost every broker, there are several variations which enterprising brokers have added to their platform, here are a few of them:

  • High/Low Options: In these types of contracts, you have to predict whether the price of the asset will be higher or lower than a predetermined value. The target price that the rise or fall is measured against at the expiration of the contract is known as Strike Price. You can set the expiry deadline on the price of the asset along with the call or put options.
  • One Touch Option: In these types of options you have to predict whether the price of the asset will touch or stay within a certain value. When selecting one touch options, you have to determine the position of the barrier and the time of expiration of the contract. In these types of options, only two outcomes are possible, i.e. the option breaches the barrier or it does not.
  • Range Options: These are options where you have to determine whether the price of the asset will fall between two ranges or stay outside of them. You can determine the range of the assets as well as the expiry time. Finally, you will have to predict whether the price will remain within the range or stay outside of it.
  • 60 Second/Turbo Options: These are simple High/Low Options however with a time bar of only 1 minute. You have to determine whether the price of the asset stay below or rise above the strike price. These types of options are ideal for persons who are looking for a way to make some quick money by capitalizing on short term market trends. You should also know that these options are perhaps the riskiest there are as the movement of most assets tends to be very erratic on shorter trends.
  • Ladder Options: These are perhaps the best kind of Binary Options there are! In them, you are given a range of different price levels which are placed in an equidistant manner from each other. You have to determine whether the price of the asset will end up above or below at each price level. The advantage of ladder option is that it can allow you to “lock” your profits in place if the price of the asset goes according to your prediction on a particular price level. Such a system to an extent mitigates the “all or nothing” character of binary options trading and returns at least some profits if your predictions pan out on some of the rungs of the ladder.

These are some of the basics that should help a trader get started, when trading in binary options you have to bring yourself up to speed on many aspects including the historical trends that an asset has traced, and how the market has been behaving among other things.

The Trading Club is designed to help you trade better by understanding the underlying dynamics of both binary options in general as well as your chosen asset(s). The training provided by the Trading Club is offered via Skype as well as the phone and has some of the most experienced traders in the field sharing their views and expertise with new and upcoming traders. Some of the things covered include:

  • Binary options fundamentals.
  • Chart analysis.
  • Technical analysis.
  • Market research.

In short, the Trading Club will point you in the right places for all the training you will need to succeed in Binary Options Trading. Remember, the information that you will be introduced to will come straight from highly experienced professionals who themselves are raking in thousands upon thousands of dollars per day.

Sign up with the Trading Club today to learn the basics of Binary Options.

Binary Options Basics: Binary Options 101 for Dummies

Binary options trading has grown increasingly popular as one the fastest and easiest ways to trade. Fast does not necessarily equal effective though. Traders need to be cautious when working within this market. They are very different from other types of trading as the volatility is higher and the trades are short term.

***Keep in mind that binary options trading is prohibited in the European Economic Area, so if you are from the EU, check out our article on CFDs trading and how it works.

Binary Options 101: What are Binary Options?

With binary options, you do not actually own any of the assets. Instead, you are attempting to predict the movement of the underlying asset only. Think of it as a prediction of which way a particular asset is going to move and less of a long-term investment.

With binary options, you do not actually own any of the assets. Instead, you are attempting to predict the movement of the underlying asset only. Think of it as a prediction of which way a particular asset is going to move and less of a long-term investment.

For example, if you are trading in the stock market and bought 100 shares of Google, you would actually be partial owner of this public company. Obviously, your share would be minimal, but you would still be a shareholder.

In binaries, it is totally different. All you’re doing is predicting whether the price of Google will go up or down. This allows you to trade dozens of assets without actually taking ownership. The assets that you trade in binary options are called underlying assets for this reason.

Binaries are really simple to understand with just a little knowledge, but they do take a while to master and become profitable. They are simple in concept, but very complex when it comes to using them correctly. You can learn more from our free online binary option trading course.

What is: The Fundamentals of Binary Trading?

In their simplest form, binary options can only go one of two directions, hence their name. You can either be right or wrong. They are an all or nothing type of trade and there is no middle ground. This might sound threatening, but in reality they are quite easy to understand.

All you need to do is:

  1. Select an asset
  2. Predict whether you think that asset will go up or down in price
  3. Select the amount you are willing to risk

The broker that you are working with will display the percentage amount that you will have returned to you before officially committing your money to the trade

  • Select the timeframe you want to work in
  • Click “trade”

This is one of the greatest things about binary options. You have more information about how the trade will conclude with binary options trading than with any other type of trading. You know exactly how much you stand to gain and exactly at what time that money will appear in your account if you are correct in your prediction. Binaries explain all of these things prior to your commitment.

Trading Tip – Make sure your computer is working in an optimal state and avoid brokers from our binary option blacklist.

Binary Options for Dummies?

Without assets to trade the binary options market would not exist. Imagine a marketplace without a market. This wouldn’t make any sense. However, there are dozens of assets to trade on a daily basis.

With binary options, you can trade all of the major currency pairs, stocks, indices, and commodities. The exciting thing is that you are not limited to only one place. Whether you want to trade gold futures, Apple’s stock, or the Japanese yen, you can do it all from the same platform.

Trading binary options is about making winning trades and placing winning bets. Read more about itm and otm meaning to be assure you understand the basics.

You can also trade on an international scale without having to change brokers. Many of the top binary options brokers include numerous stocks and indices from Europe and Asia, allowing international traders to use their platforms without any problem. The good news for you is that brokers act as a one stop shopping place for all of your trading needs. You can trade pretty much everything with the same web site without having to keep switching screens.

There are four main types of assets to trade on the binary options market. Each of these are traded in the same fashion. Make sure you learn about each of these before trading them on a live trading account.

We have also seen over the years that more “dummies” tend to opt to trade with a binary options robot or auto trading bot. We do not suggest this and instead propose to read more about binary trading strategies in order to learn trading yourself.

Forex

This is the marketplace that holds all the currency pairs. Some of the major currency pairs include the EURUSD, GBPUSD, USDJPY and many more. If you were to trade the Forex market you would actually own one side or the other. Meaning, if you were to buy euros you actually own the euro currency based on the price and if you bought the US Dollar you would actually own US dollars at the current price.

The difference between Spot Forex Trading and binary trading is the way we buy and sell the asset. In binaries we are predicting whether the euro dollar will go up or down. You can trade forex on the binary.com MT4 platform when you get a bit more experienced.

Stocks

Stocks are among the easiest types of assets to trade, because many first-time traders are already familiar with their machinations from traditional stock markets. The stock market is widely traded on a daily basis. You can trade thousands of stocks from around the world. In the binary markets, you can trade a selection of stocks based on the price only. Using our example from above, you’d actually trade the Google strike price predicting whether the price will go up or down from the point of entry. With so many stocks to choose from, be sure to understand the stock you are trading before you actually invest in it.

Stocks are prone to traveling up and down in price for extended periods of time, and the market sentiment and investor mood surrounding them is quite easy to analyze. Investors who trade in stocks must train themselves to be on the lookout for any type of business report, especially quarterly reports or P&L earnings reports, so that they can properly analyze the potential price movement in a particular company’s stock.

Indices

All indices are made up of stocks from certain exchanges. Your goal is to predict whether that particular indices will move up or down from the starting strike price. Each of these will be open at different times, so be aware of this when binary trading.

Each index is slightly different: some may hold as few as 10 companies, whereas some (like the S+P 500) stockpile up to 500 companies. Trading in indices is very similar to trading in stocks, but with a notable lack of stock volatility. Make sure to analyze the larger companies and stocks present in your indices, as these will likely be the assets that will affect the overall movement of an index. Watch for government reports or major announcements from large companies present in your chosen index.

Commodities

Commodities concern actual physical materials like corn, wheat or gold and are most often traded as futures with three-month time windows. We would all like to own gold but owning actual physical gold doesn’t apply here. When trading gold on the binary markets you are trying to predict if the gold price will go up down, just like the other assets.

Price activity is high in the early days of the three month contract, and movement remains variable until about the midpoint of the three months, after which it slows to a crawl. Traders need to remain vigilant in their world news research if they are trading commodities; many different events can affect physical goods, and investor sentiment can change rapidly and price dips or rises can occur dramatically. Monitoring market news is a key aspect of commodities asset trading.

If you were to invest $100 at a strike price of $1684, predicting the price to go up over the next 15 minutes, you will receive a payout of $180 assuming the rate was at 80%. If you were to lose this trade, you would end up losing your total investment. This is also known as all or nothing trading.

Each asset class offers a unique blend of opportunities for profit. If you are a novice trader, diversification is a very good idea. You never know which asset class will suit your particular binary options trading strategy best, and platforms offer so many different mechanisms with which to make money from all types of assets. As you become an advanced binary options trader, you’ll know just where to turn for the best profit daily profit opportunities.

How do Binary Options Work?

With binary options, it’s important to remember that all of your trades will have strict time lines that you need to pay attention to. Some of these can be pretty short and others can last a bit longer. Ultimately, you will need to decide what timeframes work best for you. If you don’t like having money tied up in a trade for a long time, 60-second or 5-minute options might be best for you. If you don’t mind waiting, you can trade hour long trades or longer.

The thing to remember about expiry times is that they are adaptable only up until you commit to the trade. Once the trade is locked in, you must sit back and wait. This is different from other types of trading where you can sell off your purchased shares at any time you want, but it is a fact of options trading that you cannot get around.

Some brokers will allow you to sell off your trade for a small refund (closing options early), but this is a rare scenario that you shouldn’t worry about until you become an advanced trader. Instead, it’s far more important to spend time researching trades beforehand.

The 3 Main Types of Binary Options

There are three main types of binary options that you need to be aware of. Here you are simply attempting to predict whether the price of the asset will have gone up or down at the time expiration.

Call / Put trade

With this binary option type, you are simply attempting to predict whether the price of the asset will have gone up or down at the expiration time.

One Touch Trade

Here, you will be given a target price at the beginning of the trade. If the asset reaches that price or beyond at any time during the life of the trade, your investment will be deemed a profitable one. This price is always stipulated by the broker before you execute the trade so you can best prepare your information ahead of time. Read this article to learn more about touch no touch binary options.

Boundary Trade

With this choice, the broker will give you a range of prices and it is up to you to determine whether the price of the asset will be within or outside the given range.

There are a few different variations of these trades, and some of the more exotic versions can have pretty high payouts, some around 300 percent, depending upon the broker.

One example is a one touch trade with a really far off target price. Usually, in order to get the big payouts on these, you need to go with the hardest to reach option. For this example, you would have to select that yes, the far-off target price will be attained. These have higher rates of return because they are much harder to be correct with.

Which Binary Option is Best for Me?

Figuring out which choice is going to be best for you is something that will be different for each person. Basically, you need to ask yourself these two main questions:

1: What Experience Do You Have with Binary Options Trading?

First, you need to look at what your experience is. Are you a former Forex trader looking to augment profits with a new strategy (trading patterns)? If this is the case, your expertise on the currency market is fully transferable to the binary options marketplace. Or maybe you are a former day trader, looking to alleviate some of your risk. If this is true, binary options can help, and you will want to begin with your focus on the stocks that you are most familiar with.

2: What Are Your Goals?

Ultimately though, it comes down to what your goals are. You need to figure out what your trading goals might be and then develop a plan to realize those goals. If you want to make $1,000 per week, you need to figure out which types of options will help you to hit this mark, and which timeframes will be best suited to get you there.

The answer to the above question is something that will be different for each person, but you should always place an emphasis on the quality of your trading and not on the quantity. Five trades per day that are correct are going to return more to you than six correct and four incorrect.

Understanding Binary Options Trading

Take a close look at these 3 steps you will need to begin trading binary options.

Step 1: Select a Broker

Check out our updated list of the best binary options brokers. Make sure to select a broker that has a free demo account (like the ones on our list of top brokers).

Step 2: Practice Trading on a Free Demo Account

Many brokers, like IQ Option or NADEX have free demo trading accounts, and you need to take full advantage of these.

What is a demo account?

Binary options demo trading is basically no-risk trading since real cash is never exchanged. You are given play money and for a limited time you are able to trade those play dollars in real time and learn the ropes of how binary options work. The longer you demo trade, the smaller the learning curve will be when you start trading with your own real money. Even if you only have 72 hours to demo trade, you need to capitalize on this. At the very least, you want to learn the software that you will be using in order to eliminate the possibility of user error.

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Demo trading should be used as much as possible until you have established a method that works for you and you are confident with it. You want to eliminate the possibility of mistake because of inexperience. You want to use them as much as possible while you have the opportunity available to you.

Step 3: Make Your First Deposit

Once you’ve figured out which broker will best suit your needs and you’ve gotten some practice from their trading platform, you deposit your trading money with them via a credit card or wire transfer.

Each broker has a different minimum deposit, so make sure to check what deposit is required beforehand.

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Make sure that your trading money is money that you can afford to lose and not funds that you will need to get through your daily life.

Once you have created an account and have funded it, you are set to begin trading.

Conclusion

Binary trading is fast paced and exciting, but it’s not for everyone who doesn’t have best binary options education. There can be a lot of risk in binary options trading. If you are new or simply changing your venue, binaries can have a lot to offer. Know that binary options have a lot of possibility for profits, but because of their all or nothing nature, there is also the chance that you can lose substantial amounts of money. For this reason, you will want to get as much practice as possible and want to do as much research as you can. These binary options courses are a good place to start your journey and make sure you signup only on the best binary options brokers reviewed on our site ensure a stable binary options payout. What is the point of winning if you don’t get paid?

***Binary options are prohibited in the European Economic Area. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. This material is not investment advice. ***

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Binary Options Basics

Binary Options Types, Pros and Cons

Binary options have become very popular investment tool, perhaps due to how simple they seem to be. The name ‘binary’ hints at the fact that traders are presented with two choices. This makes them seem easy to understand, which is part of the reason why traders with fewer skills like them.

The idea is that you are predicting on which way prices in various global markets will go in a specified period of time. If you guess correctly then you claim your profit, and if you guess incorrectly, you lose your stake. That’s it!

Binary Options Basics – What are They?

One of the binary options basics you need to be aware of is that the type you’ll see traded most often is called a high-low or fixed-return option, which lets you wager on the movements of stocks, indices, commodities and foreign exchange. These options expire at a predetermined date, time and strike price. If a trader bets correctly on the market’s direction and the final price when the deal expires, they get paid a fixed amount. It doesn’t matter if the instrument has moved a little or a lot since the trade was opened, it just counts as a win, and the trader still receives that same amount. If they get it wrong, they lose their original stake.

So, you see how simple life as a binary options trader appears to be? You’re betting that a stock, index, commodity or currency pair is going to go one way or the other. If you think your asset or index is going to go up, you take what’s called a “call.” If you think it’s going to drop, then you take what’s called a “put.” A call makes money when the instrument is trading higher than the strike price. A put makes money when the instrument is trading lower than the strike price when the deal expires. The broker lets you know what the strike price, expiration date, payout, and risk are when the trade is first set up. With the majority of high-low binary options traded beyond US borders, the strike price is usually the current market price of the asset or index.

US Binary Options vs. Overseas Binary Options

In countries outside the US, binary options usually pay out a set amount and bring a set level of risk. It’s also brokers who offer them directly instead of an exchange. The brokers make their money by taking in more on losing trades than they pay out on winning trades. Apart from certain exceptions, these financial instruments will usually be held until the date of expiry.

US Binary options listings were first made available by the Chicago Board Options Exchange (CBOE) in 2008, which is regulated by the SEC.

These options can be traded at any time, with the rate sitting somewhere between one and a hundred, depending on how likely each one is to make or lose money. On-screen, the trader sees a totally transparent deal and is free to cut their losses or walk away with their profits before the expiry time if they want to.

A trader may also choose to enter while the rate is fluctuating, in order to take advantage of different risk-to-reward situations, or hold until the trade expires, closing the position at the highest amount of gain or loss as compared to what it was when they entered.

Since US binary options are traded on an exchange, this means that every trade takes place between a buyer and a seller who are willing to enter into this arrangement with each other. To make its money the exchange adds a fee that matches counter-parties.

Example of a High-Low Option

In this example, you believe that the NASDAQ index will rally for the duration of the trading day, so you purchase an index call option. The index is currently trading at 1,700, so you’re betting that when your trade expires it will be sitting at a higher number. You have a huge amount of choice when it comes to selecting when you want that expiration time to be. You could choose minutes away, or you could settle for months. It all depends on what your analysis points to. If it suggests that 30 minutes from now would be the best time, then you can choose that. This ‘for example’ deal will pay out 60% on top of your original stake if the NASDAQ rises above 1,800 at that time. If it drops to less than that then you will lose your stake. Minimum and maximum stakes vary from broker to broker.

Let’s say you invest $100 in the call. Expiration is in 30 minutes. The NASDAQ price at expiration is where the clock stops and determines whether you win or lose. The price at expiration could be the last quoted price, or the (bid+ask)/2. Every broker will have their own price rules about expiration.

With this example, we’re assuming that the last quote on the NASDAQ before expiration was 1,703, which means you get a $120 profit (because that’s 60% of $200). You also get your original $200 investment back as well. But if the price at expiration had been 1699 you would kiss your original $200 goodbye.

In the event that the price on expiration is exactly the same as the strike price, the trader usually gets their money back, although you should check with individual brokers to be sure of what their rules are. Any profits that you make will be added to your trader count automatically as soon as the position is closed.

Other Types of Binary Options

This example is for a typical high-low binary option—the most often traded binary option outside the US, but international brokers will usually offer a whole host of other types of binaries too. Here are two examples:

  • “one-touch” options. The asset you’re trading needs to hit the strike price only once before expiration to make you some money. Targets are set above and below the present price, so traders can pick which one they think the price will hit before the expiration date and time.
  • “range” options. The trader defines a price range that the asset will trade inside until expiry. You win if the price doesn’t step outside this range. You lose if it does.

With a lot of brokers competing in the binary options arena, some have taken to offering products that give payouts between 40% and 400%. Many will have different structures and requirements, but you’ll always know the elements of risk and reward before you embark upon the trade. This potentially means you can make a lot of money from your investment, but brokers don’t give money away, so with such big headline figures, chances are you won’t.

In contrast to US binary option brokers, there are some foreign brokers who will permit traders to exit positions before they expire, but most don’t. Doing this before a position expires usually means the broker won’t pay out as much, or you’ll suffer a modest loss, but not have to give up the whole investment.

The Pros and Cons of Binary Options

You’ll always know the risk and reward ahead of time, which eliminates a huge amount of doubt. And you’ll always know how much you’re going to win or lose because both amounts are fixed. No trader likes unforeseen surprises, so this is a big plus for this kind of trading. Another one is the fact that there are often no fees or commissions to be paid.

Simplicity is obviously a factor because you’re essentially tossing a coin and placing a wager on heads or tails. The asset either goes up or it goes down.

You also don’t need to worry about liquidity, because as a trader you won’t be taking ownership of any underlying asset.

Brokers can offer endless strike prices and expiration times and dates, so there are lots of choices. It’s also worth bearing in mind that at any time of the day or night market is open somewhere doing a roaring trade in many different asset classes..

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Trading Education, Free Demo Account!
    Get Your Sing-Up Bonus Now!

  • Binomo
    Binomo

    Good Broker. Only For Experienced Traders!

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Binary Options Guide For Beginners
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