1 introduction to trading and binary option
The binary options market allows traders to trade financial instruments spread across the currency and commodity markets as well as indices and bonds. This flexibility is unparalleled, and gives traders with the knowledge of how to trade these markets, a one-stop shop to trade all these instruments. A binary trade outcome is based on just one parameter: The trader is essentially betting on whether a financial asset will end up in a particular direction.
In addition, the trader is at liberty to determine when the trade ends, by setting an expiry date. This gives a trade that initially started badly the opportunity to end well. This is not the case with other markets. For example, control of losses can only be achieved using a stop loss. Otherwise, a trader has to endure a drawdown if a trade takes an adverse turn in order to give it room to turn profitable.
The simple point being made here is that in binary options, the trader has less to worry about than if he were to trade other markets. Traders have better control of trades in binaries. For example, if a trader wants to buy a contract, he knows in advance, what he stands to gain and what he will lose if the trade is out-of-the-money.
For example, when a trader sets a pending order in the forex market to trade a high-impact news event, there is no assurance that his trade will be filled at the entry price or that a losing trade will be closed out at the exit stop loss.
The payouts per trade are usually higher in binaries than with other forms of trading. This is achievable without jeopardising the account. In other markets, such payouts can only occur if a trader disregards all rules of money management and exposes a large amount of trading capital to the market, hoping for one big payout which never occurs in most cases. In order to trade the highly volatile forex or commodities markets, a trader has to have a reasonable amount of money as trading capital.
For instance, trading gold, a commodity with an intra-day volatility of up to 10, pips in times of high volatility, requires trading capital in tens of thousands of dollars.
The payouts for binary options trades are drastically reduced when the odds for that trade succeeding are very high. Of course in such situations, the trades are more unpredictable.
Experienced traders can get around this by sourcing for these tools elsewhere; inexperienced traders who are new to the market are not as fortunate. This is changing for the better though, as operators mature and become aware of the need for these tools to attract traders.
Unlike in forex where traders can get accounts that allow them to trade mini- and micro-lots on small account sizes, many binary option brokers set a trading floor; minimum amounts which a trader can trade in the market. This makes it easier to lose too much capital when trading binaries. In this situation, four losing trades will blow the account. When trading a market like the forex or commodities market, it is possible to close a trade with minimal losses and open another profitable one, if a repeat analysis of the trade reveals the first trade to have been a mistake.
Where binaries are traded on an exchange, this is mitigated however. Spot forex traders might overlook time as a factor in their trading which is a very very big mistake. Binaries by their nature force one to exit a position within a given time frame win or lose which instills a greater focus on discipline and risk management. In forex trading this lack of discipline is the 1 cause for failure to most traders as they will simply hold losing positions for longer periods of time and cut winning positions in shorter periods of time.
Below are some examples of how this works. This psychology of being able to focus on limits and the dual axis will aid you in becoming a better trader overall. The very advantage of spot trading is its very same failure — the expansion of profits exponentially from 1 point in price.
They will simply make you a better overall trader from the start. To successfully trade you need to practice money management and emotional control. Introduction Video — How to Trade Binary Options These videos will introduce you to the concept of binary options and how trading works.
Here are some of the types available: Will a price finish higher or lower than the current price a the time of expiry. These can often be some way from the current strike price. Select the asset or market to trade — Assets lists are huge, and cover Commodities, Stocks, Cryptocurrency, Forex or Indices. The price of oil, or the Apple stock price, for example. Select the expiry time — Options can expire anywhere between 30 seconds up to a year. Some broker label buttons differently.
Choose a Broker Options fraud has been a significant problem in the past. Here are some shortcuts to pages that can help you determine which broker is right for you: Low minimum deposit brokers — if you want to trade for real without having to deposit large sums of money. Asset Lists The number and diversity of assets you can trade varies from broker to broker. Expiry Times The expiry time is the point at which a trade is closed and settled.
Expiries are generally grouped into three categories: Long term — Any expiry beyond the end of the day would be considered long term.
The longest expiry might be 12 months. Regulation While slow to react to binary options initially, regulators around the world are now starting to regulate the industry and make their presence felt. The major regulators currently include: There are several, more advanced Binary Options trading methods available to traders. Short Term Options — This is the collective term used to describe options that expire in 5 minutes or less, and are some of the most traded Options. These can include an expiry in 30 seconds, 60 seconds, 2 minutes and of course, 5 minutes.
These options are typically used to trade around breaking economic events and news stories. Short Term Options are hugely popular, but can be tricky and require an understanding of Fundamental Analysis.
Touch Options — The markets have a nature to consolidate and this provides trend patterns. Traders can analyse and use these to make educated assumptions on the prospective future values of an asset. This is where Touch Options come in.
In a standard Touch Option , Traders select a specific value that an asset must reach within a specified period of time. This value is called a Trigger. In the case of the No Touch Options , you may select the same Trigger , but you are now investing on the assumption that your asset will NOT to reach the Trigger value by the pre-set expiry time.
If you are correct, you will earn the pre-agreed return. Dependent on the broker, the Touch , No Touch , and High Yield Touch Options may provide traders with the opportunity to exit an option early if the price goes against them.
Boundary Options — These are also known as Range Options. The first price will be higher than the strike price and the second price will be lower than the strike price, thus providing a Range or Boundary. A trader must now select if the asset will finish In or Out of that given range, within a predetermined time frame. These options can usually be closed early, and should you do so whilst in the correct range to be In The Money , you will not get the full pre-agreed payout, but most brokers will provide some form of a return.
Since the guide is specifically aimed at sharing hand-on experience of binary options trading you need two steps to have a grasp of the subject successfully: Sequential reading of the guide and applying knowledge stated here into practice at a time will make you confident that you receive a real benefit from and start making large sums of money out of binary options.
Why they are so profitable? What are binary options? What is its difference from trading currencies and shares? What kind of trading strategies are there?
How to select my own trading strategy?