As someone who loves exploring new ways to make money online, I’ve come across binary options trading a few times recently. Today, I’ve partnered with Ben from BinaryOptionsTrading-Review.com to share what it’s all about. In short, binary options trading is not investing — it’s gambling. But, just as some people make a full time living from playing poker online, you can make good money with binary trading if you know what you’re doing. Just don’t let this replace your real investments. Now, here are the basics of binary options…
With the advent of internet, people became more closely connected than ever. We can now talk to anyone in the world whenever we want, exchange e-mails, gather information, join social networks and so much more with just a few clicks of a button.
Of course, this technological development has had a lot of influence on the economy – since information became more available, people wanted to use that to make profit. In recent years, new forms of online trading appeared and they attracted a lot of people in a very short amount of time because literally anyone with sufficient funds and an internet connection could join. Trading is not an exclusive privilege of specialized brokers anymore, and binary options are the latest hit in the world of online trading.
In this article, we will show you the basic principles of this type of trading, so that you can have a clear picture of what this industry is all about.
How to Do Binary Options | Basic principles
The basic principle of binary options trading is actually very simple: you choose an asset and the expiry time of your trade, and the object is to guess whether the asset’s price will be higher or lower when your trade expires than it was when you opened it.
That’s why these are called binary options.
For example, let’s say you want to predict the price of gold and you choose the expiry time of your trade to be 1 p.m. tomorrow. You make the prediction by buying the so called call (the price will be higher) or put (lower) options. If you buy a call option and the price is indeed higher when the expiry time comes, you win.
The same happens if you buy a put option and the price is lower when your trade expires. The catch is that you lose everything you invest in a trade if your prediction turns out to be incorrect; whereas when you win your profit is somewhere in the neighbourhood of 80% to 85%, but this depends on your broker and what they decide to offer you.
How to Do Binary Options | Choose your strategy
Because of this last fact, you usually need to be right more than 50% of the time to be profitable. To this end, various binary options strategies are deployed to give traders the edge when trying to predict how the market will behave.
These strategies are numerous, but there are some basic principles everyone should be aware of.
For example, investing everything you have in your trading account is generally not recommended – you’re better off if you open several smaller trades instead because they can then act as your safety net should you make a mistake and lose your investment.
Furthermore, psychology plays a major role in this business because you need to keep a cool head at all times and not get carried away when you enter a winning or a losing streak. There are also certain trading fears some traders need to overcome when placing a trade. These include the fear of losing, the fear of missing out, the fear of losing profit etc.
Having a good strategy is what helps you deal with them because you always have a system that guides your decisions and you’re not just investing money randomly.
How to Do Binary Options | Brokers
Another important factor in your trading experience is your binary options broker. These are online companies that provide you with your trading environment through their trading platforms. Different brokers have different assets and trading modes to offer, as well as different minimum financial requirements and payout percentages, so there is a lot to consider when choosing your partner.
However, the most important thing you have to do is to make sure your broker is reliable. Unfortunately, scams are not unheard of in this business, especially because brokers are so numerous, so traders (especially inexperienced ones) often don’t know which one to choose. Make sure your broker is regulated before you deposit with them because that means the company’s reliability was confirmed by an independent regulatory body.
Also, a good idea is to visit various forums and try to get as much information as you can from other brokers. Objective first-hand experiences always tell the most realistic stories. However, there are some brokers that have already established themselves as the binary options elite, so choosing one of them is probably the smartest move. Some of these brokers include IQ Option, Banc De Binary, 24option, Boss Capital, but there are even more quality options in the industry. Scammers are only a very small part of this business, but better safe than sorry, right?
How to Do Binary Options | Research everything!
Once you choose your broker and start trading, don’t rush things. Patience and knowledge are your best allies in this business.
There are loads of reports and indexes that can show you how an economy is likely to behave in the near future, so try to gather as much data as you can. Daily events can also affect the market significantly (Brexit is a pretty good example), which means that you have to be in touch with the latest developments from all over the world if you want to be a serious trader.
Also, there are loads of tools that can help you with analyzing the data you get from your trading charts, and the more of them you master, the more information you can extract from the numbers you get. Invest some time in building yourself as a trader and the results will surely show.
How to Do Binary Options | Conclusion
To conclude, binary options are based on a simple principle, but there still is some complexity to them. The most important thing is that you don’t go in blindly, but fully aware of how things work in this industry. With some patience and skill, money can be made.
Also, don’t forget to research your broker thoroughly before you invest with them. Don’t rush things, keep a cool head and you will quickly see why binary options have gained so much popularity over the last few years.
For the comments: What are your thoughts on binary option trading? Have you given it a shot? Do you think it could be a profitable hobby or is it a waste of time and money?
About the author: Ben Prescott is a senior analyst over at BinaryOptionsTrading-Review.com. With years of experience in the trading business, he knows everything there is to know about this industry. Over the last few years, he has been reviewing binary options brokers and advising traders on how to trade, so if you need some info, head on over to his website and ask away.