Learn How To Trade Binary Options Successfully And Profitably
How to trade binary options is a crucial question frequently asked by beginners, including our readers. So, we aim to give you a proper solution through this article.
Binary options are popular because of their simple trading nature, with a fixed return percentage. Despite its simplistic nature, many traders often use their binary trades more than you think.
It boils down to lack of trading knowledge, experience, or choosing the wrong broker. Whatever the reason, there must be a clear plan ahead of trading, so you don’t face ill consequences in your trading result.
Before enlightening you with the step-by-step guideline on how to trade binary options profitably, we will brief you on what binary options are.
What Are Binary Options?
We are going to explain a basic concept on binary options here, but for detailed information, read what is binary options trading article.
Binary Option is an investment type where you have two outcomes, all or nothing. It has also a fixed expiration.
You have to accurately predict the outcome with an expiry time to make a profit. Either you will win a trade or lose all the money that you have invested for a particular trade. Moreover, you can perform binary trade in two ways.
- Manual Trading
- Automated Trading
In manual trading, you do all the hard-work and place the trades yourself using trading strategies. But in auto-trading, automated trading software does the trading for you, using a build-in trading strategy.
Which method you use for trading depends entirely on your preference. If you are a new trader, you might take help from a trading robot in exchange for a price. Or you can learn the basics of trading, and do it yourself.
Binary Trading Example
You already know through our citation that binary options give you a fixed payout and loss amount. To power-up your trading journey, you must have to follow some rules.
Before jumping to those specific points, we will try to connect your existing knowledge with a small example.
James Chen from Investopedia explains binary options trade with the help of an example.
Assume stock XYZ is currently trading at $64.75. A binary option has a strike price of $65 and expires tomorrow at noon. The trader can buy the option for $40. If the price of XYZ finishes above $65, the option expires in the money and is worth $100. The trader makes $60 ($100 – $40).
If the option expires and the price of the stock is below $65, the trader loses the $40 they put into the option. The potential profit and loss, combined, always equals $100.
5 NoteWorthy Steps To Trade Binary Options
What you are expecting from this phase?
Hang on! Let me guess. Maybe, you might think that we will share with you a spell so that you can earn a lot of money. But, the section will focus on the 5 noteworthy steps on how to trade binary options.
- Choose a regulated broker
- Analyze the market and asset
- Practice on a demo account
- Make an initial deposit
- Start Live trading
As each step is very powerful, so our recommendation is to read each step without skipping.
# Choose A Broker
Choosing a broker without evaluating some factors can bring disaster. On the other hand, the retail investment market is large and have a lot of scopes. According to a report of SEC,
approximately 7,600 investment advisers registered with the SEC that serve retail investors, with over $12 trillion in retail client assets under management, and approximately 34 million clients.
Isn’t it crazy!
The actual craziest thing is that one has to choose one or more than one broker from thousands. Here, we will mention some factors that you should keep on mind before selecting any broker.
- Demo account
- Minimum initial deposit
- Ease of use
- Variety of assets
- High Payout percentage
- Fast withdrawals
- Multiple modes of payment
Taking all the above factors into consideration, we have prepared our list of recommended brokers that you can trade with.
These brokers meet all the requirements such as regulation, offering a demo account, huge asset index, high payouts, fast withdrawals, easy-to-use trading platform, and much more. Here is the list of brokers Binary.com, IQ Option, and BinaryCent that we think will offer you the best binary options trading experience.
Maximum Payout: 100%
Demo Account: Yes
Maximum Payout: 100%
Demo Account: Yes
Maximum Payout: 95%
Demo Account: Yes (Paid)
# Analyze The Market & Asset
The trading market is unpredictable and changes every sec. Three main types of analysis bring an optimal trading result.
- Fundamental Analysis
- Technical Analysis
- Sentimental Analysis
Here, an economic calendar works as a ground from where traders use data to forecast the market movement. As there is “no” best method of analysis, so you have to pick the most viable option depending on time-frame and asset information.
# Practice On A Demo Account
Registering an account is free of charge with most brokers. All it takes is your vital information, such as an email address your first and last name. Once you have created an account, you need to practice trading through a demo account.
Train yourself with the help of a demo account until you create an unbeaten situation. Educate yourself on the basic concepts of binary trading. Understand what strike price, expiry time, call, put option, etc. Familiarize yourself with the different ways you can trade binary options.
Just because the funds and the outcome in demo accounts don’t hold any real meaning, it doesn’t mean you should trade recklessly.
Trade on the demo account exactly how you would live trade. This practice will develop your trading skills and build valuable experience.
There is no fixed duration on how long you have to practice on a demo account. Take as long as you need. Finally, you can step up to real trading when you feel confident enough.
# Make An Initial Deposit
The initial deposit amount varies from broker to broker. You need to deposit in the trading account to carry out live trading. On the other hand, there is a big difference between an investment and a deposit.
An investment is a price that you pay to get the future value. Meanwhile, the deposit is a certain amount of money that one needs to open an account.
It is wise to start with a small deposit of $10 to $20.
# Start Live Trading
You can start trading on a real account once you are familiar with the ins and out of binary trading. Select your preferred asset and choose your investment amount. Depending on your prediction, buy a call or put option.
Place your trade, and wait until your trade expires. In the next section, we have listed some tips and techniques on binary trading to make your trading successful and profitable.
How To Trade Binary Options Successfully And Profitably - Best Way To Trade
We already discussed a few steps above. Those steps are the principle that one trader should follow whether he is professional or not. After that, you need to turn your binary options trading into a successful profit machine.
Don’t miss out the chance by skipping points that we covered below. Follow these tips to ensure you don’t lose money while trading binary options.
- Choice of assets
- Start trading with small
- Eliminate emotions from trading
- Choose the right expiry time
- Follow the market news
- Risk management
- Knowledge is power
~ Choice Of Assets
As you can trade with a large number of assets, so trade those assets that you are most familiar with. Do not take unnecessary risks by trading in markets that you cannot predict.
Successful binary trading depends on how well you can predict the market. Follow the market news before executing trades. Diversification of your portfolio is one way of reducing your overall trading risk. But it doesn’t mean you should diversify to assets that may not be profitable to you.
~ Stat Trading With Small
You may have heard about the risk management where you have stuck on either the 1% or 2% rule. It is a general rule of thumb for traders.
90% of traders failed in trading because they lacked knowledge of money management. Investing a considerable amount of money will not help you to increase profits.
So, at first, start with a small amount like $10. After gaining valuable experience, you can start increasing your trade size. No matter how much you practice on a demo account, trading on a live account is a different scenario. As there is real emotion involved, which brings us to our next point.
~ Eliminate Emotions From Trading
Professional traders are not super-human. They also fight to control their trading emotions. Eventually, all traders must go through a cycle of market emotions.
Controlling emotions is not a skyrocket. However, you will find a difference in the gratitude of a winning trader and a losing trader. No wonder a low expectation level can save you from a massive failure.
Stop dreaming about getting rich quickly and follow the 7 secrets that will help you to improve your trading emotions or psychology.
~ Choose The Right Expiry Time
It may seem like a matter of preference or a trivial issue, but even expiry time is a crucial factor in binary options trading.
For example, a trend was supposed to reverse within an hour. But if you placed a trade with 2-hours expiry, the trend would have reversed by then. And, you had lost the trade.
~ Follow The Market News
Whatever underlying asset you may trade, you need to be informed on the latest global events, and news associated with that asset. Many traders build strategy depending on the market news. So don’t skip on that, and act accordingly.
For example, if there is negative news regarding the gold and a price drop is imminent, log in to your binary options trading platform, and open a put position on gold.
Reacting appropriately to market news can bring in more trading success than you think.
~ Risk Management (Hedging)
Unless you are a pure gambler looking for absolute results, you should make use of hedging. Hedging is a money management strategy used to protect your profits. In this way, if you are wrong on your prediction, you lose money from your call option, but you regain that back from the put option.
Protecting your investment by buying a binary option contract opposite to your initial contract is hedging. Hedging may reduce your overall profit potential, but it also protects your capital.
If you quite confident about your prediction but still want to hedge, invest the lesser amount in the hedge position compared to your main position.
~ Knowledge Is Power
Trading education is one of the big factors that play a vital role in success. You need to constantly educate yourself with trading knowledge. Even though binary options look easy and simple, there is a lot that goes into constantly turning your trades into a profitable one.
Moreover, you are less likely to commit mistakes and perform better trading analysis when you are equipped with trading knowledge.
Learn To Trade Binary Option (Manual Vs. Automated Trading)
You can either manually trade binary options or can use binary options software, which will do the trading for you.
When you trade manually, you choose the asset, the expiry time, and most importantly, the decision to call or put. Everything depends on you alone. Moreover, you have to set a strategy using indicators and trend lines to decide.
In the case of automated binary options trading, a binary robot does all the work for you. It is a programmed software that makes decisions based on specific algorithms.
On the other hand, most binary options robots allow you to customize settings such as investment per trade, risk level, indicators, and choice of assets.
However, if you want to altogether leave your fate at the hands of the trading robot, you may do so. Or you can put manual effort also by building strategy.
We would recommend a mix of both auto and manual trading for the best results. We have compiled and reviewed the best binary option trading robots for you.
Returns up to 90%
Demo Account: Yes
Returns up to 80%
Demo Account: Yes
Regulated and Trusted
Returns up to 80%
Demo Account: Yes
Regulated and Trusted
Binary options have earned a bad press due to the actions of many scam brokers. However, there is no doubt about the legitimacy of binary options. It is a proven method of trading that brings profits in a short period.
It takes a lot of factors to be successful at binary trading. The purpose of this article was to educate new traders, on how they can maximize their profits in binary options trading.
To succeed in binary options trading, you need to learn how to trade binary options. There is no alternative or shortcut. Put time and effort in educating, and then practice what you have learned.