Binary Options 2024 – How to trade binary options
Welcome to our guide to binary options trading. In this guide, you will find all our expert opinions on trading these financial derivatives.
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Table of Contents
What is a binary option?
Binary options are a new way of trading online, allowing you to simply speculate on the rise or fall of an asset. For example, euro dollars or Amazon stocks. In binary options trading, For each correct prediction, the trader usually wins between 75% and 95% of his investment. this means that if you invest $ 100 and your prediction is correct you would save $ 180. (up or down) You can speculate on very short time frames, allowing you to trade hundreds of times a day. One of the advantages of binary options is that you just have to predict the direction of the price and you know in advance what your potential earnings are.
About Binary Options Trading
The percentage profits that traders can earn are typically higher in the binary options market than in any other market. Payouts range from 70% to 90% in ordinary trades, and up to 500% in the speculative high-yield trades. Trades with shorter expiries can open up the opportunity to make even more money.
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Let’s see an example of binary options
Unlike the traditional stock market, binary options traders do not actually buy and sell stocks. They only speculate on market sense via a financial derivative.
So basically in binary option trading yous just predict if the price of the asset will rise or fall.
Binary options are an attractive financial derivative for all type of traders, allowing you to speculate in as little as 60 seconds. Binary options trading is known to be easier than forex trading because you only need to predict whether the price of an asset will rise or fall over a period of time.
Now, for an example. Let’s say Google is currently priced at $525 and I believe that the price will rise to around $528 in 30 minutes. I could place a ‘call’ which means I believe it will go up, and then wait between 30 minutes to one hour depending on when the option I chose expires.
If I felt Google stocks price was going to go down I could place a ‘put’. Now, if at the end of the options expiration time if you were ‘in the money’ which means it closes above the price I purchased the option at I win my investment back plus 91% of my total investment. So if you are using IQ Option to trade for example and you had invested $100, you would win back your investment of $100 + $91.
Binary Option. the complete Guide
Try Binary Options: → Try Free Demo on IQ Option ←
How to Trade Binary Options – Step by Step Guide:
Here is our guide that takes you step by step on how to place a binary trade:
1. Choose your broker: To be able to trade binary options you need a broker. They are essential intermediaries to be able to trade online. You can see our reviews and opinions about the main brokers and our comparison to find the binary trading site that suits you best. Do not hesitate to open a free demo account on several of these brokers, this will allow you to see for yourself and choose the brokers most appropriate to your trading needs.
2. Select the asset or market to trade: Binary options traders can trade a multitude of different markets including stocks, indices, Forex, commodities and cryptocurrencies. This gives you a wide choice and gives you the possibility to speculate on the price of a wide range of assets like stocks, Forex currency pairs like EUR / USD or on the price of bitcoin for example.
3. Select the option expiration time: The options have an expiration date that you must choose according to your preferences or market conditions. Options can expire within 30 seconds to a year. It’s up to you to decide which expiration time scale works best for you.
4. Define the trade size: The size of your positions usually determines a potential gain proportional to your investment. However, please also take into account that 100% of the investment is at risk, so consider the transaction amount carefully.
5. Click on the Call / Put or Buy / Sell button: Will the asset’s value increase or decrease over time? Some buy / sell buttons are different depending on the broker. You should click on the Call / Buy button if you think the price of the asset will increase or click on Put / Sell if you think the price of the asset will be lower when the option expires.
6. Verify and Confirm the Trade: Most binary options brokers give to traders the ability to make sure the details are correct before confirming the trade. Check the details to make sure you did not make an entry error when setting up the transaction.
How to choose a broker:
Here is a list of pages that may help you choose a broker that’s right for you:
Compare all brokers – On this page you can get an overview of the features and offers of all the brokers we recommend.
Bonuses and offers – Get all the information about promotions, bonuses and commercial offers offered by brokers.
Low Minimum Deposit Brokers – These brokers are a good option if you want to trade without having to deposit large amounts of money to start.
Demo Accounts – Demo accounts allow you to try out a trading platform or strategy “for real” without depositing any money at all.
Halal Brokers – Are you part of the growing community of Muslim traders? These Islamic trading accounts are offered to clients who wish to do halal trading, which allows them to invest without having to separate their investment activity from their religious tenets.
Brokers who accept Bitcoin – More and more binary options brokers accept Bitcoin and cryptocurrencies as a means of deposit and withdrawal and also allow speculation on the price of this new type of asset via binary options
Best Marijuana Stock Broker: Want to Invest in the Growing Legal Marijuana Market? here, You will find a list of the best brokers to invest in US and Canadian marijuana stocks with binary options.
Type of binary options:
Up/Down or High/Low Options
These options are the classic binary options. To trade, you just have to choose an underlying asset and determine if its value will be above or below the entry price at expiration time.
In/Out, Range or Boundary Options
This is a binary options contract in which the trader predicts whether the asset to be traded will stay within a defined range of prices (IN), or trade outside this define price range (OUT) before the trade expires.
Touch/No Touch Options
A one touch option is if the underlying market will go through a set price before the expiry of the trade. If the market does go through this set price it will be settled at 100, of not the bet will be settled at 0. The return is 210%, if you trade 100$ you will receive 210$
Ladder Options
The Ladder option is decided on whether the market will end the period of the trade above a certain level. For example a ‘Wall Street to be above 12200 level’ bet will be settled at 100 if the market finishes above that figure or 0 if it finishes below it.
Binary Option: How to Start?
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Reasons to trade Binary Options
Binary options are very simple up or down trades that give you return at expiration if you are what we call “In The Money” or ITM. The payout in these trades are already predetermined, which is always a fixed amount and can be seen before you trade on any particular platform or broker website. You therefore know beforehand the risk as well as the profits that you would make at the end of the expiration of the option. You don’t have to be an expert at trading if you are thinking of trading in binary options. All you have to do is set whether or not you believe the price will go up or down from where it currently is by the end of the expiration of the option which may be anywhere from 15 minutes to 1 hour.
The rewards gained from trading in binary options are much higher than the other trading options. In most cases once the contract is over the returns on the investment is around 85%. This is surely a very high return on an investment contract that would probably be just a 5 minute or an hour old contract. The returns and turnover that an investor gains with binary options is much higher as compared to other interesting options. Moreover, traders find it extremely interesting trading in binary options because of its short contract length, and high returns.
Since the investor does not buy the asset but the option, the profits in binary options open up to a larger audience who would have otherwise only invested in stocks that have high values and prices. Also since binary options are linked to change in the direction of trade and not the difference in price, investors can make huge profits with little movements in the market.
Binary option contracts are unique and have some characteristics that sets them apart from other financial instruments. Traders can trade assets in different asset classes, and the traders always have an expiry date or time. The trader is also put in a position where he knows exactly what the trade will cost him, and what he will gain or lose depending on the outcome of the trade.
There are many reasons why you should trade binary options. Binary options were licensed for the retail trading market the same year that the conventional markets went haywire after the collapse of the subprime mortgage industry in the US.
Some of the reasons are as follows:
No re-quotes, no slippages and no leverage or margin requirements
In the traditional financial markets, there are a lot of factors that traders must contend with. Leverage, margin, slippages, poor internet network and unscrupulous practices by some brokers can affect the trade outcomes, making forex and commodity trading some of the riskiest trading ventures to get into.
Binary options trading is devoid of some of these factors. There are no re-quotes, no slippages and no leverage or margin requirements to content with. There are also no margin calls.
More choice of what to trade
Some binary options brokers offer up to 90 assets. That is 90 different financial assets that can present an opportunity to make money at any given point in time. If the market saying about a bull market being in existence somewhere, you surely have better chances of finding such opportunities in the binary options market.
Reduced Cost of Trading
If you if you want to trade forex, some broker will require you to open an account with at least $25,000 for forex trading, and even more for options trading. With binary options, you can get into the market with as low as $100. YOU DO NOT NEED AN ARM AND A LEG TO TRADE BINARY OPTIONS.
Better payouts
The percentage profits that traders can earn are typically higher in the binary options market than in any other market. Payouts range from 70% to 90% in ordinary trades, and up to 500% in the speculative high-yield trades. Trades with shorter expiries can open up the opportunity to make even more money.
What is traded on the Binary Option Market?
Securities from several asset classes are traded in the binary options market. The asset classes are:
- Currencies (forex)
- Stock indices
- Stocks
- Commodities
- Cryptocurrency
Currencies are the commonest assets traded on the binary options market. They are traded on a 24-hour basis to reflect their 24-hour operational status. A wide range of currencies which include the major currency pairs and the Yen crosses are traded.
Stock indices commonly traded are:
- Dow Jones (US)
- NASDAQ (US)
- S&P500 (US)
- Xetra DAX (Germany)
- FTSE100 (UK)
- Zurich SMI (Switzerland)
- CAC40 (France)
- TADWUL (Saudi Arabia)
- MICEX10 (Russia)
- IBEX35 (Spain)
- Strait Times (Singapore)
- SSE180 (Shanghai, China)
- Tel Aviv 25 (Israel)
- Nikkei 255 (Japan)
- Hang Seng (Hong Kong)
There are others but these are the commonest you will see on most binary options platforms. Generally, stock indices are only open for certain hours of the day when the parent indexes are open for business.
Commodities are usually not well represented in the binary options market. But it is almost a constant for gold, silver and crude oil to be listed. Any other commodities added is a bonus for the trader. Commodities can only be traded when the parent markets traded on the floor of the Chicago Board of Trade (CBOT) are open for business.
Stocks should actually be number 2 on this list because so many stocks are traded. The exact list of stocks differs from broker to broker, but the common technology stocks of Apple, Microsoft, Google and FaceBook are familiar sights here.
If you are new to options trading, you can see Professor Shiller from Yale University presenting the main options trading ideas:
American vs. European Options: What’s the Difference?
This question typically relates to traditional options, as binary options will more than likely never be offered in the American option. Understanding the difference between the two helps to comprehend the reason why this is.
The two styles mainly differ in how the contracts can be exercised. An American option contract can be exercised at any time up until its expiration. For example, a trader that currently has 1 active option contract for stock can exercise his right to buy or short the stock immediately after buying the option contract. Now imagine a binary contract using this model – traders could buy contracts with very lengthy expiration dates and then exercise on them at any time up until then to receive the payout.
This makes American-styled binaries unreasonable. In contrast, European option contracts can only be exercised at the moment of expiration. In regular option contracts, “exercising an option” means that the owner of the contract exercises their right to buy or short the underlying asset at the specified price. Until the contract is exercised or expires, it can be traded to other option traders. In the world of binary options, exercising means to close the contract and realize the loss or gain. Taking this concept, since trades can sometimes be exited before expiration, this does not necessarily mean it is being exercised. In this case, the broker simply either pays the trader or receives funds from the trader, which will be smaller than the stated return or initial investment.
Binary Options Brokers
To start trading in binary options, the first thing to do is to open a brokerage account with a serious binary options broker. On our website you will find a list of recommended brokers, where only the best binary options brokers are included. All of these brokers are considered to be the most serious and will be suitable for most traders.
In general, the best binary options brokers offer free and unlimited demo accounts; which will allow you to practice and train in good condition and without the risks generally associated with online trading.
Therefore, it is recommended to open a free demo account to familiarize yourself with the platform and practice trading for free (see table of the best binary brokers), this will allow you to try their platforms and improve your trading skills before you start. get fully into online trading with real money.
| Brokers | Payout | Min. Deposit | Bonus | Rating | Free Demo | Website |
|---|---|---|---|---|---|---|
| 98% Payout | 10$ Min. Deposit | 50% bonus (promo code: binary-option) | | Open a Free Demo Account | » Visit |
| 92% Payout | 50$ Min. Deposit | 50% bonus | | Open a Free Demo Account | » Visit |
| 95% Payout | 20$ Min. Deposit | 200% bonus (promo code: CRAZY200) | | Open a Free Demo Account | » Visit |
| 91% Payout | 10$ Min. Deposit | No bonus | | Open a Free Demo Account | » Visit |
| 95% Payout | 250$ Min. Deposit | 200% bonus | | Open a Free Demo Account | » Visit |
| 95% Payout | 250$ Min. Deposit | 200% bonus | | Open a Free Demo Account | » Visit |
Are binary options a scam?
Binary options are not a scam. They are a High Risk / High reward financial derivatives. However, there are some unscrupulous brokers and various binary options scams on the internet. So as with any type of investing, it is always worth doing your own research to make sure you are trading with a legitimate online broker before starting trading. For more information about brokers you can consult the list in our “brokers” section.
Fraud and scams in online binary options trading has been a big problem in the past. Many unlicensed brokerage firms and companies were exploiting loopholes and using unfair practices to scam traders attracted to these new exotic derivatives. which has contributed to giving a bad reputation to this industry.
Fortunately, dishonest brokerage firms are disappearing and regulators are taking steps to protect investors in the event of litigation. However, traders must turn to regulated brokers to be assured of the security of their deposited funds and of the good practices of brokers towards their clients.
Important! NEVER trade with a broker on our list of scams and non-recommend brokers, follow our recommendations and only trade with trusted brokers that we recommend.
How to avoid scams?
Here is a list of bad practices that dishonest brokers tend to use to scam traders. These are glaring signs of scams that should alert you. Knowing these bad practices will help you avoid most binary options trading scams:
Marketing promising huge gains
This is a clear warning sign. Brokers who present binary options to you as an “easy and fast way to make money” are likely to be untrustworthy. Binary Options Being High Risk / High Reward Financial Derivatives – Options trading should not be presented as an easy system to “make money online” and should not be sold as such.
Avoid Cold Calls
Serious brokers never make cold calls. Cold calling is a practice used most of the time by dishonest and unregulated brokers, for the sole purpose of getting an initial deposit on their platform or getting clients to deposit more money. Be wary if a brokerage firm contacts you this way. This would also include contact by messaging, email, and any form of unannounced contact with the aim of getting you to invest or deposit money is a blatant sign of a scam.
Know your broker
Some unscrupulous company uses schemes to send new clients to a broker with which they partner, so that the trader has no idea which broker they are trading with. These sales funnels are generally associated with the “get-rich-quick” marketing which we mentioned earlier in this article. You should absolutely avoid these brokers. This will save you from all the confusion and disappointment associated with this type of operator.
No one should trade for you.
keep control over your investments. You should absolutely avoid brokers with “account managers” who want to trade for you. Creating big conflicts of interest between the broker and the user. Employees of these brokers will always encourage traders to make large deposits and always take more risk, until they lose their money entirely. For these obvious reasons of conflict of interest, traders should not allow any business or person to trade on their behalf.
Read the terms and Conditions carefully
When accepting a bonus or an offer from brokerage firms, you should always read the full terms and conditions of use which are usually visible at the bottom of brokerage sites via the “Terms & Conditions” or “T&C” links. Read carefully to avoid certain common problems. These terms of use may stipulate the impossibility of any withdrawal and the locking of an initial deposit (in addition to bonus funds) before a minimum volume of transactions required by the broker is carried out. Familiarize yourself with these terms of use to avoid the frequent problems associated with withdrawals and bonuses offered by brokers, Some operators also stipulate on their terms of use the possibility of canceling a bonus if it does not meet your needs.
Regulation in the binary options industry
Regulators around the world are making rules and regulating the online trading industry. The main regulators currently include:
• Financial Conduct Authority (FCA) – This is the UK regulator for brokers regulated in Great Britain.
• Cyprus Securities and Exchange Commission (CySec) – It is the Cypriot Regulator, which often operates throughout the European Union via the MiFID directive
Commodity Futures Trading Commission (CFTC) – It is regulator of the United States of America , establishing the rules on trading for late investors and American investors.
• Australian Securities and Investments Commission (ASIC) Australia’s securities and investments regulator regulating brokers authorized to operate in Australia
There are also other specialized regulators like (Isleof Man Financial Service Authority (IOMFSA) and Malta’s financial regulator, The Malta Financial Services Authority (MESA) which since 2018 it is also responsible for regulating virtual financial assets. other regulatory authorities are interested in binary options and online trading.
While some unregulated brokers are trustworthy, the lack of regulation should be a clear warning sign to potential new clients of these platforms.
ESMA
ESMA (European Securities and Markets Authority) recently banned the marketing and sale of binary options to European retail traders. However, this ban only applies to brokers regulated in the EU.
European traders therefore have two possibilities to continue trading binary options: First, they may decide to take the risk of trading with unregulated brokers – Some unregulated brokers are serious, responsible and quite honest, but there are some also many who are not.
In the event of a problem with the broker, you will have no legal way to get your money back, because the regulators do not protect consumers against possible abuses by unregulated brokers.
The second, less risky option is to open an account with a brokerage firm regulated by a strong regulatory bodies outside the EU. Take, for example, ASIC in Australia is a very good example of a financial market regulator that does not enforce a ban on binary options. It is therefore possible for European traders to trade binary options through brokerage firms regulated by ASIC as long as it accepts traders from the European Union.
There is also a third possibility for European traders. This last option consists of opening a professional account while respecting certain eligibility criteria for pro trading accounts. Trader opening a “professional” type account are excluded from this new ban, as the ban is only intended to protect “retail” investors. Professional traders can therefore trade binary options with regulated brokers in the European Union such as IQ Option. However, to be eligible for a professional trading account, account holders must meet at least two of these three criteria:
1. Open 10 or more transactions per quarter, of € 150 or more.
2. Have € 500,000 in assets or more
3. Have worked for a minimum period of two years in a financial company and have good experience of financial products.
Please note that all of this informations is not investment or legal advice. As legislation may change, these informations no necessarily reflect the present law or regulations. We recommend that you consult a specialist lawyer to find out about the laws applicable in your jurisdiction.
What kinds of risks are involved with a binary options?
While the allure of binary options usually comes from knowing all of the risks before taking the trade, there are a few that aren’t as obvious that should be considered.
- Market volatility is more often than not the biggest factor when it comes to risk. Entering trades on options contracts that are based on assets which tend to move sporadically without warning can – and eventually will – move against the trader’s position and lose a trade that would’ve otherwise ended profitable.
- There’s also the factor of risking more per trade than the potential payout. Brokers set their payout rates based on probability, and in doing so they tend to manipulate each contract slightly in their own favor. If they didn’t, they wouldn’t make money. Some binary brokers also charge fixed fees or on a spread-basis. Regardless of the revenue system they choose, the trader will always start out in the red. In other words, where traders of other financial markets are used to setting 1:1 risk-reward ratios, binary options oftentimes offer less than 100% payouts with the potential to lose 100% of the investment. With some contracts, payouts can range up to 500%, but these are generally offered because the probability of the trader winning is low.
- Even though the risk per trade is always limited, traders should also take into account that their profit margin is also limited. Traditional options offer higher profits and losses because their value is derived from the magnitude of the difference between strike price and market price; binary options are strictly based on a yes or no question being answered between these two prices.
- Tightening regulation laws is also an influential risk. Because binary options are relatively new and the uncertainty surrounding the instrument, it’s likely to face more restrictive policies in the future. The US government has already banned brokers company for unlawfully soliciting customers.
- The last risk to consider is the structure of a binary option model. The entire trade is based on an extremely specific value, meaning one or two ticks/pips can ultimately decide the trade’s fate. Markets are almost constantly moving, which means moving a small increment in either direction isn’t unlikely. This is especially important for binary option traders. It should also be noted that the risk that comes with binary options is harder to hedge against compared to other investments.