Binary Options 2020 – How to trade binary options
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.
Binary Option. the complete Guide
Let’s see an example of binary options
With binary options you know in advance how much you can earn. For each correct forecast you would generally earn between 80 and 95% of your investment. Therefore, if you invest $ 100, you will receive a credit of $ 180 to $ 195% for each successful trades. This allows you to simplify your risk management and facilitate your decision making in the market.
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 + $91.
About Binary Options Trading
The percentage profits that traders can earn are typically higher in the binary options market than in any other market. Payouts range from 70% to 90% in ordinary trades, and up to 500% in the speculative high-yield trades. Trades with shorter expiries can open up the opportunity to make even more money.Try Binary Options Trading for Free
Type of binary options:
Up/Down or High/Low Options
These options are the classic binary options. To trade, you just have to choose an underlying asset and determine if its value will be above or below the entry price at expiration time.
In/Out, Range or Boundary Options
This is a binary options contract in which the trader predicts whether the asset to be traded will stay within a defined range of prices (IN), or trade outside this define price range (OUT) before the trade expires.
Touch/No Touch Options
A one touch option is if the underlying market will go through a set price before the expiry of the trade. If the market does go through this set price it will be settled at 100, of not the bet will be settled at 0. The return is 210%, if you trade 100$ you will receive 210$
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
Reasons to trade Binary Options
Have you tried your luck in trading options, but were a bit skeptical since all you’ve heard from people is that they have lost the shirt on their backs trying to trade? Well, there is now a safer way to trade, as well as have the opportunity to make easy profits, 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:
Less risky to trade
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 live in the US and trade forex, the new guidelines issued by the Commodities and Futures Trading Commission (CFTC) 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.
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
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.
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 site 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.
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Are binary options a scam?
Binary options are not a scam. 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 start trading. For more information about brokers you can consult the list in our “brokers” section.
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.