TradeBinaryOptions.net will help you start trading binary options, showing you the best strategies, broker reviews and trading tips. In order to understand how binary options trading works one needs to be clear about the underlying basic concept of the trading strategy. Binary Options are also called all-or-nothing, normal fixed return binary options or simply digital options. Here estimates are made of the performance of the underlying assets during a certain time period. In other forms of investment the investor first purchases the asset that they wish to invest in and then the value of the gain or loss are decided as per the change in the value of the asset.
When the asset is sold in the market at a time when the value increases, it leads to profits while selling the asset at a time when the value decreases causes losses as the original amount that was invested cannot be gained back.
How does binary option trading work?
When we talk of normal fixed-return binary options trading it is usually referring to two kinds of trading possibilities. One can predict call or put, given the market conditions and other factors influencing the price of the asset. If you wish to invest when the asset price is predicted to rise, it is best that one chooses the call option. In other cases, if the asset price falls, one usually chooses the put option.
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What’s the difference between binary options and traditional trading?
There are several differences between binary options trading and traditional options trading/day trading. With Binary Options your profit or loss is known before the expiry time.
For example if the broker offers a 85% payout, and you buy a contract for $100, then you know that there are two possible outcomes: you either make $85 profit or you lose your $100. It doesn’t matter if the market direction is heading more in your favor. It’s enough if the price is 1 cent above the strike price, if you buy a call option.
The strike price is determined by price of the asset and the moment of purchase. This will be compared to the price of the assets at the expiry time. You will make the same amount of profit in case the gained value is 1 cent or is $1000. Your only goal is that you predict the right market direction. Binary options brokers usually have a much lower minimum deposit, than traditional brokers.
With traditional trading you won’t know your potential profit right off the bat, as this will be influenced by the exactly gain or loss of a value. With this type of trading you can decide when to sell the asset and there is no fixed timeframe.
Different Kinds Of Assets
The first step in these investment matters is to choose an asset. There can be different assets that one can choose to invest, but there are 4 categorties: indices (national or international indices), forex, and commodities like gold, silver, oil, corn, wheat, coffee, and stocks. The binary options brokers usually have ~130 or more assets that you can trade. There are many brokers that offer a huge variety of assets and there are still brokers like finpari that still accept US traders.
Learn How to Trade Binary Options
Those who are interested in trading in binary options need to understand the different techniques as well as strategies involved. There are several online resources that can be resorted to for learning by novice as well as experienced traders.
Educational material needs to be referred to in order to understand the scientific trading strategies followed in this kind of trading rather than depending on feelings or luck. One can start by investing in a commodity and has to predict as per the price movement of the commodity within a time frame which can be as little as one hour.
The decision has to be on how much to invest, instruments as well as time frames. The right actions will lead to considerable profits made in a short time frame. However, it is imperative that one resorts to a reliable trading platform and techniques in order to undertake binary options trading.
Those who are starting off with binary options trading will surely find several trading strategies to follow. However, when one is new to this trading platform, they might find it difficult to choose the right strategies. Here are some strategies recommended that are easy to understand and can help one to start off trading profitably on the platform.
How To Trade Binary Options Profitably
When you are deciding to trade in binary options you need to know the right tools and techniques for being able to trade profitably in different assets in the market. Those who are experienced investors would like to know the pulse of the market, especially with regard to the asset that he or she is trading in. It is also important to stay updated on financial news in the local and international trading forums which influence the asset trading platform directly or indirectly.
- The Guiding Line: When one is new to the world of trading in binary options it is important to be level headed and not be a rush in taking part in the several online trades that take place in different forums. The trading strategy that is used needs to be well thought out as well. There are some guiding principles that one should opt for in order to trade profitably.
- Invest In Diverse Trades: When one is looking at signing up for at a suitable online trading platform, it is best to choose one that offers diverse trades in different assets which one can participate in. One should be confident of a certain trading strategy and opt for one asset where the strategy works well.
- Look For Bonuses At Binary Options: If you wish to lock in profits it is best to take on a site that offers several sign up bonuses and other schemes so that one can stock up well in advance. There are certain sites that guarantee a profit when one trade in binary options using their platform for the first time. Many offer bonus cash at the time when one signs up for the first time.
- Try Trades With Early Exit Strategy: There are some binary options trading sites that offer an early exit option on the trades that are made. When one's trade is making profits, but the time frame of the trade is not yet over, you could decide to exit and take the profits as are showing before the trade matures. In case you are uncertain of the final outcome, this option allows one to get a sizeable profit earning from trading options on certain trading platforms.
It is important to back up the above mentioned strategies with sound knowledge of the asset's performance in the market and not give in to tips or rumors that are not backed by solid market information. Also never sign up with a broker that is not regulated. There are only a few brokers that have an ASIC license.
Binary Options Trading Strategies For Beginners
Especially if you are new to binary options trading, you should do some research before risking your money on the broker sites. One of the first things you should do is to open a demo account with a binary option broker. This way you can see how the trading platform works and you can get accustomed to the different features and functions of that broker. Below you will find a few of the best strategies that you can use when trading binary options online:
The Moving Average Method
The moving average convergence divergence indicator is a useful tool that is a short term based trading tool. As the binary options are a short term trading mechanism, one can profitably use this method to predict the pattern of movement of an asset's price in the market. Two moving averages are used in this method as well as a histogram. A trend is understood from the signals that are found on these charts. For a trade that is being considered for a time span of within five minutes these charts prove effective.
Studying The Trend
One strategy that proves effective in all trading platforms is the use of trends. The trend is your friend and this philosophy works for all kinds of trading including binary options. The trend might take time to understand, but analysis of the trend lines for an asset's price movement is vital to take the right call or put option.
The Pinocchio Strategy
There are different trading aspects that are taken into account in this trading strategy. There is a technical price action signal which is called the pin bar which is also known as the shooting star. This signal offers contrary analysis and helps one to identify the reasons which support or the factors that resist a certain action with regard to the asset price.
Hedging With Binary Options
In this kind of trading binary options hedging is important. One needs to protect one's account by opening up offsetting positions. When offsetting positions are opened up it can help one to protect themselves against unexpected losses. It is also beneficial in locking in profits. Even if binary options trading is a simplified form of trading one needs to protect themselves by hedging.
The 123 System
This is a simple strategy where the price is determined on the reversals. The system relies on the reversal pattern which is formed at the resistance and support levels. For newbies who are embarking on options trading understanding this strategy is very important based on which certain charts are formed to help one make quick investment decisions.