Binary Options: What are they and How to Start Trading Them

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Binary options are short-term financial contracts where traders predict whether an asset's price will rise or fall by a set expiry time.

If the prediction is correct, the trader earns a fixed return; if not, the full investment is lost. It’s a high-risk, all-or-nothing trade.

Binary options (BO) trading has many positive features. Starting with your first trade, you will have the possibility to get up to 85% of the amount you invested. Another important feature of this trading type is its high-security/low-risk level in comparison with other options. The risk level of a particular financial operation can easily be identified in advance because binary options give you the possibility to see the amount of your expected profits or losses immediately. Beyond that, when using these instruments, the trader can choose a time period during which a specific option’s execution shall be performed, and that means that it is possible to perform short-term trading. There are many binary options success stories and everyone can be successful.

If you are not sure that you will do everything right on the first try, or if you don’t want to risk your money before you are ready, just try to perform your trading operations with minimum financial investments or on a demo account. You can independently set your own account’s size because binary options allow you to invest as little as $1. After becoming more experienced, you will be able to close transactions with larger financial volumes.

What are binary options?

Binary options are a method to make money on the financial markets. The key advantages of these instruments lay in the simplicity of work and in the possibility to get high, and most importantly, known-in-advance profits from your transactions. All you have to do is find the right way to determine how the price of a certain asset (currencies, oils, or stocks) will change during a specific time.

But like many trading methods binary options may have some disadvantages. For example, if you fail to correctly determine the changes in the exchange rate of the assets, then you will lose your bet. Binary options are a real financial instrument, but they come with significant risks.

Novice traders can try binary options copy trading. With this tool, you will earn your first profit and be able to follow experienced traders.

Binary option types

Many brokers offer a wide variety of trading instruments while modernizing old ones and developing new tools. In this section, we will list the most popular tools and those most commonly used for trading.

Binary option – high/low
When using this instrument it is very important to correctly forecast the increase or decrease of the price within the specified time. All you have to do is to select one of the actions. If upon completion of the option’s execution, the price is higher than at the beginning, you will get your profit. This is one of the most popular variants.
Binary option – Touch
When working with this instrument, you have to determine the level that the price will touch (i.e., reach or will not reach) during its increase or decrease. Regardless of the direction the price goes, after reaching the determined mark, you receive your money. Another variant is when the price does not reach the determined mark. If using the previous variant, you get your profit after the first touch, then using this variant you have to wait until the transaction’s execution is completed. In case the price doesn’t touch the predetermined mark within this period of time, then your profit remains.
Binary Option – Range
When working with this instrument, the price must remain within the range preset by the trader. To make the execution of the range profitable, the trader has to specify the price range, in which (in his view) the price will change during the specified period of time. The trader gets a profit in when the price doesn’t go beyond the specified frames.
Binary Option – Spread
When working with this instrument, it is not only about forecasting if the price is to be above or below the current mark. You also have to indicate its exact value. For example, you can make a forecast of the price decrease by 10 points within the next 30 minutes. Such option type is riskier because it can be a lot more complicated to forecast such precise data than just to indicate if the price goes up or not. But if you deal often with such transactions, many brokerage companies will give you a higher percentage because the risk level of such transactions is bigger.

Step-by-step guide on binary options trading

To start making money on binary options follow the simple instructions below.This step-by-step guide will allow you to easily get started in the binary options market, as well as get extra payments from the Traders Union in the form of a rebate of part of the spread for each transaction completed. Follow these steps:

Register on the Traders Union website
By becoming a member of the Traders Union and opening an account with a selected binary broker, you will get extra payments in the form of a rebate for each transaction completed on the binary market.
Choose a broker from the Traders Union Binary Rating
Only reliable binary options brokers are presented in this rating, and they are regularly verified by Traders Union experts. The higher a broker is in the rating table, the more popular it is among customers.
Open a real trading account on the broker’s website
Go to the broker's website using the Traders Union referral link on the Union's website. Open a real trading account on the broker's website and enter the number of this account in the “Accounts” section of your personal account in Traders Union. Read also How To Verify Your Binary Options Trading Account
Deposit to a brokerage account and start trading
After the account is confirmed by the Traders Union specialists, you can start working on the binary market and start buying and selling binary options.

Top binary options brokers

To trade binary options effectively, it's important to choose a broker that offers fair payouts, fast execution, and strong regulation. We have analyzed and compared top binary options brokers to help you find the most reliable platforms for secure and profitable trading.

Top 5 binary options brokers
	Foundation year	Min. deposit	Min. trade size	Min. Payout (%)	Max. Payout (%)	Open an account
CloseOption	2013	5	1	17	95	Open an account Your capital is at risk.
IQcent	2017	100	0.01	70	95	Open an account Your capital is at risk.
Pocket Option	2017	5	1	50	128	Open an account Your capital is at risk.
Nadex	2009	250	1		100	Study review
Raceoption	2014	250	0.01	70	95	Open an account Your capital is at risk.

Of course, the list of brokers doesn’t end here, because the financial market presents plenty of opportunities for BO trading. We have provided you with the information about the three best BO companies. If you want to see the full list of binary brokers, visit our Binary Brokers Ratings.

Best binary options strategies

It is practically impossible to make a large profit while trading binary options without using a well-considered strategy. Any trader is free to choose his trading strategy and brokerage company depending on his goals. You can trade manually or use binary options auto-trading software.

Some people just use “trendy” strategies with these instruments, others trade using long-term or short-term strategies, and some users aim to get their profits by using any method necessary. Today, the financial market is full of various BO trading strategies, and it would be virtually impossible to list all of them here. Also, keep in mind that the financial market is constantly changing and is frequently being influenced by different political and economic factors. So it is not always easy to find the right trading strategy that would work permanently and smoothly under such conditions. Let’s examine the most suitable strategies for beginners:

Three-in-a-row strategy
- Moving Average (moving the average price on a chart, which helps to determine the trading trend and when to stop trading);
- Stochastic (helps in determining the price deviation at the moment from its previous values);
- RSI (relative strength index measures a trend’s strength and determines the spots for chart changes).
Simultaneous use of all three instruments gives traders the ability to perform the correct assessment of the situation on the market and to make an informed bid. All too often, there are situations in which every indicator (separately from other indicators) may give an imprecise signal. However, while using these indicators simultaneously, they can filter out each other’s values, thus making it possible for traders to perform a proper analysis of the current market situation and take benefits from this BO trading strategy. Read also information about binary options performance to maximize your profits.
Using the “reverse” strategy for binary options trading
The strategy’s main idea is to define on a chart those moments when the price enters a trend and to forecast the next most appropriate moment to make your bid and get some profit. The following indicators should be used to analyze a chart under this strategy: Bollinger Bands, MACD, and MA. When using this strategy it is important to make bids in the timeframe that shows a steady upward trend.
Using the “spring” strategy for binary options trading
This reversal strategy lies in bidding against the main trend. This may not always be easy, and to work under this trading strategy it’s recommended to use three indicator types: CCI (market prices analyzing indicator), Bollinger Bands (channel indicator), and Stochastic (as mentioned before, it serves to determine the price deviations at the given moment from its previous values). With this strategy, you can use any time frame you want – from 5-minute intervals and more.
Using the “Martingale” strategy for binary options trading
The Martingale strategy is one of the most popular BO trading strategies. Its system is based on the theory of probability. There are only two directions that the price may take during the trading process—either up or down—and the probability of each direction is equal to 50%. A trader puts a certain amount on the selected option, and in case he wins, then he repeats this transaction. In the event of a failed transaction, he doubles the amount to cover his losses from the previous bad transaction in case of success. The experienced traders point out that, even with frequent losses, this BO trading strategy still works great because a large number of bad transactions in a row is a rare occurrence in the BO field, and sooner or later, your winnings will cover your losses. This strategy is excellent for experienced traders, who already have a certain amount of money on their accounts, and who can understand and analyze the market’s conditions.
Using the “New Martingale” strategy for binary options trading
The “New Martingale” strategy was originally developed and practiced by the well-known trader and trainer Mr. Nikolay Kokar. The “New Martingale” strategy is based on its predecessor, the “Martingale” strategy, but now boasts several improved features. The main idea is that when trading with the “New Martingale” strategy you enter the market only at the time that this strategy is ready to pan out. This strategy has two key rules you should follow while trading: (a) it’s necessary to determine the trend precisely and correctly and (b) to be able to analyze 30-minute charts when the price on the chart begins its sharp fall because that is the right moment to enter the market.

Binary option bonuses for beginners

Brokers often offer their beginners various bonuses. This extra capital can be used during the trading process along with the trader’s main funds, but users can withdraw them out of their accounts only subject to certain conditions set by the broker. Such bonuses are of several types:

Binary option bonuses at registration
This type of bonus is granted as a deposit amount at registration. It is often charged after the first deposit placement. It can be equal to 100% of the trader’s own deposit. The percentage is different from trader to trader and the peak amount is limited. To withdraw the obtained bonus funds the trader has to perform the requisite quantity of transactions (specified by broker) using the bonus amount. Always check the broker’s terms and conditions.
Binary option bonuses on additional deposits
These are additional trading funds that are provided by a broker depending on the sum invested by a trader. The quantity of such bonuses is a bit lower than the one at registration, but they also make some positive contributions by adding free capital for one’s trading.
Risk-free option bonuses
The idea behind this bonus is as follows. A broker insures the trader’s first transactions. If in performing his first transactions the trader loses money, the broker can replace the lost funds to cover those losses. The advantage of such a bonus is that the trader takes no risks during the trading process. If he loses money, then his loss is covered (reimbursed) by the broker, and if he reaches profitability, he keeps all his earnings.
No-deposit bonus or binary options without investments
These bonuses are deposited to a trader’s account during registration by the broker and require no initial deposit by the trader. Such bonuses usually have stricter withdrawal conditions, but allow a new user to test drive the working principles of the platform and provide a safe opportunity to learn how to trade. Often, such bonuses are given automatically, but in some cases, a special application may be required to get them. If you are interested in Binary No Deposit Bonus Without Verification read the Traders Union article.
Cash back bonuses
This is the simplest bonus type. The basic idea is that the broker compensates a part of the trader’s losses – normally 15-20%. This bonus should be used only when the trader is at a loss. However, there is no need to return a bonus if trading at a profit.
Referral bonuses
Referral bonuses are deposited into a trader’s account for every referee attracted to the brokerage. Moreover, a certain percentage is paid into a trader’s account for every deposit into the account by another broker’s customer who registered on a platform through the referral link of the trader.

Binary options used on free demo accounts

A demo account is an account that uses virtual funds. Traders can use a demo account to evaluate the quality and conditions of a broker’s trading platform. Aside from that, demo-accounts are frequently used by beginners to practice their skills and by experienced users to test new BO trading strategies. It is very important when the broker has such an account type on its platform, thus giving its customers the chance to use the platform for free.

Demo accounts are very easy to use and their added benefit is that you cannot lose your real money. So using a demo account of a real one can teach you a lot without any monetary risk. When the time comes to enter the real market, you will be well-informed about all instruments and strategies and your trading will be much easier with your newly-gained experience!

Traders Union recommends that beginners try trading binary options by using demo accounts of the flowing brokers:

9.4/10

Go to broker

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Minimum deposit:

Review

CloseOption is a binary options broker that was registered in Georgia in 2013 and operates under the supervision of the National Bank of Georgia. It provides its clients with trading in pairs with fiat currencies and cryptocurrencies through a proprietary web platform. CloseOption’s services are used by over 2 million traders worldwide, including the United States. The broker specializes in active options trading but also offers an affiliate program to generate passive income. More than ten payment systems are available to CloseOption clients for depositing and withdrawing funds, with the majority of them allowing fee-free transactions.

Pros/Cons

•licensed by a reputable financial regulator;

•loyal first deposit of $5;

•size of payments increases as trading volumes increase;

•money prizes for trading with virtual funds;

•many ways to contact technical support that operates 24/7.

•a small range of trading assets;

•clients cannot trade with leverage;

•payments on accounts with small deposits are lower than those of competing brokers.

9.2/10

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Your capital is at risk.

Minimum deposit:

$100

Review

IQcent is a Marshall Islands-registered broker that offers access to online CFD and binary options trading. The company accrues many bonuses to customers and allows you to use electronic payment systems for depositing and withdrawing funds. IQcent offers a proprietary terminal with built-in technical analysis tools that support standalone and copy trading. The company also has a trading platform for mobile devices (mobile app). IQcent clients get trading access to the following instruments: binary options, CFDs on stock indices, gold, silver, currencies, and cryptocurrencies. In total, more than 100 trading instruments are available to IQcent clients. The company does not charge commissions for making a deposit, withdrawing funds in cryptocurrency, and maintaining a trading account. IQcent provides clients with access to primary training articles and guides and uses modern technologies to ensure the safety of client funds and users' personal data. 256-bit SSL encryption, 3D Secure, and Visa MasterCard Secure Code are used to achieve these goals.

Pros/Cons

•A simple but functional web trading terminal that does not require installation and is compatible with most devices.

•Regular update of bonus programs.

•The ability to receive additional income for attracting new customers.

•Access to trade in more than 100 financial instruments, including currency pairs, cryptocurrencies, stock indices, gold, and silver.

•Availability of useful tools such as technical and fundamental analysis tools, a section with current news, and an economic calendar.

•The support team, including online chat operators, is available 24/7.

•IQcent does not provide MetaTrader terminals.

9.1/10

Go to broker

Your capital is at risk.

Minimum deposit:

$10

Review

Raceoption is a Forex and binary broker providing financial services internationally. The company offers optimal trading conditions for buying and selling assets of different groups, and it gives options to make money on binary options and copy transactions of professional traders. Raceoption clients have access to a referral program and bonuses; the broker also regularly conducts trading competitions among all traders. Trading is available around the clock, and the support service is also available at any time of the day.

Pros/Cons

•The company offers ways to generate passive income.

•It offers many methods to deposit and withdraw funds.

•The broker cooperates with traders globally.

•It takes only a few minutes to open a trading account.

•There are no commissions for maintaining the account or for non-trading activities.

•The company charges a 5% commission for money transfers via VISA cards.

Risks when trading binary options

Binary options are popular trading tools that allow you to earn a fixed profit of up to 80%. But don’t forget that there is always a risk of losing your investment in any trade.

The risks of losing money when trading binary options depend on various factors, so let’s consider the most common of these, which are:

The lack of a trading strategy and overconfident trading are the primary mistakes of novice traders. Be careful to use prudence and to thoroughly analyze the market.
Trade options with “one-touch” mechanisms (where the yield can reach 200-400%) should be avoided. This presents a risk of losing your investments. Instead, choose a more cautious type of option like the classic “up/down” option.
Incorrect forecasting of the option price movement. Don’t trust unverified trading signals and sources. They can turn out to be unprofitable.
Ignoring the money management rules. Open a deal using an amount that does not exceed 5-10% of your deposit. I repeat. Use the money management rules and do not exceed 5-10% of your deposit.
Ignoring the money management rules. Open a deal using an amount that does not exceed 5-10% of your deposit. I repeat. Use the money management rules and do not exceed 5-10% of your deposit.

Above, we examined the trading risks directly when working with binary options, but don’t forget that the success of working on the binary market also depends on the broker’s reliability. In order not to become a victim of scammers, bucket shops, or short-lived successes, choose trusted brokers from the Traders Union Binary Options Rating.

Expert opinion

When working with binary options, you may have a lot of questions and wish to benefit from any expert’s opinion who works with binary options. Antony Robertson, an experienced Traders Union trader and financial analyst, is one of the outstanding professionals in this area.

He opines that binary options trading is one of the most profitable areas of the Forex market, but you must exercise discipline and the correct approach to this activity. Antony Robertson recommends using your trading strategy when trading binary options and do not rely on luck or chance. He emphasizes that despite the relative ease of working with binary options, these trading tools still require forecasting and analysis. Remember that a high level of profitability, which can be obtained with successful BO trading, can turn into a loss for a trader who takes a frivolous approach to his work.

Also, special attention should be paid to the choices of a binary broker. The more reliable and proven the company is, the more chances you have to get a stable income when trading binary options. When choosing a broker, pay attention to its trading terms, its regulation, experience in the market, as well as customer feedback regarding cooperation with the broker.

All this information is presented in the profile of each binary broker from the Traders Union Rating, where the company's reliability is confirmed by its high position in the ratings table.

Videos about binary options

You can get more information by watching our topic-oriented video archive. It provides a good overview of all the peculiarities of working with binary options and focuses on how to make money on binary options. See here:

FAQs

What are Binary Options?

Binary options are financial trading instruments. When working with them you can easily make large profits. To do this, you just need to correctly predict the change in the price of the selected asset.

Are there risks when working with binary options?

As fast as making a profit when trading binary options, you can incur losses. To avoid this, you need to carefully analyze the market and follow the rules of money management.

Can I trade binary options on a demo account?

If the selected binary broker provides a demo (training) account, then you can start working with binary options without investment. Traders Union experts recommend choosing a broker from the TOP-3 ratings of binary options brokers.

How to start trading binary options?

To start working in the binary market, register on the Traders Union website, then select a reliable broker from the rating and open a real trading account with this company using the Union's referral link. This way you will receive a rebate for your trade and will be able to count on legal assistance.

Team that worked on the article

Mikhail Vnuchkov joined Traders Union as an author in 2020. He began his professional career as a journalist-observer at a small online financial publication, where he covered global economic events and discussed their impact on the segment of financial investment, including investor income. With five years of experience in finance, Mikhail joined Traders Union team, where he is in charge of forming the pool of latest news for traders, who trade stocks, cryptocurrencies, Forex instruments and fixed income.

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Chinmay Soni is a financial analyst with more than 5 years of experience in working with stocks, Forex, derivatives, and other assets. As a founder of a boutique research firm and an active researcher, he covers various industries and fields, providing insights backed by statistical data. He is also an educator in the field of finance and technology.

As an author for Traders Union, he contributes his deep analytical insights on various topics, taking into account various aspects.

Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO).

Upward Trend

Uptrend is a market condition in which prices are generally rising. Uptrends can be identified by using moving averages, trendlines, and support and resistance levels.

Binary options trading

Binary options trading is a financial trading method where traders speculate on the price movement of various assets, such as stocks, currencies, or commodities, by predicting whether the price will rise or fall within a specified time frame, often as short as a few minutes. Unlike traditional trading, binary options have only two possible outcomes: a fixed payout if the trader's prediction is correct or a loss of the invested amount if the prediction is wrong.

Index

Index in trading is the measure of the performance of a group of stocks, which can include the assets and securities in it.

Cryptocurrency

Cryptocurrency is a type of digital or virtual currency that relies on cryptography for security. Unlike traditional currencies issued by governments (fiat currencies), cryptocurrencies operate on decentralized networks, typically based on blockchain technology.

CFD

CFD is a contract between an investor/trader and seller that demonstrates that the trader will need to pay the price difference between the current value of the asset and its value at the time of contract to the seller.

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