Note:
We advise you to avoid unverified binary options brokers for the risk of losing your deposit. We recommend choosing brokers with extensive experience in this area and leaders in the ratings of binary options brokers on the Traders Union website.
Start trading binary options with Pocket Option
Binary option trading for beginners is a simplified version of trading in which you need to make a forecast as to where the price will be at the time of option expiration relative to the opening price - higher or lower. If your prediction is correct, you will receive a reward.
Are you curious about trading but find the complex world of stocks, Forex and options a bit intimidating? Binary options may provide a simpler entry point into investing. In binary options, you make short-term forecasts as to whether an asset's price will rise or fall within a set time period. While binary trading carries risk, it can generate substantial returns.
For those interested in dipping their toe in binary waters, this beginner's guide aims to break down the basics in plain terms. We'll explain how binary options work, common terminology, and types of trades. More importantly, we'll share tips from experienced traders on choosing a reputable broker, using demo accounts to practice, and strategies to help manage risk.
What is the minimum deposit required to start binary options trading?
Most brokers require a minimum deposit of $10-50 to open a real money trading account.
What factors influence the payout percentages?
The payout percentages depend on the length of the expiry time - the shorter the duration, the higher the potential return tends to be (up to 90% payout). Longer trades offer lower returns, usually around 65-75%.
How can I practice binary options trading without risking money?
All reputable brokers offer free demo trading accounts credited with fake money. This allows new traders to experience the real trading platform before going live.
Can binary options trading be a full-time job?
While it is possible to trade binaries as a career, it requires disciplined study, optimal money management and emotional control - most experts do not recommend relying solely on binaries for income.
Binary options trading is the process of trading simplified options contracts with a specific fixed risk and reward. Such options are known as binary options because they are based on a “one or the other” payout approach. Traders can choose up, down, touch, no touch, and a number of other trading strategies. As options trading becomes more popular, more traders are looking into binary options as a somewhat less risky options trading approach.
A binary option can be chosen by a trader based on whether or not a particular underlying asset (such as a stock, crypto, commodities, etc.) is going to move upwards or downwards in a set period of time. Essentially, binary options traders are betting money on this timeline prediction. Traders will be able to see how much money they will earn if a prediction is correct. If the prediction is incorrect, the trader will lose their bet and the money they put at risk. If the prediction is correct, the trader gets their money back in addition to a return. In general, returns are very large and tend to be around 70% or greater.
Now that we understand a bit more about what binary options are, let’s move on to our step-by-step guide.
Binary Options on IQ Option
To piggyback off our previous definition, let’s examine an example of a binary options trade in motion.
Let’s say that you have predicted that the price of silver will rise from its current price of $1,000 in exactly one hour. The winning trade will provide a return of about 85%. You choose to place a $100 trade on this scenario. An hour later, the option contract expires and silver has risen to $1,250. You receive your $100 back in addition to an 85% return, totaling $185. It doesn’t matter how much the price of silver rose – if it rose at all, you won the trade. It’s very simple when compared to other forms of trading.
Some basic terminology in the world of binary options include the following:
Asset – The underlying currency, commodity, stock, or index that the binary option is based on.
Broker – A person or company that allows traders to trade binary options on the options markets.
Current rate – The currency cost of an asset.
Range option – The limit that an organization will specify for various zones.
In-the-money – A term used to describe the scenario in which a trader predicts the movement of an asset correctly, thus making the binary option worth money.
Out-of-the-money – The opposite of in-the-money. This term describes the scenario in which you predict the asset price incorrectly and thus lose.
Rate of profit – The overall percentage of income that a trader receives after a trade expires, thus showing how profitable the trader’s choices have been in the market.
There are a number of different types of options.
Call/put options are common in binary options trading. Essentially, a put is a contract that provides the right to sell the asset at the strike price at any point up until the contract expires. A call is a contract that provides the right to buy the asset at any point up until the contract expires. These are derivative investments, which means that the price of the assets is based specifically on the movements of another product. Puts and calls can be written and sold off to other traders, which generates income.
One-touch options are very different. Essentially, this type of option pays out a premium to the person who holds the option if the spot rate climbs to the strike price at any point in time before the option expires. One-touch options are usually quite inexpensive, though they are not usually traded by smaller investors.
It’s also important to understand trading range. Trading range occurs when a specific security trades between high and low prices for a certain amount of time. The top of that security’s trading range will create price resistance, and the bottom will provide price support. Traders will often use a variety of different types of technical indicators to enter into or exit out of a trading range.
It’s also important to understand expiration dates. The expiration of a binary option is the exact date and time when that option will be settled into cash. It’s important to think very critically about whether your asset of choice will go up or down by the expiration date set.
Because binary trading is very much an all-or-nothing process, there is incredible risk involved. The only way to successfully predict the changing value of an asset is if you do a ton of research on that asset and recent changes. Even then, you’re not guaranteed to win. And if you lose, you lose the entirety of what you bet.
Still, with this big risk comes big opportunities. Traders can make a lot of money trading binary options, as the returns tend to sit somewhere between 70% and 85% or even more. Find out what is the highest risk in binary options in the TU article.
There are a few different excellent brokers out there for trading binary options. All three brokers have a fairly high trust level on Traders Union and also offer some unique bonuses.
| Broker | Min. deposit | Trust Rating | |
|---|---|---|---|
10 |
100 of 100 |
||
50 |
100 of 100 |
||
20 |
100 of 100 |
Binary.com offers a top up virtual demo account. Most brokers offer demo accounts, in fact. If you walk away from this guide with only one piece of advice, it should be to try a demo account.
A binary options demo account is essentially a “fake” trading account. Users use fake money to practice trading on the platform of their choice. The demo account will simulate the motions of the market to provide a true, legitimate trading experience. Using demo accounts is risk-free and is vital in learning how to trade. How else can you learn to trade binary options unless you get some hands-on experience? With a demo account, you can get this experience without having to risk any of your capital. Just as well, most demo accounts are 100% free to use, and some don’t even require you to make an account at all.
As binary options trading becomes more popular, more and more people are looking into potential trading strategies for success. There are many different types of strategies out there, many of which are quite useful. However, there is no binary options trading strategy that will guarantee that you will be successful. So much of this type of trading relies on risk and taking chances, so there really isn’t a strategy that can guarantee success. Still, using a strategy can make trading a bit easier. Specifically, the following strategies are used by many successful traders in binary options.
No matter market you’re involved in or what specific asset you’re trying to trade, one of the best ways to make money with binary options is to follow a trend. It’s probably the best strategy a beginner can use when getting into binary options. Asset prices usually move in conjunction with trends. The price of an asset will go up or down along with relevant assets because the market is always speculating in real time. If you are interested in learning about Trend Reversal Patterns In Binary Options, read the Traders Union article.
Beginner traders need to remember that a trend almost never follows a straight line. Traders will usually see an asset’s price navigate in a sort of zig-zag path, which usually follows a general direction. Identifying the pattern will make it possible for traders to estimate if an option’s price will be higher or lower when it expires. When it comes to trading with trends, one can trade with overall trends or trade on swings.
Follow the Trends
Following the news is a very basic but effective strategy that can result in good profits. It’s a lot easier to do in lieu of technical analysis, all while forcing you to read the news and stay in the loop throughout the day. Start with online news, but also take the time to navigate to the newspaper, listen to news radio, watch news channels on television. The goal is to get as much information from as many sources as possible, so you can understand your asset right down to its core in order to predict whether it will rise or fall in price.
This strategy must be used with the above news strategy. Straddle trades have to be made shortly before an important announcement takes place. The value of an asset could jump for a short period of time after a big announcement, but the trader must purchase the option and estimating that the price will drop again. When the price begins to fall, the trader can call another option predicting that the price will go back up. The Straddle Strategy leverages swings, so you will be able to make a profit regardless of if the price rises or falls. This strategy is a very consistent way to make money, even when the market is very volatile.
Binary options are very high-risk instruments. It’s absolutely vital to follow the rules. It’s also vital to never trade with leveraged funds – always start small and use margin. The most successful binary options traders typically risk about 1% or less of their total capital. For example, if a trader has a $1,000 account, they should keep their risk to around $10-20. In general, it is not advised to risk more than 5%, though 1-2% is the sweet spot for successful traders with a solid risk management technique.
Binary options trading can be quite profitable. However, the risks are also very, very high. So much of a trader’s success comes down to the quality of their trading strategy, the brokers’ conditions, the acceptability of risk, and the overall state of the market. In general, we wouldn’t recommend binary options trading as a day job, but rather as a way to generate some extra income on the side.
Trading the markets involves not just analysis and strategies, but also dealing with human emotions. Psychological factors like fear, greed, and impatience can sabotage even the best-laid plans. Here are some tips to help binary options traders maintain discipline:
Control impulse decisions: Don't chase losses or become overly optimistic when winning. Reacting to short-term fluctuations rather than sticking to analyzed scenarios often ends badly.
Avoid performance pressure: Comparing results to others adds unnecessary stress. Each trader's journey is unique. Focus on improving your own performance over time through learning.
Don't fall for market noise: Rumors and hype on social media aim to fuel reactions. Filter signals carefully from dispassionate analyses instead of random tips.
Learn from mistakes: We all make errors while gaining experience. Acknowledge slip-ups graciously and mine lessons from what went wrong to strengthen your skills.
Take breaks when needed: Step back from trading screens during stressful periods to relax and regain perspective. Emotions run high when tired.
Binary options trading is the process of trading simplified options contracts that have a fixed risk and reward. Essentially, traders predict which one or two potential results could come from the trade in a fixed timeframe. If the trader is correct, they receive their risked capital in addition to a 70-85% profit. If the trader does not make the correct prediction, they lose all of their risked capital. Even though binary options trading is very simple in nature, it is very risky and often compared to gambling.
Still, traders can build a lot of wealth with binary options trading if they know their risk and only put on the table what they are comfortable with losing. In order to successfully break into binary options trading, follow these steps: Learn the binary options basics and terminology, consider the opportunities and risk, choose a good broker that offers newbie bonuses, play around with demo accounts, implement a strong strategy, and don't get greedy.
Binary trading can be very profitable, but it's vital for traders to know how risky it can be. If you implement a solid strategy and assess the market situation properly, you'll be very successful in binary options trading.
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.
The area of responsibility of Mikhail includes covering the news of currency and stock markets, fact checking, updating and editing the content published on the Traders Union website. He successfully analyzes complex financial issues and explains their meaning in simple and understandable language for ordinary people. Mikhail generates content that provides full contact with the readers.
Mikhail’s motto: Learn something new and share your experience – never stop!
Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.
The topics he covers include trading signals, cryptocurrencies, Forex brokers, stock brokers, expert advisors, binary options. He has also worked on the ratings of brokers and many other materials.
Dr. BJ Johnson’s motto: It always seems impossible until it’s done. You can do it.
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). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.
