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7 Tricks To Be Professional At Binary Options Trading
Are you a professional at binary options trading? If not, then you are in the right place to boost up your energy.
Most of you already know what binary options are, as you are here for the top tips and tricks on trading binary options. But, for the uninitiated, we will give a short brief.
Binary Options are financial instruments that allow you to trade on all kinds of assets such as forex, stocks, futures, crypto, indices, and much more. There are only two directions in binary trading and this is where it gets its name from.
By accurately predicting the outcome, you win a payout. If you are wrong, you get nothing and lose your initial investment. The time from when you place the trade till the time the trade lasts is the expiry time.
When you think the price of the asset will increase, you buy a call option. Moreover, when you believe the price will decrease, you purchase a put option.
It is just a short introduction to binary options. Head on over to our introductory guide on binary options trading that covers all the concepts of options trading in great detail.
Can Anyone Be A Professional At Binary Options Trading?
Binary Option is simpler and far less complex compared to other forms of trading. It is easy to understand as well as beginner-friendly. But, does that mean it is easy to score profits when trading binary options?
Let’s take a look at statistics and probability.
In a study conducted by FinanceMagnates , they covered on Japanese binary trading industry. The average payout ratio was found to be at 95.69%. On an average 74.1% of traders ended up facing losses trades.
Roughly 1 in every 4 traders ends up making money trading binary options. By now you have realized even if they are simple to trade, it doesn’t mean everyone’s making off it.
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- What’s the difference then?
- Why are some traders expert while the majority keep losing money, and blame their broker?
- Are they missing out on some secret information?
Sorry to burst your bubble, but there is no secret mantra or formula that will make you rich overnight. There are, however, a few tricks and tips that you can apply in your trading. It will help you stay ahead of the curve.
Via this article, we will share with you the 7 best tricks to become a professional Binary Options trader. We will suggest you read till the last to find out what these tricks are.
Choosing a Time Frame for Binary Options
Choosing a Suitable Time Frame for your Binary Options Trading Strategy
The following article provides detailed information about trading different time frames in binary options. This includes example strategies, guides and tips for trading different time frames.
>> Skip to your Preferred Time Frame:
1. 60 Second Trading
This type of binary option operates exactly as standard ones except their expiry time is just 60 seconds. They have only recently been introduced into the marketplace and are now supported by a number of prominent binary options brokers. They tend to remain within the domain of the expert trader as they require an in-depth understanding of the financial markets in order to utilize successfully.
This binary options variant has developed into one of the most popular tools by providing investors with the capability of profiting from the high volatility associated with key economic news publication. This is because these events can generate significant price surges within the matter of minutes. However, you will require professional understanding and knowledge to enable you to trade these releases proficiently. You should also appreciate that experts utilized advanced hedging techniques to increase their chances of success as well as substantially reducing their risks.
60 Seconds Binary Option Example:
– The USA Labor Department is scheduled to present its all-prevailing Non-Farm Payroll number imminently. Your fundamental studies strongly suggest that the outcome should be bullish by beating market expectations and should provide a boost for the US Dollar. As such, you decide to activate a 60 seconds ‘PUT’ binary option, based on the EUR/USD, in order to exploit this event.
– You hit the ’60 seconds’ button on your trading platform.
– You pinpoint the ‘EUR/USD’ asset. The present value is displayed as 1.3700.
– A return ratio of 80% and a rebate ratio of 15%.
– The present time is 8.29.30.
– Expiration will occur 1 minute later at 8.30.30 EST.
– You activate a ‘PUT’ binary option using the EUR/USD as its underlying asset.
– At expiration, the EUR/USD stands at 1.3684 and your position closes ‘in-the-money’. You collect a total payout of $1,800, including your initial deposit of $1,000.
– If, instead, the EUR/USD had risen to expiry with a closing price above 1.3700, then your trade would have closed ‘out-of-the-money’ and you would have received a rebate of $150.
60s Support and Resistance Strategy
The 60 second binary option has become increasingly popular since its inception during recent years. Several strategies are now presented that you can utilize to help you trade it successfully.
Most assets exhibit a strong inclination to progress in a series of waves with each featuring a crest and a trough. These restrictions are evaluated to be key retraction levels which may be easily recognized by major resistances and supports. A popular 60 seconds strategy is to detect those occasions when price distinctly rebounds against these levels. New binary options can subsequently be executed in the opposite direction to that in which price was advancing before it bounced.
For example, the following GBP/USD 60 seconds chart reveals excellent examples about when to implement both PUT and CALL binary options. Basically, anytime price rebounds against resistance then you need to initialize a ‘PUT’ option.
In the same manner, if price bounces upwards after probing support, then you should implement a ‘CALL’ binary option.
Your initial action to implement this strategy is to identify an asset that has been range-trading for some considerable time. You need to then recognize the prominent supports and resistances by either utilizing those displayed on your trading platform or by simply linking the highest peaks for resistances and the lowest ones for supports, as demonstrated on the above diagram.
After you notice price challenging one of these levels, you must then wait until the current candlestick verifies a genuine rebound by cleanly closing beneath a resistance or above a support. Adopting this process provides you with some defense against fake alerts. If an effective verification is obtained, then execute a new ‘PUT’ binary option, constructed on the GBP/USD, supported by an one minute expiry time in the event of price rebounding against a resistance, as exhibited on the figure above.
By betting $100 with a return ratio of 75%, you would have received a payout of $75 for both the ‘PUT’ binary options presented above. In fact, your original deposit of $100 would have increased exponentially to over $900 for the four positions identified above within five hours if you had reinvested your profits each time.
60s Trend Following Strategy
Another one minute strategy that has acquired significant popularity in recent times is structured on monitoring trends. This is because such techniques enable you to exploit the benefits of ‘trading with the trend’ and, as such, fulfils the intent of the famous adage, which advises that the ‘trend is your friend’. The fundamental concept is to track a trend and implement a ‘CALL’ binary option whenever price rebounds upwards against the lower trendline within a well-defined bullish channel. Alternatively, you should trigger ‘PUT’ binary options whenever price ricochets downwards after striking the upper trendline in an established bear trend.
For instance, the above one minute trading chart for the USD/CHF distinctly presents a well-defined bearish pattern. As you can verify from analyzing this diagram, four prospects for instigating ‘PUT’ binary options occurred after price rebounded downwards against the upper trendline.
When you utilize a trending strategy, you must initially detect an asset that has been progressing within either a bearish or bullish channel for a while. You then must construct the trendlines by linking a sequence of consecutive lower highs for the upper trendline and successive lower lows for the lower trendline during bearish trends, as highlighted in the above diagram.
After you notice price probing the upper trendline, then you should wait until the active candlestick is fully completed so that you can validate that it definitely exits below this level. If confirmed, then trigger a new ‘PUT’ binary option, based on the USD/CHF, supported by the 60 second expiry time. Visualize that your bet is $5,000 and the return ratio is 75%. The 4 successful positions detected in the above figure would have generated you over $4,700 in about two hours if you reinvested your gains every time. Perhaps now, you can start to comprehend why so many investors have become so excited about 60 second binary options.
60s Breakout Strategy
A popular 60 seconds strategy is attempting to exploit breakouts since they are relatively simple to identify and can produce outstanding profits. The principle concept of this approach is that, whenever the price of an asset has been advancing for some extended time-period within a confirmed horizontal channel, then when it does acquire sufficient momentum to breakout of this restricted range it normally travels in its preferred direction for some significant time.
Your first action to instigate such a strategy is to detect an asset that has been progressing within a limited range for some considerable time. Consequently, you will be seeking a horizontal trading structure that is distinctly demarcated by a top and a bottom, as illustrated in the above AUD/USD 1 minute chart. Frequently, price will rebound against its ceiling and floor several times before it eventually breakouts, as demonstrated once again by the above diagram. A major breakout should therefore be evaluated as a powerful sign to activate a new binary option.
2. Day Trading (15m – 24 Hours)
Many traders base their binary options trading strategies on day-trading which entails that all positions are opened and closed within the same day. If you desire to do the same then you will need to undergo serious training in order to ensure success. Do not follow the herd who think that this type of trading will produce them instant profits. The financial markets only allows those traders to prosper who have attained the right levels of education enabling them to develop good trading strategies which they can apply emotionless and with discipline.
However, if you are prepared to make the necessary commitments then the rewards are well worth the effort because you can attain a good lifestyle from day-trading. If that is so, then what is the best route forward you may well ask? You are well-advised to develop your day trading skills by using the following steps:
Day Trading Tips for Binary Options
1. You must first learn how to analyze the financial markets competently by gaining a good understanding of fundamental and technical analysis. You are also recommended to design your own trading strategy as opposed to trying to purchase one. This is because you will develop a better feel as well as superior skills in doing so. In addition, you need to select a good binary options broker supporting a top class trading platform.
2. Next, you are recommended to write a business plan that precisely details your trading strategy. You should also state the prime objectives that you would like to achieve from day-trading. In addition, you should include your risk analysis. Once you start to trade, you must then record all your trading activities, such as your entry and exit values of your trades as well as your profits and losses.
3. You must next use a demo account to fully test your trading strategy. You should attempt to simulate live conditions but without risking your own equity. You will discover that your many binary options broker will be very willing to provide you with such a facility. If not, then locate one that will.
4. Once you have gained confidence using your demo account, you should then progress onto live trading by exposing your equity to small incremental steps of increasing risk. You can achieve this by first using a micro live account then a mini and finally a standard one.
5. Your trading strategy must incorporate a good risk and money management strategy in order to provide the maximum protection for your equity. Many experts advise risking a maximum of 2% of your total equity per trade.
6. Day-trading can produce some very nerve-racking situations. Consequently, you must strive at all times to keep your emotions under as much control as possible. You can do this be sticking closely to your trading strategy.
7. You should constantly seek improvements for your strategy. If you do make any adjustments, then you must re-evaluate its performance by calculating its new win-to-loss ratio and expectancy value.
3. Swing Trading
If you are still experiencing serious problems caused by not strictly following the guidelines of your binary options trading strategy then do not become disheartened because there is a solution. You simply may need to change to a trading strategy that possesses features that you can trade consistently and with confidence. Does one exist you may ponder? Yes, one does and it is called Swing Trading. Yet, despite its many inherent features that are especially suitable for novices, you will discover that many of its advocators are still not able to use it with the discipline necessary.
What is Swing Trading?
As a swing trader, you will seek quality entry opportunities by identifying assets exhibiting short-term momentum. After you have executed new trades, you can keep them active for periods ranging from a few days to multi-weeks. Fundamentally, you will try to trade assets by deploying their monthly or weekly fluctuations between oversold and overbought statuses.
You are recommended to swing trade assets that are range-trading as opposed to tracking a trend. Generally, Swing trading provides a better foundation for a binary options trading strategy than many other popular methods. This is because you can more easily identify new opening and closing levels using the crossover features of renowned technical indicators, such as the Stochastic Oscillator and the Relative Strength Index.
Regardless of these significant advantages, you must still display the discipline required to adhere to your trading strategies because many traders fail to do so. This is because you need to be patient when timing new entry points. A study of the historical data records of any asset will clearly illustrate to you that they definitely create well-defined bottoms and tops. As such, from hindsight, trading such formations should be comparatively simple. Nevertheless, you will find that real life presents a very contrasting picture.
Additionally, you must develop a trading psychology that can deal with the negative emotions created during serious drops in your trading capital. You must maintain your trust in your binary options strategy even when price significantly moves against your trades. You will discover, however, that this skill is complex to learn because the financial markets generate unpleasant emotions that are very difficult to control.
You will need to possess a trading strategy if you want to trade the financial markets successfully. You must also ensure that your strategy is well designed and tested and exhibits a positive expectancy value. If you have little time per day that you can devote to monitoring your trades, then you may find that swing trading is a good solution for you. This is because it will involve you placing very few trades daily although the ones you do will be of high quality.
This strategy is highly recommended for novices because it is easy to understand and to construct a profitable trading strategy based on it. Swing Trading is an investment technique that will require you to open positions with more stable assets and then keep them live for periods that can extended from a few days to a few weeks.
Swing trading can function just as well in stable or volatile trading conditions and depends on the momentum of price and its short-term oscillating patterns. You do not need to wait for price to attain a highest or lowest value to enter new positions. Instead, you base your entry and exit conditions on oversold and overbought positions of assets, which are quite easy to detect.
You can also benefit from the fact that the oscillations of assets can exist for days, if not weeks. This feature provides you with ample opportunities to achieve substantial profits, if you can master this strategy proficiently. You will also not have to devote serious amounts of time monitoring your open positions. If you have a full time job, then you should benefit greatly from this attribute.
You will just need to monitor your trades a couple of times a day just to evaluate their progress. Expert consensus views swing trading as one of the less risky trading strategies because it allows you to open positions based on consistent fluctuating patterns as opposed to more unstable events, such as fundamental news.
Basically, you need to identify assets exhibiting stable trading patterns so that you can profit by opening trades that follow their well-defined oscillators or swings. This is a great strategy to select if you are concerned about your risk exposure. You can take a further step to provide optimum protection for your equity by also utilizing sound money management concepts.
You can build a trading strategy that will enable you to undertake Swing trading by using a technical indicator such as the Relative Strength Index (RSI) indicator (pictured above). This tool identifies overbought conditions of an asset when it registers readings of 70 and above. Similarly, the RSI posts oversold conditions when its readings are flagging 30 and below. You should use this indicator with time frames that extend form the daily and higher because their associated statistics are more reliable than those of lower time-frames. You should execute a ‘CALL’ binary option whenever the RSI drops below 30, bottoms out and then climbs back above the its 30 level. Similarly, you should activate a ‘PUT’ binary option after the RSI climbs above 70, achieves a top and then drops back below its 70 level.
The RSI has gained a good reputation for monitoring the oscillations of assets using Swing Trading. However, you must take care because the RSI cannot guarantee success just on its own and so you must be wary of false signals. You can increase your confidence by utilizing a second indicator as a confirmatory source, e.g. Stochastic Oscillator.
4. The Power of the Longer Time Frames
When you were first introduced to binary options trading, you may have been lead to believe that because price generates predictable patterns that you could easily predict its future movements. This certainly would be fantastic if it were true because then you could achieve considerable success and profits. This would be extremely desirable state of affairs whether you were a novice or an experienced pro.
Is there any truth in this observation and can you really forecast the financial markets that easily? You will find that assets do, indeed, constantly produce price formations that are generated by such events as risk aversion and risk appetite, etc. If you were to research into the trading psychology that creates many of the famous price patterns, such as tops and bottoms, then you could enhance your analytical skills in order to produce more profits.
However, you will discover that this objective is harder to achieve than at first glance. Your main problem is that price does not generate movements that adhere to any type of predictable formula but seem to advance in a form of ordered chaos. If you perform a lengthy analysis of trading charts, then you can certainly verify that assets do definitely produce price trends that do exist for some extensive amount of time. Consequently, you are recommended to try to trade trends instead of attempting to predict their precise point of birth.
If you do undertake such a task then you must not make the beginner’s mistake of concentrating your analysis on trading charts displaying the very short time-frames. In contrast, you will fare much better if you study trading charting using the daily time-frame or higher. This is because you will discover that the statistics associated with the larger times frames are superior to those of their shorter time-frame counter-parts.
In addition, you will obtain a better and clearer picture of price movements and formations because the longer time frames filter out more of the random noise generate by the financial markets. If you use shorter time frames then you will find that this noise problem will become increasingly amplified. Many experts even advise that you should not consider using time frames of less than one hour if you are a novice. This is because the better quality information displayed by trading charts using longer time-frames will allow you to identify price formations much better.
You need to understand that although price may have been advancing in a trend for some time that it could still generate rapid oscillations and retractions very quickly. After some analysis, you could deduce that a trend comprises many smaller price fluctuations within its boundaries. Consequently, the main enemy that you will need to counter if you consistently utilize shorter time frames is noise which will constantly obstruct your trading analysis. However, if you choose more wisely and use longer time-frames, then this problem will be minimized providing you with better quality trading opportunities.
You also must understand that many beginners opt for the shorter time frames because they think that the associated increased action produced by the random noise will present more opportunities for faster success. However, this is a serious misconception and will only generate major losses over the long haul.
5. Volatility and Time Frames
Basically, you will discover that statistics provide more reliable readings the longer the time frame you use on a trading chart. You will also be able to verify that this feature is especially so when price is experiencing a stable period. Consequently, you are advised to base your trading strategies on the daily time-frame or higher. Some traders do utilize the shorter time-frames of 10 minutes and under for specific types of trading strategies although they realize that very short time frames are not recommended for statistical analysis.
For instance, scalping is constructed on the premise of very short time frames has been incorporated into the design of many automated robots. You will find that you can develop a trading strategy by selecting from a large number of times frames. If you have constructed or bought a successful trading strategy exhibiting a positive expectancy value then you are advised to stay with it and optimize its performance. If not, then the following information may be of use.
You will discover that volatility can produce abnormal price formations. In addition, the larger price movements and spikes that are associated with these violent trading periods dramatically hinder the effectiveness of statistical analysis. You must also realize that even the longer time frames can expose trading positions to sudden sharp price retractions.
Unfortunately, many novices view the market conditions produced by increased volatility as just increased opportunities for large profits. However, you must understand that the resultant large price swings generate substantial opportunities for sizeable losses if you do not take the necessary precautions. Consequently, you must alter your trading strategy in order to be able to cope better with these erratic conditions. You can achieve this objective by considering the following types of action.
1. Use Less Leverage
When price is volatile, your top priority is to protect yourself from the demoralizing effects of serious losses. You can achieve this objective by evaluating how your current levels of leverage affect your positions and if you need to alter them.
2. Choose your new trades with more caution
You must not consider opening more positions during volatile times just in order to capture larger profits. You must understand that under these conditions you could easily incur excessive losses.
Consequently, you must take extra time evaluating the reward-to-risk ratios of every trade very carefully before you implement them.
More About Adam
Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.
Binary Options Guide: The Truth About Binary Options
Trading binary options can seem deceptively simple, but leaning too far into that notion can blind people to some of the risks that often accompany this type of trading.
Before I go any further, I want to make it clear I’m not a binary options trader. I trade penny stocks and teach day trading. I’d love to see you join the Trading Challenge — it’s the result of over two decades of trading and a decade of teaching. It’s awesome.
If you’re interested in taking the binary options path, it’s critically important to understand exactly what you’re getting into and set appropriate expectations. And you should get a mentor who trades binary options. Seriously. Preparation is key.
Again, I don’t trade binaries. For the most part I think they’re scams. Can you trade them successfully? There are successful traders in every niche. But most traders lose. That’s the reality of the industry.
It doesn’t matter if you’re trading forex, penny stocks, options, big caps, or … binary options. Most traders lose and most trading teachers don’t want you to know about it. So I’m going to tell you about binary options in this post. But I don’t trade them and I don’t recommend it.
Will trading binary options enable you to buy a villa in the South of France next year? Probably not. Will they allow you to quit your full-time job and finally start on that novel you’ve always wanted to write? Don’t count on it.
Here, we’ll take a look at what binary options trading is all about and you can decide whether it’s right for you. As you read, keep in mind that binary options are getting outlawed in more and more countries. Companies are getting shut down. Or they’re based overseas in places where you can’t sue them. More on that later.
Table of Contents
What Are Binary Options?
Before we dive into specific binary options trading strategies, let’s review exactly what binary options are. According to Investopedia’s definition:
A binary option, or asset-or-nothing option, is a type of option in which the payoff is structured to be either a fixed amount of compensation if the option expires in the money, or nothing at all if the option expires out of the money. The success of a binary option is thus based on a yes or no proposition, hence “binary”. A binary option automatically exercises, meaning the option holder does not have the choice to buy or sell the underlying asset.
At the core, binary options are based on a yes or no proposition. You must decide whether you believe an underlying asset will be above or below a specific price at a specific time.
Binary trades are ruled by expiry times. These time constraints indicate how long you have to make your predictions regarding whether you believe an underlying asset will be above or below a specific price at a specific time. Once the expiration limit occurs, your predictions determine whether you gained or lost money.
Expiration times vary from binary option to binary option. Some of these minimums are known as short expires, which means the expiration date is actually within mere minutes of the buy-in.
There are medium and long expiries, as well. For medium expiries, the deadline could be anywhere from two to five hours. Long expiries typically last between two and 24 hours. Many experts believe that longer expiration times can help make predictions easier.
What Are the Underlying Assets of Binary Options?
In order to participate in binary options trading, you must first have ownership of an asset that can be optioned for a fixed amount. The types of assets common in binary options include stocks, indices, commodities, and currencies. Many binary traders chooses to trade with stocks, as this option can allow them to get high returns within a short span of time.
Along with indices and commodities, currencies are another popular binary option vehicle. Since currencies are liquid and often subject to dynamic price fluctuation, many traders choose to analyze their binary options across the complex — and often shifting — global currency market.
A quick aside since we’re talking about forex. Be aware that the forex market is among the most difficult to trade. Why?
Because it’s the biggest and most liquid market in the world. You’re up against the smartest, richest, and often most experienced traders in the world. Personally, I don’t want to compete against that. Plus, the forex markets move so fast on news you don’t have access to, that there’s no edge whatsoever.
And now, a new asset has emerged: cryptocurrency. I don’t trade crypto, either. I’ve traded the random crypto-based stock. But this is a whole niche unto itself and I’m happy with penny stocks. Crypto has its own version of binary options — which is why I’ve included it here.
Led by Bitcoin, this new, digital currency class is intriguing investors around the world who see the digitization of finances as the way of the future.
According to Options Advice, there are two prominent ways you can capitalize on Bitcoin binary options. The first strategy is by trading on what you think the imminent fluctuation of Bitcoin might be, and the second is trading regular options with Bitcoins as your currency.
If you’re interested in taking the cryptocurrency binary options route, I strongly suggest familiarizing yourself as much as possible with the trends dictating the ebbs and flows of the altcoin market.
An entire niche financial industry has been built up around educating consumers and future investors of digital coins and tokens. From resources like Cryptoslate to ICO listing sites like Coinschedule, there are many resources available to help you make the most strategic crypto trading moves possible.
There are also a lot of scams. And strange happenings. Like when a crypto exchange CEO died with the ONLY key to $137 million in crypto. Ouch. More than 100,000 cryptocurrency holders learned a very hard lesson. Back to binary options …
What is a Call and What is a Put?
Two of the most common terms you’ll hear throughout the binary options world are call and put. These two labels represent the market positions of binary options.
You typically choose to call if it looks like the value will rise within the confines of the expiry time.
Options also have a strike price, which is the price at which the security would be bought or sold.
If you choose to call, you’re signifying your confidence that a stock will rise within the time limitations. If the stock valuation moves upward at all, you’ll receive both your initial investment as well as the return.
On the opposite end of the spectrum, a put signifies your confidence that the valuation of a stock will drop within a certain time limitation. So if you predict that a stock valuation will decline before the expiration date, and the stock does dwindle, you will have succeeded at that trade and will receive your initial investment — as well as the trade — back.
What Are Other Types of Binary Options?
Beyond call and put options, there are other distinguishing factors that separate binary options from one another.
This guide from Binary Tribune delves more specifically into binary options types based on the number of interactions a trader must initiate with the trade. The levels include one-touch, no-touch, double one-touch, double no-touch, and paired options.
Let’s take a look one-touch and no-touch options …
Essentially, a one-touch binary option indicates that in order for you to receive a payout, a trigger (or predefined barrier) must be reached. Traders often choose one-touch if they feel confident that a stock will move in a certain direction at a minimum amount.
The option only has to meet the predefined trigger level once (hence the “one-touch” term). However, as indicated by Binary Tribune, this strategy is often accompanied by some risk.
Beyond simply calling or putting, you also must feel confident that a certain valuation threshold will be crossed. However, with greater risk often comes greater reward.
In contrast, a no-touch binary option essentially depends on a trigger level not being reached.
Rather than hedging your bets that the valuation of a stock will rise above or dip below a specified amount, you’re betting that the trade will not dip above or below an amount.
Because you’re making the trade with the intention that a threshold will not be crossed in either direction, it’s referred to as “no-touch.” Like their one-touch counterparts, these trades come with greater reward — and risk — potential.
I liken one-touch and no-touch calls and puts to something like an electronic stop-loss. The problem is, you don’t have control. You’d better be damned sure you’re right. Which is impossible.
What Are the Pros and Cons of Binary Options?
Now that you understand binary options basics and the different factors between them, you might be wondering whether this type of trading aligns with your goals. Let’s weigh the pros and cons.
We’ll start with the benefits …
Low Barrier to Entry. You don’t need a masters in economics to engage in this kind of trading. For this reason, many first-timers enter the trading arena through buying and selling binary options. Comparatively, binary trading is relatively simple. When compared directly to other types of trading, including quantitative or arbitrage, trading binary options is straightforward.
Fast Returns. Many traders are eager to see fast results and liquidate within a specific time frame. Those who play the long game (investors) are typically most concerned with growing their money steadily over long periods of time. Many opt to invest in index funds, IRAs, or bonds. Trading binary options is fast paced.
Thing is … you can get all the speed you need trading penny stocks. So, while binary options might be a fast game, the reward might not be worth the risk.
High Rewards. Binary options trading is touted by those who promote it as high reward. It’s possible to receive up to a 70% return on their investments if your binary trades reach your expiration dates in the money. This high average return is what makes this type of trading vehicle attractive to many novice and expert traders.
As explained by Investopedia, the risk on binary options is capped off, so while the rewards could yield high returns, you can’t lose more than the cost of a trade.
Low Cost. If you’re just getting started with trading, there’s a good chance you don’t have excess capital lying around to snatch up shares of the fastest-rising stocks on the market. Binary trades offer an alternative to other types of investments that require high-capital buy-ins.
In theory, you can experiment with a binary trade for any amount you’d like, whether it’s $5 or $50. Starting small and working your way up to bigger trade amounts incrementally is a great way to learn the lay of the land.
As you familiarize yourself with expirations, strike prices and — if you’re interested in one- and no-touch options — triggers, it’s best to gamble with an expendable amount that won’t derail your entire financial status. Notice I used the word gamble — just sayin’.
Accessibility. Binary trading platforms make it easy to trade on any day and at any time. When it comes to binary options, traders aren’t necessarily beholden to standard market times and broker availability.
Now, let’s explore some of the disadvantages of binary trading …
Scams. Conduct any Google search on binary trades and one of the first things you’ll likely notice are the abundance of hits warning against binary scams and shady binary brokers.
Remember when I said I’d get back to the part about shady companies? Here goes …
… and I say this to protect and warn you.
Like I said, these companies are often based overseas. Places like Cyprus. (I have nothing against Cyprus. It’s a beautiful country with amazing people.) Anyway, these companies are based in places where you can’t sue them if they screw you.
Then you sign away pretty much your entire life in the forms they make you fill out. Your odds of winning are so low the brokers who do it are pretty much laughing at you. They’re laughing that so many people fall for this crap. It’s like going to the casino.
So, if you come across a binary broker that sounds too good to be true, it’s because he or she most likely is. And if you come across a binary broker who doesn’t let you liquidate your investment, run in the other direction.
Short term. Binary trades have expiration dates that are often fairly short windows of time. Given this, it’s impossible to use binary options as mechanisms for long-term investments. Which, of course, I don’t mind because I day-trade and teach day-trading. But if you’re looking for buy-and-hold investing, binary options aren’t the right solution.
Can You Really Make Money with Binary Options?
Short answer: It’s possible, but you MUST know what you’re doing. Like I keep saying. Most traders lose. Doesn’t matter the niche. I would never trade binary options. Ever. Your choice, I’m just tryin’ to keep it real.
If you’re serious about binary trading, start small. By making small trades and working your way up, you give yourself breathing room to assess market trends and develop the necessary skills.
As is the case with many types of trading, history is sometimes the best predictor of the future. Many successful binary options traders experience trading wins and financial growth because they’ve spent time studying and familiarizing themselves with market movements.
Wait. Does this sound familiar? Yep. You guessed it: you can’t cheat your way to success. Doesn’t matter the niche. I don’t trade binary options. I don’t recommend you trade them. But if you decide it’s for you then prepare yourself. Study your ass off.
Learning common candlestick patterns can make it easy to spot recurring trading patterns. If you want to understand candlestick patterns — and you do if you are serious about trading — I recommend you get a copy of the classic “Japanese Candlestick Charting Techniques” by Steve Nison. Doesn’t matter which niche you trade, this book should be on your bookshelf.
Of course, trading patterns are never 100 percent accurate, so don’t fool yourself into thinking of them as absolute stock predictions. However, the more you can learn about patterns and begin to recognize them yourself, the more likely you’ll be comfortable making your own options decisions.
Is it Safe and/or Legal to Trade Binary Options?
Naturally, binary options contain risk. And by now you know my take. I pretty much think they’re scams. But there are differing opinions and some even consider them safe trading routes. I’m not gonna tell you not to trade them. I recommend you don’t. I’ll be interested to hear back from you. When you’re ready to trade the way I teach … apply for the Trading Challenge.
While it’s legal to trade binary options within the United States, they’re only available to trade on Commodity Futures Trading Commission (CFTC) regulated exchanges within the country.
Binary options traded outside the U.S. are structured differently to those traded here. You can learn more in this article on Investopedia: What You Need To Know About Binary Options Outside the U.S.
The Bottom Line
The good: Some traders like binary options because they are traded at fixed costs. You know where you stand.
The bad: Binary investments are too much like flipping a coin, there are too many scams, and your odds of winning are so low you might as well go to the casino.
The bottom line: Educate yourself like crazy. Avoid sketchy brokers. Start small and work your way up. Remain vigilant. Stick with these rules, and someday you might reach your trading goals. Will you do it with binary options? I doubt it. But you might prove me wrong.
Want to Try Binary Options Trading?
At this point, I hope I’ve shed enough light on binary options trading that you don’t do it. But … you might be thinking about giving binary options trading a shot. If you do, study your butt off. Get a mentor. Don’t screw around. The best of the best in every niche work with a mentor.
Trading — any type of trading — can quickly become complicated. Like any other sector of trading, it’s important to seek out an education before you attempt to invest in this way. I can’t help you trade binary options. But I can help you learn to trade penny stocks …
Is the Trading Challenge for You?
As a teacher I want to help my students forge long-term, sustainable careers as traders. The Trading Challenge can help you reach your goals through risk-averse, conservative trading.
Plus, my best students — those who have become millionaires themselves — join me in coaching you.
What do you get?
- Wednesday morning live trading webinar. I show you live trades so you can see how it’s done. And it’s not only wins. These are true live trades. Sometimes I lose. But you’ll see how fast I cut losses and why I get out so fast when things turn against me.
- Wednesday evening live lesson and Q&A. No matter where I am in the world. This is killer stuff.
- Thursday live trading & review with Mark Croock. @thehonestcroock is at it every Thursday. You don’t want to miss this. Mark is one of my best students/teachers. He’s constantly in the challenge chat room alerting students.
- Annual Penny Stocking Silver Membership. You need this. Thousands of hours of video lessons and archived webinars. Immerse yourself. This is how to get good fast.
- PLUS: Two monthly bonus webinars by my top student Tim Grittani. It won’t take long to understand how Tim went from $1,500 to where he is now when you see how meticulous he is about his trades. Learn from a master.
WAIT! There’s more …
I always wanted to write that. Anyway, there is more, but you have to apply for the Trading Challenge to get it. Simple.
Will you be my next success story?
As you’ve now learned, if you study hard, start small, keep your scam radar on high alert, and stay educated, then becoming a successful trader is possible. But it’s not easy. So don’t even think about doing it if you’re not willing to work hard.
As for binary options …
Look, whatever you decide, it’s about how much time and effort you put into learning. I don’t think binary options are a good way to go. Plain and simple. But there are success stories.
If you’d rather learn what I teach, then apply for the Trading Challenge. But no lazy losers allowed. Seriously. Only join the Trading Challenge if you’re willing to work hard.
Are you a trader? Do you trade binary options? Comment below and let your fellow traders know how it works for you. Even if you are brand new, I love to hear from readers. Comment below!
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