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Binary Options Trading: Does It Make Money?
Binary Options trading is a unique kind of trade in financial options.
In fact, you can even refer to it as an exotic option trading alternative.
Increasingly we see that this form of option trading is gaining popularity.
However, it still remains a comparative niche area in a global perspective.
Therefore, it excites both curiosity as well as mis-selling opportunity.
So even before you begin to understand what binary options trading is, remember it is important to make an informed choice.
Knowledge is the only armory that can guarantee profits in binary options trading.
This is because this is an option where you can either, get fixed returns or nothing at all.
The chances of tackling complete loss are pretty high if you are not completely confident about how you play.
Only in-depth understanding of binary options will help yield a better profit perspective.
However, binary options also quote controversy in many places.
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This form of trading is either banned or is questioned upon by many countries.
Moreover, there are several instances of brokers mis-selling it to beginners.
That only increases the chance of potential problems and future losses.
So it further emphasizes the need to understand this investment instrument properly.
Definition of Binary Option
The term binary option refers to a uniquely structured Options trade.
In this, you can either get complete profit or nothing at all.
The payback amount is always fixed in this case.
It never varies as per market forces.
The customer gets a fair idea of it the moment they buy the option.
So if the relevant option expires in the money, you get the pre-decided price.
However, in case the option expires out of money, you cannot expect any payback at all.
Perhaps the name Binary is also derived from here.
There are no shades of grey in between.
It is a very clear yes or no strategy without a scope for ambiguity.
This is where we get the concept of the binary from.
You must also remember that, in this case, an option holder cannot buy or sell the underlying asset.
Only the option can be exercised in totality.
Often the biggest charm of the binary options is the simplicity of the entire proposition.
After all, the investor has to simply guess a price and make a move.
However, often the simplicity of the concept is what highlights the inherent challenge.
You need an in-depth understanding of the market for making a proper guess.
Anticipating future market movement is not simple.
You have to be very thorough with the overall market movements to guess that.
There is no scope for making a generic prediction.
You have to only look for making specific guesses.
That alone can yield a meaningful profit going forward.
In many ways, this also defines the core challenge in Binary options trading.
It helps you make simple guesses about the future market movement.
That, however, is possible when you are through with the complex market developments.
How Are Binary Options Different from Plain Vanilla Options?
Those of you are well versed with the market may question how it is different from a plain vanilla option?
Well, there are many differences between the binary trading option and plain vanilla options.
As the name indicates, you do not have any special element in this kind of option.
Moreover, a vanilla option gives the trader the right to trade in the underlying asset too.
The Option holder, therefore, has the right to buy or sell the underlying asset as well.
However, that is never an option in case of the binary trading option.
In this case, only the option can be exercised.
There is no way you can take a position or sell the underlying asset.
This is one of the biggest difference between the two types of options.
The platform for Binary Options trading is also unique.
Binary Option occasionally trades on the SEC regulated platforms.
But almost always you find these on internet-based platforms.
They are most commonly traded on platforms that are outside the ambit of regulation.
Conversely, the Vanilla options almost always trade on major exchanges and well-regulated platforms.
As a result, these options are considered relatively safe.
In comparison, this is also a reason why Binary Options court controversy.
They are more prone to fraud and other types of mis-selling.
Even in terms of recovering profit, the Binary Options are not as dependable.
But Vanilla Options by far are more reliable.
As they trade on established exchanges, so there is a reasonable amount of surety about them.
There is always a better chance of recovering your investment.
Moreover, it also reduces the chance of risk involved with the investment.
The prospects of mis-selling also come down to a significant extent in vanilla options.
Examples of Binary Options Trading
But I am sure that the concept of binary options will be clearer with an example.
Let us assume that you bought an S&P Binary Option.
When you bought the Binary Option, assume S&P Index was trading at X level.
You expect the Index to touch 2x after a certain duration.
This is primarily after the announcement of some key news trigger.
Let’s say the economic data that is going to be announced is expected to impact the prices positively.
You expect the S&P 500 index go up on the basis of this news.
So the Binary Option that I buy indicates that I will get $100 when the S&P 500 touched 2x levels.
Now let us assume that the Index did go up that high.
That too within the stipulated time that I agreed to.
As a result, I can then claim the said amount of profit.
However, if the Index does not go up that high or slips for a different trigger, I lose my money.
I will not even get the $50 that I used to buy the Binary Option.
I lose the entire investment that I may have made into the Option.
Importance of Binary Trading Strategies
But for sustained benefits, you have to be careful about binary options trading strategy.
The right strategy is very important to maximize your returns.
At the same time, it also helps to moderate your risk profile.
Both the elements are extremely important for the quality trading experience.
Also only through this route, you can look at sustaining considerable profit.
The strategy, therefore, plays a crucial role in creating successful trading modules.
That is often the deciding line for the quality binary trading experience.
But then the question is what strategy you should choose,
Different kinds of market experts will suggest different strategies.
But the problem is different kind of strategies works for different traders.
Depending on whether you are a beginner or a veteran, you will select your trade.
Moreover, in many ways, this also moderates the level of risk that you can take up.
Some traders are okay with a large risk exposure.
But many may want to leverage a lot less in the market.
Based on that, you have to take a constructive call on the market.
Therefore when you are choosing a strategy, you have to be very careful about these facts.
Binary Options Trading Strategies
Here is the list of the binary options trading strategies that make money:
- Long-Term Strategy
- Semi-Conservative Strategy
- Aggressive Strategy
1. Long-Term Strategy
This is perhaps the most common strategy for beginners in binary options trading.
This allows newcomers to gradually build up an asset in the market.
At the same time, veterans can use it to consolidate gains in the market.
The main feature is minimizing risk and maintaining a steady pace of capital growth.
In this conservative binary strategy, traders need to identify the Key pint 1 & 2.
Normally these are the two ends of a zigzag on the trading graph.
These identify a downtrend or an uptrend in the market.
The point 1 and 2 are the two ends of this trend.
Keeping a tab on retracement level is very important in this case.
The higher the retracement level, better the profit prospects.
This is also because a high retracement level sends a stronger signal.
You have to enter the strategy when the price hits a Fibonacci level or is within a set range.
The duration of your Option can vary from few hours to a couple of days.
You can take a bigger position depending on the type of success you experience.
On an average, this strategy can yield close to 5K profit is less than 21 days.
Once the contract expires, you can start the fresh one from where you left.
2. Semi-Conservative Strategy
As the name indicates, this strategy is less conservative than the previous one.
Needless to mention, it also entails a higher risk level around it.
So if you are a complete beginner, this may not be the ideal strategy to start with.
You can undertake as many as 4-6 trades a day in this case.
Again, in this case, look out for the Value chart levels of 8 and the Fibonacci levels.
That often holds the key to sustained gains.
Though the money management levels are similar to long-term strategy, there is one difference.
Your money increases at a much faster pace in this case.
Therefore, it opens up a much higher earnings prospect.
The Fibonacci level, therefore, plays a crucial role in the overall success of the strategy.
Moreover, you have to also pay close attention to the charts.
That is what will help you extract maximum possible gains from these strategies.
The timing of the trade also plays an important role in the overall gameplan.
It is what decides the amount of built-in risk that is involved.
It is, therefore, needless to mention that analyzing the charts is also crucial.
If you want to master binary options trading, you need to master trading charts too.
3. Aggressive Strategy
This is perhaps one strategy that completely explores the potential of trading charts.
Apart from the Fibonacci levels, it seeks to profit from every possible breakout.
This is why in this case, you have Fibonacci levels drawn for every potential trading cycle.
In many ways, it opens up the prospect of steady gains at regular intervals.
It introduces the concept of steady and continuous returns in trade.
So you are pretty much identifying every possible short-term cycle.
The idea is to optimize the potential of every cycle that can yield the profit.
The retracement levels, as a result, gain considerable prominence in this case.
We have already mentioned a higher retracement level leads to improved profitability.
You can easily employ this strategy on a wide variety of asset classes.
From stocks to commodities and currency, this is a definitive winner.
But the point is you have to employ the right measure and regulate the risk exposure.
Most importantly, it is never a good idea to lose track of your trading objectives.
Key Elements to Include in Binary Options Trading Strategies
The binary options trading strategies can differ significantly.
The idea is never about which strategy to adopt.
This is because every broker will try and further their own strategies.
Given the nature of markets, every new broker may formulate their unique approach.
But whatever the strategy might be, it has to keep certain basic requisites.
Often that is what determines the final profitability of the product.
That can define whether binary options trading strategy is your cup of tea or not.
This is essentially about creating trading signals in the market.
The most common approach is looking for the right type of trigger.
It can be based on any specific economic news, data or political development.
The idea is to gauge how it may impact the market on the whole.
It basically gives a fair idea of the direction prices may move in a given period.
Being alert about market development is crucial in this case.
So the starting point is knowing what may happen and how best you can optimize the result.
That will also determine the extent of profitability.
2. Your Trading Position
It is very important to analyze how much you want to trade.
This depends on a wide range of factors.
The most important one is the overall risk exposure that you are comfortable with.
You have to calibrate the amount of money you are putting in each trade.
You have to also take into account consecutive loss possibilities.
3. Review Your Performance
This is very important to enhance your profitability.
You have to carefully analyze the patterns and the strategies and analyze what is working.
Accordingly, you must also incorporate course correction in your strategies.
That ensures long-term success in your trade.
Can You Make Money Through Binary Options Trading?
This is perhaps one of the biggest concerns around binary options trading.
How much money can you make using these strategies?
Well, different articles on the internet will offer different viewpoints.
But the point is your approach towards investing can be the biggest game changer.
Often beginners in the market are buoyed by emotion and take up trade on a hunch.
Well, this approach can never help you lock profit in binary options trading.
You have to remember that investing in these is not the same as gambling in a casino.
Moreover, if you are starting off, it is better to first master the concept.
In this context, you may often seek the help of simulated trading.
That will help you get a better grip on the overall strategy a lot more effectively.
You have to learn and understand the concepts of binary options trading properly.
It is always better to start off only after that.
Online binary options trading is perhaps the simplest format.
This is what will help clock longer-term gains for an extended period.
But again, you need time and attention to master these online trading platforms.
That will help you lock in your profitability a lot more effectively.
Choosing the right broker is also crucial.
After all, you do not want to lose your money being associated with a fraudulent partner.
Therefore, undertake thorough research and carefully study the track record of the broker you choose.
That will surely improve your chance to make money from these trading options.
Therefore, binary options trading per se are quite attractive investment alternatives.
But you have to be careful about the brokers and strategies you choose.
That will determine the final amount of profitability using these instrument.
Some countries have banned or are in the process of banning binary options trading.
As an astute trader, you must keep a tab on all these factors.
Only then, you can look at sustainable long-term gains from binary options trading.
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Parvinder Singh is a full time business and money writer with a Master’s degree in finance from the University of Delhi. With over 7 years of experience, Parvinder has helped many startups, financial institutions and marketing agencies in improving their business, marketing, finance, investment, trading etc. View all posts by Parvinder Singh
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!
Can You Really Make Money Trading Binary Options?
Posted by Contributor | Nov 20, 2020
Note from Kalen: This article is for informational purposes only. If you’re interested in binary options, this shows some things you need to know. Trade binary options at your own risk, and if you do decide to give them a try, learn what you’re doing before diving in head first. Binary Options trading isn’t a scam, but it does require a lot of work, and it can be risky. Check out The Truth About Binary Options before investing.
Binary options have become a popular way of trading financial assets online because of their simplicity and high returns. Nonetheless, various researches still show that only less than 30% of retail traders achieve profitability trading this market. For this reason, most investors often question whether it is possible to really make money trading binary options. The short answer is YES, but the long answer is that it requires hard work, commitment and dedication to consistently churn out profits from the binary options market.
Most critics of the legitimacy of binary options trading usually cite the risk/reward ratio that traders are exposed to when trading this market. On platforms such as Option.FM, traders can receive returns of up to 91% on trades they place in the market. This is one of the highest returns in the industry. Such a return means that, if a trader places a $100 trade, he stands to gain $91 if he is right. However, if he is wrong, he will lose $100. His risk is essentially greater than his potential reward. This is the reason most critics dismiss binary options as a derivative of gambling.
However, what the critics fail to acknowledge is the ease of trading binary options as well as the potential to return profits within a quick turnaround time. In binary options, traders will book definite profits if the asset price closes higher or lower (even fractionally) than the strike price. In other market such as forex, the amount of profits will depend on how far away the asset price moves from the strike price. In such a market, traders need to perform more thorough and in depth analysis than in binary options. If the markets are less volatile, traders in such markets will also have worse risk/reward ratios than in the binary options market.
In binary options, traders have the opportunity of returning profits quicker than in other markets. On platforms such as Option.FM, traders can trade contracts with expiry times of up to 30 seconds. This gives traders the chance to make money within a quick turnaround time. Making huge returns within such a short time is not possible in other markets.
How to Make Money Consistently with Binary Options
1. Choose the Right Asset to Trade
The first decision a trader has to make before placing a trade in the market is selecting an asset. This is not an easy task because the binary options market allows traders to speculate on prices of over 150 financial assets that include stocks, forex pairs, commodities and indices. It is important that traders select assets that have sufficient liquidity and volatility because money in binary options is made from price movement. Such assets include EURUSD, Oil, USDJPY and Gold.
Traders should also trade the right assets at the right time. Different assets have different ideal times for trading. For instance, American stocks and indices are ideal for trading between 1300hrs-2300hrs GMT when the New York market is open whereas Japanese and Australian stocks and currency pairs are ideal for trading when the Tokyo stock market is open (0000hrs-0900hrs GMT).
2. Incorporate a News Trading Strategy
Incorporating a news trading strategy as part of their trading plan can help traders minimize their trading risks and boost their profitability. This is because economic data is one of the major catalysts for price movement in the binary options market. Due to the wide range of tradable assets in binary options, there is usually at least one high impact economic data release daily that will significantly spur price movement in the markets. A trader who tracks economic data releases will have the opportunity to profit by anticipating such movements.
Economic data releases are usually tracked by economic calendars which can be found for free in many online sites such as www.forexfactory.com. Tracking economic data can also help traders reduce their trading risks. Traders can avoid trading assets that are likely to be impacted by scheduled economic data release if they are unsure of the effect such data will have on the prices of the underlying assets.
3. Diversify your Trades
It is important to sign up with a broker that will allow you to trade different types of binary options contracts. There are various ways traders can trade the price movement of their favorite assets. Diversifying your trades will help boost your profitability in the market. For instance, on platforms such as Option.FM, traders can trade contracts such as short term options, long term options, Call/Put options, while other trade contracts available in the industry includes, Pairs, No Touch options, One Touch options, Ladder options and weekend options. In contracts such as weekend options, traders can make returns of up to 500% on a single transaction.
4. Protect Your Capital
Amateur traders usually focus on making money but professional traders mostly focus on risk management. Managing risk is the proven way of achieving consistent success in the financial markets. Traders should always ensure that no more than 5% of their capital is risked on any one trade. There are many trading opportunities in the market and no trade is better than the other. Traders should also use the various innovative in-trade management features available in platforms such as Option.FM to reduce their risk exposure as well as to boost their potential profitability. One such feature is the Early Close which allows traders to exit their positions before expiry. Traders can use this feature to reduce their overall loss by exiting bad trades. This feature can also be used to lock in profits by exiting good trades that may potentially turn bad.
5. Take advantage of Robots and Signals
To ensure that you are always ahead of the other traders out there, you may want to take advantage or binary robots and signals. The advent of the Internet has changed how people do their trades. Your brokers can offer you binary robots—these are software that are create to automatically trade for you whenever you can’t. The robots will trade whenever an opportunity is available based on the preferences that you set. It is important that you learn what you are doing to maximize the benefits you can get from binary robots.
On the other hand, binary signals is a type of service that automatically notifies you when is the best time to put or call your chosen asset. Signals will prove to be helpful for people who are always on the go and are unable to check for latest market trends to make an informed financial decision. Using signals will keep you always at ease because you can never miss an opportunity to earn huge profits. The notification will go straight to your phone or email for your convenience. Both beginners and expert traders use signals to step up their game in binary options trading.
It is possible to make consistent profits trading financial assets in the binary options market but traders need to work hard and to strictly follow a sound trading plan that will reduce their trading risks while enhancing their potential profitability in the market.
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