Step by Step Process To Enter A Binary Options Trade

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect Choice For Beginners!
    Free Demo Account!
    Free Trading Education!
    Get Your Sing-Up Bonus Now!

  • Binomo
    Binomo

    Only For Experienced Traders!

Risk and Money Management: How to Reduce Your Risks in Binary Options Trading

In this article, you will find out how to minimize your risks when trading binary options and earn more with smaller investments. You will also be able to compare brokers based on your risk appetite, as well as download some tips for reducing your risk and maximizing your profits.

You Will Learn:

Read these instructions all the way through, and you will save both your money and nerves. What is even more important, you won’t get disappointed with binary trading from the start and will learn the basic principles for successful trading. Below, you will find the most important info for your future business. Be careful and patient. Good luck!

Alex Ladko Binary options expert, owner of binaryoptionclass.com

Why People Lose Their Money When Trading Binary Options

Beginner traders often put large amounts at risk when investing in binary options. As a result, they lose their initial deposits quickly and get disappointed with online trading.

Most beginners lose their deposits just because they don’t follow the basic risk management or money management rules.

Here’s an example:

Sam learned about binary options on the net. He remembered he had wanted to try Forex trading for a while. However, in case of binary options, everything is much easier, and so he decided to explore binaries.

Sam invested a lot of time in finding a broker that suited his needs, he studied popular strategies, and finally made his first deposit. He selected a broker with a minimum deposit of $200 and a minimum investment of $20. So he just deposited $200 and started trading, investing $20 per trade.

After making 5 trades based on one of the strategies, Sam was twice in the money and three times out of the money. His account balance dropped to $170.

At that point, Sam thought that the strategy just didn’t work. He decided to try a different strategy and went on trading, investing $20 per trade again. After making 8 trades with this new strategy, he was four times ITM and four times OTM. His account balance now dropped to $150.

Sam got a bit bewildered, but then he discovered that his last two trades were profitable, and so he decided to raise his investment amount, this winning his money back. He bought an option at $50 and lost, His account balance lowering to $100.

Sam went on trading without relying on any system, just switch from one strategy to another. He made another six trades, three ITM and three OTM. His account balance dropped to $55, and his net loss was $145. He got disappointed and angry.

Sounds familiar, doesn’t it? Let’s see why Sam was wrong:

    After depositing $200, Sam invested $20 and even $50 in a single trade

By doing this, Sam didn’t even think about risk management, as his risk per trade was 10% to 30% of his account balance. Even the most experienced traders never exceed 2%; otherwise, you may just blow up your account. Later, I’ll explain why. For now, just accept it as the golden rule of money management.

Sam didn’t stick to any system

He made 5 trades based on one strategy, then switch to another, and then, perhaps, to another. This is another serious mistake. In order to decide whether a strategy works for you or not, you need to make 50 or, better, 100 trades. Then you need to analyze the result and conclude whether it fits your goals.

Sam tried to win his money back by raising the investment amount, which was already high

Having made a few profitable trades in a row, which drew him crazy, and he increased the investment to $50. This is a sure way to blowing up one’s account. Keep yourself well in hand and never break the rules you set.

5×5 Simple System for Binary Options Trading

The 5×5 system is a simple forex AND binary options strategy, which makes use of only two indicators. This reduces the number of charts and the rules are simpler to keep track of. Once you are comfortable with the system, you could even look at adding in another rule or indicator without causing a lot of confusion for yourself. The 5×5 system uses an RSI and an SMA indicators, both of these set to run on period five. This strategy can be altered a little to work with binary trading as well.

How does it work?

Create a chart using the two indicators 5 RSI and 5 SMA (smoothed moving average) and set a 50 horizontal line on the RSA only. Use it for monitoring a currency on a daily chart. The candle for the day must cross below or above the 5 SMA. Once the candle closes, wait for the next candle (on a daily chart this will be the next day) and wait for the movement to be 10 pips or more above or below the previous day’s high/low. When looking at calls, you would only enter if the RSI is above the 50 line or under the 50 line for put options.

Simple 5×5 trading strategy

  • For a call option: Watch the daily candle for a cross above the indicator 5 SMA and then close. On the following day, the candle needs to be at least 10 pips or more above the high of the previous day and the RSI needs to be above 50, then you can enter.
  • For put option: Watch the daily candle for a cross below the indicator 5 SMA and then close. On the following day, the candle needs to be at least 10 pips or more below the low of the previous day and RSI needs to be below the 50, then you can enter.

To avoid losing trades where possible, it is always better to trade in the same direction of the trend. If you use resistance and support lines, you can also get an idea if the price level will hold or if there may be other factors at work that can affect it. You can also cut out on losing trades by ignoring the signals that do not follow the current trend.

Pros and Cons

One of the detriments of this system is the length of time to wait before being able to trade, up to 2 days or more to check if the trend is stable before trading. There is also no guarantee that even after the wait you are not entering just before a retracement. This strategy does ignore the trends to a degree, but you should ensure that you only trade with the trends and not against them to avoid losses.

This strategy is easy to understand and use by anyone and it is easy to follow and remember the rules. Trading with the trend when using this strategy means you can get some good signals in the trend direction due to the SMA which is a trend identifying indicator. The RSI helps you confirm the information you need to trade. This 5×5 strategy is a good start for a trading template and adding in an indicator of your choice will help you trade binary options with this system. It is important when trading to try and keep things as simple and uncomplicated as possible.

The 5 RSI and 5 SMA that you work with in this strategy are good enough to start with. If you add in resistance and support lines you can improve the system and help you find your way to more profitable trades and fewer losses. Or look at adding in a Stochastic Oscillator to help find the resistance and support areas easier. Having to wait for days to obtain a signal with this strategy may be off-putting to some traders, but there are ways to use this strategy for lower expires. When trading on less than 4 hour expires, waiting for moves of 10 pips or more can be a problem before entering so you might not want to wait that long. Wait on a candle to close in the direction you are trading in, check the S/R lines and check the RSA is still below 50 for 4 puts and candles are still below the 5 SMA. Check the S/R lines for confirmation before trading.

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Learn How To Trade Binary Options Successfully And Profitably

How to trade binary options, is a question frequently asked by beginners including our readers. So, we aim to give you a proper solution through this article.

Binary options are popular because of its simple trading nature, with a fixed return percentage. Despite its simplistic nature, many traders use on their binary trades far more often than you think.

It boils down to reasons such as lack of trading knowledge, experience, or choosing the wrong broker. Whatever the reason may be there must be a clear plan ahead of trading, so you don’t face ill-consequences in your trading result.

Before enlightening you with the step by step guideline on how to trade binary options profitably, we will give a short brief on what binary options are.

What Are Binary Options?

We are going to explain a basic concept on binary options here, but for detailed information, read what is binary options trading article.

Binary Option is an investment type where you have two outcomes, all or nothing. It has also a fixed expiration.

You have to accurately predict the outcome with an expiry time to make a profit. Either you will win a trade or lose all the money that you have invested for a particular trade. Moreover, you can perform binary trade in two ways.

  • Manual Trading
  • Automated Trading

In manual trading, you do all the hard-work and place the trades yourself using trading strategies . But in auto-trading, automated trading software does the trading for you, using a build-in trading strategy.

Which method you use for trading depends entirely on your preference. If you are a new trader, you might take help from a trading robot in exchange for a price. Or you can learn the basics of trading, and do it yourself.

Binary Trading Example

You already know through our citation that binary options give you a fixed payout and loss amount. To power-up your trading journey, you must have to follow some rules.

Before jumping to those specific points, we will try to connect your existing knowledge with a small example.

James Chen from Investopedia explains binary options trade with the help of an example.

Assume stock XYZ is currently trading at $64.75. A binary option has a strike price of $65 and expires tomorrow at noon. The trader can buy the option for $40. If the price of XYZ finishes above $65, the option expires in the money and is worth $100. The trader makes $60 ($100 – $40).

If the option expires and the price of the stock is below $65, the trader loses the $40 they put into the option. The potential profit and loss, combined, always equals $100.

5 NoteWorthy Steps To Trade Binary Options

What you are expecting from this phase?

Hang on! Let me guess. Maybe, you might think that we will share with you a spell so that you can earn a lot of money. But, the section will focus on the 5 noteworthy steps on how to trade binary options.

  • Choose a regulated broker
  • Analyze the market and asset
  • Practice on a demo account
  • Make an initial deposit
  • Start Live trading

As each step is very powerful, so our recommendation is to read each step without skipping.

# Choose A Broker

Choosing a broker without evaluating some factors can bring disaster. On the other hand, the retail investment market is large and have a lot of scopes. According to a report of SEC,

approximately 7,600 investment advisers registered with the SEC that serve retail investors, with over $12 trillion in retail client assets under management, and approximately 34 million clients.

Isn’t it crazy!

The actual craziest thing is that one has to choose one or more than one broker from thousands. Here, we will mention some factors that you should keep on mind before selecting any broker.

  • Regulation
  • Demo account
  • Minimum initial deposit
  • Ease of use
  • Variety of assets
  • High Payout percentage
  • Fast withdrawals
  • Multiple modes of payment

In addition to that, you refer to our list of binary options broker . It’s not necessary that you have to stick to one broker. No broker is perfect, and one broker may not suit all your needs. Don’t hesitate to trade with multiple brokers.

Taking all the above factors into consideration, we have prepared our list of recommended brokers that you can trade with.

These brokers meet all the requirements such as regulation, offering a demo account, huge asset index, high payouts, fast withdrawals, easy-to-use trading platform, and much more. Here is the list of brokers Binary.com , IQ Option, and BinaryCent that we think will offer you the best binary options trading experience.

Binary.com

IQ Option

BinaryCent

# Analyze The Market & Asset

The trading market is unpredictable and changes every sec. Three main types of analysis bring an optimal trading result.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect Choice For Beginners!
    Free Demo Account!
    Free Trading Education!
    Get Your Sing-Up Bonus Now!

  • Binomo
    Binomo

    Only For Experienced Traders!

  • Fundamental Analysis
  • Technical Analysis
  • Sentimental Analysis

Here, an economic calendar works as a ground from where traders use data to forecast the market movement. As there is “no” best method of analysis, so you have to pick the most viable option depending on time-frame and asset information.

# Practice On A Demo Account

Registering an account is free of charge with most brokers. All it takes is your vital information such as an email address, your first, and last name. Once you have created an account, you need to practice trading through a demo account.

Train yourself with the help of a demo account until you create an unbeaten situation. Educate yourself on the basic concepts of binary trading. Understand what strike price, expiry time, call, and put option, etc. Familiarize yourself with the different ways you can trade binary options.

Just because the funds and the outcome in demo accounts don’t hold any real meaning, it doesn’t mean you should trade recklessly.

Trade on the demo account exactly how you would live trade. This practice will develop your trading skills and build valuable experience.

There is no fixed duration on how long you have to practice on a demo account. Take as long as you need. Finally, when you feel confident enough, you can step up to real trading.

# Make An Initial Deposit

The initial deposit amount varies from broker to broker. You need to deposit on the trading account to carry out live trading. On the other hand, there is a big difference between an investment and deposit.

An investment is a price what you pay to get the future value. Meanwhile, the deposit is a certain amount of money that one needs to open an account.

It is wise to start with a small deposit amount like $10 to $20.

# Start Live Trading

You can start trading on a real account once you are familiar with the ins and out of binary trading. Select your preferred asset and choose your investment amount. Depending on your prediction, buy a call or put option.

Place your trade, and wait until your trade expires. In the next section, we have listed some tips and techniques on binary trading to make your trading successful and profitable.

How To Trade Binary Options Successfully And Profitably – Best Way To Trade

We already discussed a few steps above. Those steps are the principle that one trader should follow whether he is professional or not. After that, you need to turn your binary options trading into a successful profit machine.

Don’t miss out the chance by skipping points that we covered below. Follow these tips to ensure you don’t lose money while trading binary options.

  • Choice of assets
  • Start trading with small
  • Eliminate emotions from trading
  • Choose the right expiry time
  • Follow the market news
  • Risk management
  • Knowledge is power

Choice Of Assets

As you can trade with a large number of assets, so trade those assets that you are most familiar with. Do not take unnecessary risks by trading in markets that you cannot predict.

Successful binary trading depends on how well you can predict the market. Follow the market news before executing trades. Diversification of your portfolio is one way of reducing your overall trading risk. But it doesn’t mean you should diversify to assets that may not be profitable to you.

Stat Trading With Small

You may have heard about the risk management where you have stick on either 1% or 2% rule. It is a general rule of thumb for traders.

90% of traders failed in trading because they have lack of knowledge on money management. Investing a huge amount of money will not help you to increase profits.

So, at first, start with a small amount like $10. After gaining valuable experience, you can start increasing your trade size. No matter how much you practice on a demo account, trading on a live account is a different scenario. As there is real emotion involved, which brings us to our next point.

Eliminate Emotions From Trading

Professional traders are not super-human. They also fight to control their trading emotions. Eventually, all traders must go through a cycle of market emotions.

Controlling emotions is not sky-rocket. However, you will find a difference in gratitude of a winning trader and a losing trader. No wonder, a low expectation level can save you from a massive failure.

Stop dreaming about to get rich quick and follow the 7 secrets that will help you to improve your trading emotions or psychology.

Choose The Right Expiry Time

It is may seem like a matter of preference or a trivial issue, but even expiry time is a crucial factor when it comes to binary options trading.

For example, a trend was supposed to reverse within an hour. But if you placed a trade with 2-hours expiry, the trend would have reversed by then. And, you had lost the trade.

Follow The Market News

Whatever underlying asset you may trade, you need to be informed on the latest global events, and news associated with that asset. Many traders build strategy depending on the market news. So don’t skip on that, and act accordingly.

For example, if there is negative news regarding the gold and a price drop is imminent, log in to your binary options trading platform, and open a put position on gold.

Reacting appropriately to market news can bring in more trading success than you think.

Risk Management (Hedging)

Unless you are a pure gambler looking for absolute results, you should make use of hedging. Hedging is a money management strategy used to protect your profits. In this way, if you are wrong on your prediction, you lose money from your call option, but you regain that back from the put option.

Protecting your investment by buying a binary option contract opposite to your initial contract is hedging. Hedging may reduce your overall profit potential, but it also protects your capital.

If you quite confident about your prediction but still want to hedge, invest the lesser amount in the hedge position compared to your main position.

Knowledge Is Power

Trading education is one of the big factors that play a vital role in success. You need to constantly educate yourself with trading knowledge. Even though binary options look easy and simple, there is a lot that goes into constantly turning your trades into a profitable one.

Moreover, you are less likely to commit mistakes and perform better trading analysis when you are equipped with trading knowledge.

Learn To Trade Binary Option (Manual Vs. Automated Trading)

You can either manually trade binary options or can use binary options software which will do the trading for you.

When you trade manually, you choose the asset, the expiry time, and most importantly, the decision to call or put. Everything depends on you alone. Moreover, you have to set a strategy using indicators and trend lines to make a decision.

In the case of automated binary options trading, a binary robot does all the work for you. It is a programmed software that makes decisions based on certain algorithms.

On the other hand, most binary options robots allow you to customize settings such as investment per trade, risk level, indicators, and choice of assets.

However, if you want to completely leave your fate at the hands of the trading robot, you may do so. Or you can put manual effort also by building strategy.

We would recommend a mix of both auto and manual trading for the best results. We have compiled and reviewed the best binary option trading robots for you.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect Choice For Beginners!
    Free Demo Account!
    Free Trading Education!
    Get Your Sing-Up Bonus Now!

  • Binomo
    Binomo

    Only For Experienced Traders!

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