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Is it possible to trade binary options for a living?
So while all the strategy posts, and articles on money management, trading psychology, brokers, trading software options, indicators, and so forth might provide the foundation to getting yourself personally set up in the trading business, the main question that everybody should be applying to themselves is, can I actually trade binary options for a living? Can I log on to my computer every weekday morning, pull up my charts, my trusted broker, and do this as my form of work for years on end without having to return to my day job ever again and retire comfortably?
It’s not an easy question to answer, as everybody’s situation is different. For one, yes, it is mathematically possible to do this for a living if you are good at it. In the binaryoptions.net forum, I posted a probability spreadsheet that you might find useful as a way of estimating how much money you can make over a given period of time given your start-up capital, in-the-money percentage, trades taken daily, percentage invested, and things of that nature.
One thing I must say is that in order to actually trade profitably to the point where you do this as your living, you’re more often than not going to need a lot of start-up capital. You can theoretically turn smaller amounts of money into larger sums, but in order to do that successfully you’re going to need to be able to a) have a very, very high ITM percentage and b) consistently take trades in higher volume.
I’ve mentioned in the past that trading in high volume is not something I can recommend, as it contributes to overtrading – i.e., taking lower quality set-ups. You can turn very small sums into large sums by trading lower volume, but this would entail very risky money management practices, basically where your trade size is equal to (or nearly equal to) the sum from your previous winning trade. For example, you deposit $200, trade that $200 with your first trade, which you win and now have an account balance of $360. You would then take that $360 and trade that with your second trade. Upon winning, you would now have $648 and trade that with your third trade, and so forth. This would allow you to continue trading in lower volume and only take the best set-ups. But the main issue with this form of money management is that once you lose – which is inevitable because everybody loses trades – you would wipe out your account completely. But I, of course, don’t recommend this strategy at all. I am a big proponent of fixed-investment money management, where a single amount of money is invested into each trade. This amount remains fixed until your profit returns and trading skill dictate that you can increase your trade size.
The truth of the matter is that trading is very difficult even if you do have a lot of start-up capital to begin with. Even if you have $50,000 in saved up capital to dedicate to trading (which isn’t all that uncommon among forex traders) and you are absolutely sure you can trade this money profitably, it’s not going to be easy getting a 100% return on an annual basis, giving you a yearly salary of $50,000.
The scary thing about the trading profession is that no salary is ever guaranteed to you. Your profit is dictated entirely and directly by your trading results. This can be pretty unnerving when your entire financial future is contingent on getting profitable trading results. And this is a huge reason why many traders will start panicking when they aren’t getting the results they want/need and end up making irrational trading and money management situations and end up wiping out altogether. It can be a very, very precarious profession for those reasons.
Here is my opinion. I believe all traders should look at trading as a means of supplementing their incomes, rather than replacing their current stream of income altogether. Nobody should make the “newbie” mistake of viewing trading as a get-rich-quick scheme that will allow them to quit their day jobs because it really isn’t that easy.
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.
- 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.
# Analyze The Market & Asset
The trading market is unpredictable and changes every sec. Three main types of analysis bring an optimal trading result.
- 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.
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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.
Life hack: how to always make a profit in binary options trading?
How to profit from binary options? And, preferably, permanent. Of course, there is no universal way, but there are secrets that you can use.
Some traders smile condescendingly when it comes to binary options trading, seriously believing that such trading is akin to a casino. In their opinion, trading in the foreign exchange market is a matter requiring certain knowledge and skills, maximum attention and concentration, and binary options are a guessing game. Guessed – you are in profit, did not guess – you have to fork out.
To your surprise, it is worth noting that there is a small amount of truth in their statement. Quite tiny, but nonetheless . Today we will tell you about the life hack, which will allow you to make a profit in binary options trading.
Choosing the right broker BO
We immediately draw attention to the fact that such a way of earning money is in no way connected with something illegal. No need to buy any hacker programs, crack the broker’s server, have any secret knowledge and all that. All that is required of you to make a profit in the BO trade is a knowledge of brokers’ particularities and the skill of simple analysis. This is what will allow you to make a profit in 70% of transactions.
To get started, you need to choose the right broker from rating of binary options brokers. To our, and now yours, life hack worked, the broker should offer binary options trading of two types:
- one touch options;
- options with long expiration dates.
One-touch options will serve as a guideline for determining the direction of Call or Put, and we will buy a long-term binary option with an expiration period of 5-6 days.
How does it work?
So, the broker is selected, now it is necessary to determine the direction for purchasing the option. On the day off, we go to the trading terminal of our broker and study the price levels for one touch options.
After that, we determine the distance in points from the current price to the upper and lower levels set by the broker. Naturally, one distance will be greater, the other less.
The direction for buying a long-term option will tell us exactly more:
- if the distance is greater than the top level, this is the Call direction;
- if the distance is greater than the lower level – this is the direction of Put.
After such simple arithmetic calculations, we select the appropriate long-term option, which we buy on Monday morning with an expiration date by the end of the week.
Why does it work?
The essence of the scheme of this legal cheat is quite simple. Broker sets levels for one touch options so that the price reaches him with minimal chances. And the point here is not in some sky-high price levels.
A thorough analysis is carried out, the main result of which is to determine not the price level itself, but the time for which the price can reach it. The price may well reach the set mark, however, in most cases this happens after the expiration of the option expires.
This is the weak point that we use. After the expiration of the long-term option purchased by us expires, the price may not reach the level specified for the “one-touch” option, but, with a greater degree of probability, it will justify our forecast of the direction, bringing us profit.
Of course, you won’t be able to use such a life hack often – there are only four weeks with a “tail” in a month, but this is enough to get a stable profit in binary options trading.
Your Starting Guide to Binary Options
Have you ever wondered what the term “binary option” means?
If you’ve looked into online trading and financial investment before, then the answer is probably “yes.”
Usually, the term “binary option” refers to a kind of trading term, where you get a fixed payout by predicting the outcome of a trade from two potential results. It’s a bit like flipping a coin. If you’re right about whether heads or tails will come up, you’ll receive all the money agreed to. If you’re wrong, then you lose the stake you made on the option, and that’s it.
The reason that binary options have their name is that there are no extra possibilities that might happen. Either you win, or you lose – it’s that simple.
What are the Benefits of Binary Options?
The most obvious benefit of binary options investments is that it’s incredibly simple. There’s a basic YES or NO proposition to consider – and that’s all. Binary options are also very flexible. They allow you to trade in a range of markets, including Forex, commodities and indices, and a variety of market conditions.
With binary options, you’ll also be able to choose between a short-term or long-term investment window, with durations that last anywhere between 10 seconds and a whole year. While your losses are limited by the initial stake that you place into the trade, you can earn huge payouts, up to tens of thousands of dollars.
Which Are The Best Brokers?
There are lots of brokers on the market which offer binary options trading. They differ in: regulation, safety, trading tools, trading assets, support, fees and other factors. Among option brokers with the best reputation we have selected the top 2 choices to make it easier for you to make a decision.
Highly sophisticated platform:
– easy to use
– perfect for beginners
– demo account for training purposes
– lots of different financial instruments
– Great research tools
– Forex, Metals
– Oil, Commodities
– Indices, Stocks
– ETF’s, Gold
+ Mobile App
+ Web Trader
– Credit Card
– Wire Transfer
– Skrill, Qiwi
– Allows Hedging
– Offers MT4
– Offers social trading
Offers mobile trading apps
– Allows scalping
– Accepts credit cards
+ Mobile App
+ Web Trader
– Credit /debit cards
– Bank transfers
Our Top Choices in Overview
IQ Option (Best Binary Options Trading Company)
- USD $10 Account Minimum
- Average fees of 1.2 pips (EUR/USD)
- Best For Binary Options Trading
IQ Option has a long trading services history. The company started operating in 2020. Having their main quarters in Limassol, Cyprus, they are authorized and regulated by the Cyprus Securities and Exchange Commission (CySEC) only. IQOPTION LTD is registered at St. Vincent and Grenadines, this entity is not regulated.
IQ Option index brand has been recently updated to make sure the UAE clients get the same advanced tools and platforms, internationally available to other customers. They provide an improved in-house advantage platform different from the most known Metatrader 4/5 platform.
Those powerful tools are available without any risk – you can open a demo account with no limitations. $10,000 in virtual currency is also provided for you to practice with and is not limited in any way.
IQ Options has won many awards due to the quality of their services. IF you are looking for a solid platform you don’t have to look any further.
Olymp Trade (Best trading techology – beginners and advanced traders)
- Allows hedging
- Offers MT4
- Offers social trading
- Scalping allowed
- Offers trading app
Olymp Trade is an online digital options broker from St. Vincent, operating since 2020. Since 2020, they are a member of the International Financial Commission. By becoming a Finacom member it is under Finacom supervisory. Finacom is a third party regulator guaranteeing security against fraudulent brokers. This gives Olymp Trade the trustworthiness needed to become an authority broker as you have to meet strict rules in order to be approved by this regulator.
All in all, it is a trustworthy platform as it is regulated by FinaCom and comes with a Verify My Trade audit. It also has a lot of interactive learning material. The interface is user-friendly, the design is clean and very intuitive. The broker has a lot of awards, and many positive reviews from traders, on the platform. Overall we would recommend it, especially if you are a trading beginner.
What Are Binary Options?
Binary options are a financial asset that can be traded on any instrument and in (almost) any market. Binary options are considered “all or nothing” trades because the total profit or loss is known before the trade is ever made. Their straightforward nature means that there are no complicated calculations that need to be done.
When you’re adequately informed through news announcements, global trends, or quarterly reviews, you may be able to make an accurate determination about the direction a price may go. Making binary options trade based on this information could generate significant profit for you.
Another significant benefit to binary options is that you can choose from many different kinds of derivatives. Commodities, stocks, and cryptocurrencies are just some of the areas that can be traded using binary options. Examples include aluminum and corn for commodities; Apple and Google for stocks; the dollar and the Euro in Forex; and Ethereum and Litecoin in cryptocurrency. All of these can be traded with binary options.
Knowing how and where binary options came to be can be very helpful when you start trading binary options. This is especially true when beginners are attempting to shift to full-time trading. Binary options (also known as “digital” options) came about many decades ago. In the beginning, only large brokerages had access to binary options. After the 2008 recession, the US Securities and Exchange Commission began allowing binary options to be traded through an exchange.
More than a decade later, binary options are now accessible to the entire world, the demand for binary options trading is continuously increasing and, since the investments on binary trades are so small, demand is likely to only increase.
What Types Of Binary Options Are There?
There are many different binary options types that can be treated. Four of the more frequently treated are listed below.
This option answers the question, “Will the future price be above or below the current price at a specific point in time?” This type of binary is, by far, the most common.
- In/Out (Range or Boundary)
With this type of option, a range of prices is determined based on whether or not the price will finish inside those boundaries or outside of them.
When you set this type of binary options, your position indicates whether the price will “touch” a specific level between the start of the trade and the end. The trade is considered complete as soon as the “touch” happens.
The “ladder” type of binary options is similar to up/down trades with the crucial difference that the future prices are predetermined.
When Do Binary Options End?
One critical component of binary options trading is knowing when the trade will end. This is known as the “expiry time.” The expiry time is the point that determines whether or not you have made or lost money. These times frames can vary from 30 seconds to a year, but the unique variable is that they will end at a predetermined time.
While 30-second expiry times to technically exist, the majority of day traders use the 5 to 30-minute expiry timeframe. This increases the potential for profits while still limiting the risk of loss. Also, by shortening the expiry time of your binary options trades, you can complete more trades within a single day. This, in turn, increases your potential for profit.
The Legality Of Option Trading
Even though it’s occasionally debated on national television, binary options are legal. While some companies use binary options to operate scams, the majority of companies follow the laws and regulations correctly.
Frauds And Scams
Government regulators are actively looking for brokers who promise “quick cash” as this is a sign of a scam. The reputation of binary options was damaged by such dishonest marketing, but it is hoped that the problem will be resolved quickly.
Even though binary options are legal, it is wise to avoid “quick money” promises, telemarketers that claim to be brokers or any claim that connects “free” with “binary options.”
You should always be aware of and knowledgeable about the dangers of fraud and carefully vet any broker you come in contact with.
CFD Trading Vs. Binary Options
Many people wonder whether or not binary options and CFD trading are the same thing. While they are similar in many ways, CFD’s have potentially unlimited risk. For example, if the price goes up, the change in value must be paid by the seller. Alternatively, if the price goes down, the seller gets paid.
Binary options work differently because your risk is limited. If you put in a call option at 10%, it doesn’t matter if the price sinks by 99% you will only lose 10%. Conversely, if the price goes up by 99%, you will only earn 10%. Both the risk the potential for profit are limited. Both options are considered as day trading.
If you want to find the most suitable online trading platforms for options trading then check the article here.
What Speaks For and What Factor Against Binary Options?
Below is a short list of benefits to binary options trading.
- Low Financial Risk
- Trade Control
- Profit Potential
There are four significant variables to remember when considering trading in binary options.
Those factors are your risk tolerance, capital requirements, trading style, and the benefits and risks of binary options.
Despite the long list of benefits to binary options, there are several risks.
- Reduced Trading Odds
- Limited Trading Tools
- Price Of Losing
- Risk Management
What Are The Steps To Becoming A Binary Options Trader?
The pathway to becoming a binary options trader is just as simple as binary options themselves.
Step 1 – Find A Broker
Finding your broker is probably one of the most difficult, and most important, decisions that you will make in day trading. So how do you determine which broker is right for you? We would definitely recommend to go with IQ Option UAE if you are from the UAE
If you’re going to day trade binary options with high-frequency, you’re going to spend a lot of money on commissions. The key here is broker transparency. This lets you know in advance how much each trade will cost and how much you need to make on each trade in order to pay the fees for each trade.
Most brokers require a minimum deposit of approximately $50 in order to begin options trading. When first starting out as a binary options trader, it may be worthwhile to find brokers who offer low minimum deposits.
Focusing on a specific asset type – though not required in options trading – can be beneficial for beginning traders. Finding a broker who specializes in your asset of interest may accelerate your success in that asset class.
You should always verify that your broker is registered and compliant with the proper regulatory bodies in your region.
Trading binary options is done through some kind of platform. You will also spend many hours per day on that platform, so you should make sure that you like it, it provides the data you need, and it’s easy for you to use. Without the proper platform, it’s almost impossible to make profitable trade decisions. Before paying for a trading platform, do your due diligence by comparing and contrasting platforms and checking reviews from other traders.
For day traders, maximizing your time directly correlates to your profit. Because of this, errors or problems in systems or support can cause significant losses. Be sure to verify that your broker offers 24/7 customer support in the format that you prefer (live chat, phone support, email, etc.)
Smartphones and iPads have come a long way in recent years, and many brokers now offer valuable mobile apps for enhancing day trading. Be sure to check with your brokerage about compatibility and the tools that would best support you in your trading.
One technique that brokerages use to attract customers is through creating an offer around their services. Examples of this would be online courses or certain trading situations that are “fee-free.” Be sure to evaluate their offer to see what extras are beneficial for your specific situation.
However, be wary when the offer seems “too perfect.” This is also a technique that scammers use to attract victims.
- Demo Accounts
After filtering through the hundreds of different brokerages that offer options trading services and arriving at a list of 2-3 that you like. Now is when the decision becomes more difficult. Since there’s no such thing as a “perfect broker,” the better brokerages have set up “demo accounts” where you can “play” with different assets and options.
Since demo accounts are updated using live data but do NOT use real money, they are an excellent place to practice trading. This gives you experience with trading, but it also helps you learn the systems that the brokerages use.
Using this technique, you can improve your trading skill while saving for the initial deposit of capital you will need when you open your trading account.
Our recommendation for trading binary options is IQ Option platform. You can read our detailed review, insights and trading experience here.
Step 2 – Which Market And Which Instrument?
Since binaries can be traded on pretty much anything from Forex, stocks, wheat, or Google, you can trade in pretty much anything. However, it is wise to begin with an asset class you are already familiar with in order to shorten the learning curve.
Step 3 – When To End The Trade?
Profitable binary options trading balances the number of daily trades with the movement in price. Day traders usually focus on shorter trades with expiry times from 30 seconds to 6 hours. Even though a higher trading volume potentially means higher profits, it’s advisable to trade based on accurate data, not just the number of trades possible.
Step 4 – What Size Should Your Trade Be?
The more you bet, the more you could make. In contrast, the more you bet, the more you could lose. Careful risk management will help you make enough disciplined trades to make a profit without risking everything in a single trade.
Step 5 – What Option Should You Choose?
After going through the previous steps, you should have a list of options to choose from. That may, in fact, be very large. This is a dangerous situation for a beginning day trader as the temptation is to focus on the trades that have the most substantial returns. However, it’s almost always better to focus on the trades that are relatively safe as these virtually guarantee that you will get a return. Remember, the goal isn’t just to win, it’s to win over and over again.
Step 6 – Confirm The Trade
This is the final step, and after all of the previous steps, you should feel very confident about your choice. The only thing you need to do now is wait for the trade to expire. After that, you just collect your payout and repeat the process.
Strategies for binary options are more straightforward than trades for other asset types, so the strategies for them are less complicated. However, you must have a strategy.
One primary reason why you must have a strategy is that it helps limit emotional decision making when trading. One of the most subtle emotions, overconfidence, always leads to errors in the long term. The time tested way to limit emotional decision making is to follow a strategy.
A second primary reason a strategy is essential to professional trading is that it allows you to repeat your successes. Without a strategy in place, you never know if your profitable trades were because of intelligent decision making or just luck.
Building A Strategy
Two critical parts of your binary options strategy are creating your signal and money management.
Step 1 – What Is A Signal, And How Do You Create One?
A “signal” is the direction that a price will go. Knowing the signal allows you to make a prediction about that price movement. Technical analysis and the news are the two main ways of creating a signal.
It is possible to predict price movements in advance if you are able to identify patterns using financial charts. Using appropriate charts and identifying the data patterns in those charts is the first step in building your strategy.
Since those patterns form the foundation of your strategy, you should triple check that your brokerage has the right tools available for your research.
But remember, this research does not have to be as nuanced as other forms of market analysis. Common indicators such as price actions, trends, mirrors, support and resistance levels, and MACD indicators are all useful in options trading.
If technical analysis is not your strong point, you can also base your decisions on the news. One benefit of this approach is that the information is easy to understand. Techniques for using the news as your data source are to look at the release of company financial reports or global news that affects an entire market.
One negative of depending on the news for your information is that key details for your particular strategy can be left out of the report, leaving you with insufficient data to make your trading decision.
By staying up to date on market changes, you should be able to make your trades before most traders. A few useful new sources for trading information are:
(Insert your own list here)
Step 2 – Trade Amount
It is always a good idea to keep things simple when beginning to trade. A straightforward strategy is to set a fixed amount to trade for each day. This provides you predictable income and helps you know when you’re “done” for the day.
What is the Martingale Strategy?
The idea behind the Martingale Strategy is to quickly win back what you have lost. This is done by trading simply trading more than you usually would after a loss. For example, a person who loses on a $500 trade would bet more money on the next bet (around $1000) in order to quickly recuperate the lost money.
Obviously, if you make a series of losing bets, this strategy could go very wrong, very fast. This strategy is best used in conjunction with mistakes or accidents in estimation to predictions. If however, you are still in the learning phase, it’s more likely that it was an error in the strategy that needs to be fixed. If this is the case, you should focus on identifying and correcting the error as quickly as possible so that you can go on to predictably generating income.
What Is The Percentage Strategy?
Many binary options traders recommend a system based on percentages. This means that you identify a specific percentage of your total funds that you are willing to risk and then make a bet for that amount. For example, if you have $20,000 available to trade, a 1.5% risk rate would mean that your trades would be at most $300.
You would then adjust your trade amount based on your risk assessment. If, for example, your risk rate was 10%, you could make larger trades, and therefore more substantial profits (or more substantial losses). Maintaining a low percentage helps prevent you from trading more than you can afford.
What Is The “Straddle Strategy?”
In simple terms, the straddle strategy is when you place a bet on both the increase and decrease in value of an asset. This is best to use during periods of high volatility because the price change can occur rapidly; thus, you can profit on both the increase in price and the decrease in price at the same time. As this strategy is based on rapid movements over short periods, it works best in 60 seconds to five minutes intervals. However, it can apply to periods of up to one day.
Should You Use Algorithmic Trading And Bots?
One of the benefits of using a strategy is that it can be automated after that strategy is producing a consistent profit. Different software services provide “bots,” which rely on algorithms and signals that you can program beforehand.
All of the analysis and trading is done for you by the bots. This is beneficial because the bots can do more trading than you can since they are directly integrated into the trading systems. This increases your potential for profit.
The “quality-of-life” improvement provided by these bots is so significant it is worth researching and discussing your brokers offering regarding the availability and use of algorithmic trading. Some brokerages have a bot that you are allowed to use. Other brokerages give you tools so that you can build your own bot and program it according to your preferred entry points and moving averages.
However, algorithmic trading with binary options can be risky because if there is a mistake in the program that you have given to the bot, then that mistake will be in repeated rapidly and you can lose a lot of money in a short period of time.
How Is Timing Important?
The timing of your trades can dramatically affect the strategy you choose and the success you have. Some strategies performed well with expiry times of five minutes while other strategies are more successful with 15 minute or 60 minutes time frames. All strategies and all time frames can produce a significant profit. However, combining the right strategy with the right timeframe will significantly increase your potential for profit.
Success in binary options trading depends on finding a strategy that complements your style of trading. In order to do this well, carefully choose the instrument you’ll be trading. You should then use a trusted system to manage your money. The next step is to use patterns and charts in order to identify signals and other indicators about when the trade should occur and in what direction. All of these things together for your strategy.
As always, when you start something new, it’s good to get some practice in first. Demo trading accounts were invented for precisely this purpose.
To succeed at trading, you should start learning now and never stop. Each day, the markets change, and this means you need to change with them. In order to help you with that, we have provided a short list of resources below that you can use as you immerse yourself in the world of binary options trading.
Each day, a new webinar, video tutorial, or video course becomes available. These tutorials can be beneficial as they walk you through the process of making your trades. This is particularly useful when you have first started with a new piece of software or a new brokerage.
Books & Ebooks
While many internet influencers exclaim that “books are dead” and that “nobody reads anymore,” the reality is that more books and ebooks are sold today than ever before. Financial literature like Joe Duarte’s book “trading binary for dummies” or other more technical manuals give invaluable insights into the world of binary options day trading. By reading the books written by experts, you are able to learn in days or weeks what took them decades to master.
Forums & Facebook Groups
One often overlooked the benefit of social media is how beginners are able to contact and communicate with experts in their market that they would otherwise be inaccessible. This means that if you’re in the right forum or the right Facebook group, you might be able to get online feedback from experience traders about situations that are specific to your life and your trades. While not the same as having a true “mentor,” this is support can be an invaluable as it accelerates your ability to profitably participate in binary options trading.
PDFs & Instruction Guides
Similar to the video tutorials, instruction guides and PDFs provide you with a breakdown of steps that is clear and easy-to-follow. These PDFs instruction manuals are almost always completely free and downloadable, so you get instant access.
Copy Trading/Social Trading
Copied trading or social trading is an area of social media where experienced traders post their results and information from their trades for others to follow. You can then analyze their strategies and model their success. Many of social trading networks are paid, so be sure to evaluate them carefully by checking the reviews.+
Newsletters & Blogs
Similar to staying up to date with the major news outlets, company newsletters, and blogs from individuals who are “in the know,” can help you to stay aware of new developments that can cause your markets to change.
Each of these recommendations is important for successful binary options trading. Maximize on these free resources before you pay for more advanced material.
One of the best practices of many successful traders is to keep a trading journal. By keeping a record of all of your trading results, you are gathering data that you can utilize to answer the question of “Why?”
“Why was that trade successful?”
“Why was that trade unsuccessful?”
Since very few beginning traders are able to afford a mentor, which in cost upwards of $50,000 a year, your best teacher is your past. If you have accurate data, you can answer his questions. In addition, having this record helped you to answer questions from your government tax authority in the case of an audit.
Having the right strategy is only one part of successful binary options trading. Another Central component is your ability to control your emotions. Overreacting emotionally can cause you to make expensive mistakes. For example, becoming overconfident can cause you to make trades that are larger than you can afford. In contrast, becoming fearful can cause you to make trades that are too small and therefore limit your profitability.
This is why we have a strategy. If your strategy is based on technical analysis and accurate calculations, you will make money. However, if you start basing your decisions on your emotional response, your future success as a daytrader is doubtful.
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