How To Properly Use Technical Analysis in Binary Options

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Contents

Analysis and its types in binary options

Profitable binary options trading is not possible without quality market analysis. It would seem, options trading is simple, just need to make a bet on whether the price of the asset will increase or go down. But how do you know which direction to choose: up or down? And when to open the option that it certainly closed with a profit? For this you need to understand which factors and patterns affect the price change. And market analysis of option will help in this.

Market analysis is and its purpose

Market analysis is an analysis of the situation on the currency, stock or commodity market in order to predict the direction of prices or other market asset and find the best moments to open trades.

How to perform the analysis of binary options

Binary options is a derivative market instrument, which is based on a given underlying asset. It can be currency pairs, securities, stock indexes or commodity markets (for example, there are over 200 assets in Verum Option platform). Therefore, when talking about the binary options, the market analysis is meant on the specific underlying asset you want to trade.

For example, if you are trading options on stocks of Apple, you need to analyze the change of these shares, but if your underlying asset is gold, then you need to analyze the situation in the gold market.

There are two kinds of options analysis: fundamental and technical. Fundamental helps to predict the behavior of prices of market assets taking into account the influence of economics and politics, technical analysis is based directly on price chart data.

Fundamental analysis

The basic idea of fundamental analysis is that every cause brings a result, and if the world economy or politics, something important happens, it will affect the quotes.

Latest and most vivid example: on 23th of June 2020, the UK held a referendum on exit from the EU, after which the quotation of the pound sterling plummeted by almost of 6%. The United Kingdom became politically and economically unstable, and it is unprofitable for large investors to invest in its currency. And those who bet on the decline of the pound earned on this.

Of course, not only such a serious and rare events have an impact on the quotes of market assets. It could be statistics that are published regularly and are marked in the economic calendar. For example: Central Bank meetings and speeches of their representatives, the data on the labor market, inflation, business activity, GDP. Typically, when data is better than forecast, an asset increasing in price, and when the data is worse than forecast, the price of the asset falls.

For example, you opened an economic calendar and see that in an hour the publication of Eurozone GDP is expected. You only need to wait for news and see how it meets the forecasts. If GDP growth exceeded expectations, it is possible to open a call option for a rise in the Euro against the dollar, and if the actual value is “not held” to the forecast, the Euro is likely to fall, and you can make money on its decline.

Technical analysis

Technical analysis is based on the fact that the price behavior is always logical. And if you study the price chart and identify these patterns, you can predict that the price will rise or fall. Technical analysis can be carried out using only the graph (graphical analysis), or specific indicators (technical analysis).

Graphical analysis

Graphical analysis is good because it is the most obvious and logical. You just look at the price chart, find shapes that say about the continuation or reversal of the trend, and perform a trade.

Basic graphic shapes: triangle, rectangle, flag and pennant. They are all based on lines of support and resistance. To open a trade when the figure is fully formed, that is, when the support level or resistance level is broken.

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Triangle – a figure of continuation of a trend, which is formed in a period of price consolidation. The triangle is ascending, descending, symmetrical and widening.

Rectangle — continuation or trend reversal, is formed after a strong price movement.

Flag and pennant — continuation patterns usually occur in periods of price consolidation, after which the trend resumes. First a “handle” of flag or pennant is formed — the price makes a sudden jump in the trend direction. Then price is either trading in a sideways pattern with parallel lines of support and resistance (the flag), or reduces oscillations, when the lines of support and resistance converge to a single point (the pennant).

Indicator analysis

Indicator analysis — chart analysis through indicators that help to determine the trend and to find entry points in the market.

Two main groups of indicators are trend-following indicators and oscillators. The trend are visible on the chart and indicate the presence and direction of a trend. These indicators are the most popular among traders as they are the least complicated for perception and interpretation. Trend indicators include Moving Average (MA), Alligator, Parabolik SAR, Bollinger Bands.

Oscillators or stochastics are used to determine the strength of the trend to tell when a reversal is possible. These are such indicators as MACD, Stochastic, Ichimoku, RSI. The oscillators are located below the main graph and are shown as curves, the intersection of which is the signal to open transaction.

However, it does not necessarily strain with the use of indicators. For example, in the Verum Option trading platform there is a tool for automated technical analysis – Strategy Advisor which is based on the trend indicators MA and Bollinger Bands, and RSI.

Risk management

In order to achieve success, the trader should follow the rules of risk management:

  • Open the transaction only when there is a market signal obtained as a result of fundamental or technical analysis.
  • An investment in 1 option should be no more than 3-5% of the deposit.
  • If you have three unprofitable trades in a row, stop and reconsider your trade.
  • if you see that the option is in the negative, use the management tools of the transaction to minimize loss.

For example, in the Verum Option platform there are tools “Rollover” and “Sale option”. You can use rollover to prolong the expiry of the option to give the deal a chance to become profitable, or prematurely sell the option at the current price.

Which way of analysis to choose?

Each trader decides it for himself, but the professionals recommend to carry out both fundamental and technical analysis of binary options. In some cases the appropriate fundamental analysis (for example, during important news releases), and in other works technical is the best.

Of course, the analysis of the market should be studied, but it’s pretty simple. To trade binary options it is even enough to have basic knowledge, that every beginner is able to learn.

How to Succeed with Binary Options Trading 2020

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What is a Binary Option and How Do You Make Money?

A binary option is a fast and extremely simple financial instrument which allows investors to speculate on whether the price of an asset will go up or down in the future, for example the stock price of Google, the price of Bitcoin, the USD/GBP exchange rate, or the price of gold. The time span can be as little as 60 seconds, making it possible to trade hundreds of times per day across any global market.

Before you place a trade you know exactly how much you stand to gain if your prediction is correct, usually 70-95% – if you invest $100 you will receive a credit of $170 – $195 on a successful trade. This makes risk management and trading decisions much more simple. The outcome is always a Yes or No answer – you either win it all or you lose it all – hence it being a “binary” option. The risk and reward is known in advance and this structured payoff is one of the attractions.

Exchange traded binaries are also now available, meaning traders are not trading against the broker.

To get started trading you first need a regulated broker account (or licensed). Pick one from the recommended brokers list, where only brokers that have shown themselves to be trustworthy are included. The top broker has been selected as the best choice for most traders.

If you are completely new to binary options you can open a demo account with most brokers, to try out their platform and see what it’s like to trade before you deposit real money.

Introduction Video – How to Trade Binary Options

These videos will introduce you to the concept of binary options and how trading works. If you want to know even more details, please read this whole page and follow the links to all the more in-depth articles. Binary trading does not have to be complicated, but as with any topic you can educate yourself to be an expert and perfect your skills.

Option Types

The most common type of binary option is the simple “Up/Down” trade. There are however, different types of option. The one common factor, is that the outcome will have a “binary” result (Yes or No). Here are some of the types available:

  • Up/Down or High/Low – The basic and most common binary option. Will a price finish higher or lower than the current price a the time of expiry.
  • In/Out, Range or Boundary – This option sets a “high” figure and “low” figure. Traders predict whether the price will finish within, or outside, of these levels (or ‘boundaries’).
  • Touch/No Touch – These have set levels, higher or lower than the current price. The trader has to predict whether the actual price will ‘touch’ those levels at any point between the time of the trade an expiry.
    Note with a touch option, that the trade can close before the expiry time – if the price level is touched before the option expires, then the “Touch” option will payout immediately, regardless of whether the price moves away from the touch level afterwards.
  • Ladder – These options behave like a normal Up/Down trade, but rather than using the current strike price, the ladder will have preset price levels (‘laddered’ progressively up or down).These can often be some way from the current strike price.As these options generally need a significant price move, payouts will often go beyond 100% – but both sides of the trade may not be available.

How to Trade – Step by Step Guide

Below is a step by step guide to placing a binary trade:

  1. Choose a broker – Use our broker reviews and comparison tools to find the best binary trading site for you.
  2. Select the asset or market to trade – Assets lists are huge, and cover Commodities, Stocks, Cryptocurrency, Forex or Indices. The price of oil, or the Apple stock price, for example.
  3. Select the expiry time – Options can expire anywhere between 30 seconds up to a year.
  4. Set the size of the trade – Remember 100% of the investment is at risk so consider the trade amount carefully.
  5. Click Call / Put or Buy / Sell – Will the asset value rise or fall? Some broker label buttons differently.
  6. Check and confirm the trade – Many brokers give traders a chance to ensure the details are correct before confirming the trade.

Choose a Broker

Options fraud has been a significant problem in the past. Fraudulent and unlicensed operators exploited binary options as a new exotic derivative. These firms are thankfully disappearing as regulators have finally begun to act, but traders still need to look for regulated brokers.

Note! Don’t EVER trade with a broker or use a service that’s on our blacklist and scams page, stick with the ones we recommend here on the site. Here are some shortcuts to pages that can help you determine which broker is right for you:

  • Compare all brokers – if you want to compare the features and offers of all recommended brokers.
  • Bonuses and Offers – if you want to make sure you get extra money to trade with, or other promotions and offers.
  • Low minimum deposit brokers – if you want to trade for real without having to deposit large sums of money.
  • Demo Accounts – if you want to try a trading platform “for real” without depositing money at all.
  • Halal Brokers – if you are one of the growing number of Muslim traders.

Asset Lists

The number and diversity of assets you can trade varies from broker to broker. Most brokers provide options on popular assets such as major forex pairs including the EUR/USD, USD/JPY and GBP/USD, as well as major stock indices such as the FTSE, S&P 500 or Dow Jones Industrial. Commodities including gold, silver, oil are also generally offered.

Individual stocks and equities are also tradable through many binary brokers. Not every stock will be available though, but generally you can choose from about 25 to 100 popular stocks, such as Google and Apple. These lists are growing all the time as demand dictates.

The asset lists are always listed clearly on every trading platform, and most brokers make their full asset lists available on their website. This information is also available within our reviews, including currency pairs.

Expiry Times

The expiry time is the point at which a trade is closed and settled. The only exception is where a ‘Touch’ option has hit a preset level prior to expiry. The expiry for any given trade can range from 30 seconds, up to a year. While binaries initially started with very short expiries, demand has ensured there is now a broad range of expiry times available. Some brokers even give traders the flexibility to set their own specific expiry time.

Expiries are generally grouped into three categories:

  • Short Term / Turbo – These are normally classed as any expiry under 5 minutes
  • Normal – These would range from 5 minutes, up to ‘end of day’ expiries which expire when the local market for that asset closes.
  • Long term – Any expiry beyond the end of the day would be considered long term. The longest expiry might be 12 months.

Regulation

While slow to react to binary options initially, regulators around the world are now starting to regulate the industry and make their presence felt. The major regulators currently include:

  • Financial Conduct Authority (FCA) – UK regulator
  • Cyprus Securities and Exchange Commission (CySec) – Cyprus Regulator, often ‘passported’ throughout the EU, under MiFID
  • Commodity Futures Trading Commission (CFTC) – US regulator
  • Australian Securities and Investments Commission (ASIC)

There are also regulators operating in Malta and the Isle of Man. Many other authorities are now taking a keen a interest in binaries specifically, notably in Europe where domestic regulators are keen to bolster the CySec regulation.

Unregulated brokers still operate, and while some are trustworthy, a lack of regulation is a clear warning sign for potential new customers.

Recently, ESMA (European Securities and Markets Authority) moved to ban the sale and marketing of binary options in the EU. The ban however, only applies to brokers regulated in the EU. This leaves traders two choices to keep trading: Firstly, they can trade with an unregulated firm – this is extremely high risk and not advisable. Some unregulated firms are responsible and honest, but many are not.

The second choice is to use a firm regulated by bodies outside of the EU. ASIC in Australia are a strong regulator – but they will not be implementing a ban. This means ASIC regulated firms can still accept EU traders. See our broker lists for regulated or trusted brokers in your region.

There is also a third option. Traders who register as ‘professional’ are exempt from the new ban. The ban is only designed to protect ‘retail’ investors. A professional trader can continue trading at EU regulated brokers such as IQ Option. To be classed as professional, an account holder must meet two of these three criteria:

  1. Open 10 or more trades per quarter, of €150 or more.
  2. Have assets of €500,000 or more
  3. Have worked for two years in a financial firm and have experience of financial products.

Strategies and Guides

We have a lot of detailed guides and strategy articles for both general education and specialized trading techniques. Below are a few to get you started if you want to learn the basic before you start trading. From Martingale to Rainbow, you can find plenty more on the strategy page.

Signals and Other Services

For further reading on signals and reviews of different services go to the signals page.

Beginners Guides

If you are totally new to the trading scene then watch this great video by Professor Shiller of Yale University who introduces the main ideas of options:

Education for beginners:

Types of Trades

How to Set Up a Trade

The ability to trade the different types of binary options can be achieved by understanding certain concepts such as strike price or price barrier, settlement, and expiration date. All trades have dates at which they expire.

When the trade expires, the behaviour of the price action according to the type selected will determine if it’s in profit (in the money) or in a loss position (out-of-the-money). In addition, the price targets are key levels that the trader sets as benchmarks to determine outcomes. We will see the application of price targets when we explain the different types.

There are three types of trades. Each of these has different variations. These are:

Let us take them one after the other.

High/Low

Also called the Up/Down binary trade, the essence is to predict if the market price of the asset will end up higher or lower than the strike price (the selected target price) before the expiration. If the trader expects the price to go up (the “Up” or “High” trade), he purchases a call option. If he expects the price to head downwards (“Low” or “Down”), he purchases a put option. Expiry times can be as low as 5 minutes.

Please note: some brokers classify Up/Down as a different types, where a trader purchases a call option if he expects the price to rise beyond the current price, or purchases a put option if he expects the price to fall below current prices. You may see this as a Rise/Fall type on some trading platforms.

In/Out

The In/Out type, also called the “tunnel trade” or the “boundary trade”, is used to trade price consolidations (“in”) and breakouts (“out”). How does it work? First, the trader sets two price targets to form a price range. He then purchases an option to predict if the price will stay within the price range/tunnel until expiration (In) or if the price will breakout of the price range in either direction (Out).

The best way to use the tunnel binaries is to use the pivot points of the asset. If you are familiar with pivot points in forex, then you should be able to trade this type.

Touch/No Touch

This type is predicated on the price action touching a price barrier or not. A “Touch” option is a type where the trader purchases a contract that will deliver profit if the market price of the asset purchased touches the set target price at least once before expiry. If the price action does not touch the price target (the strike price) before expiry, the trade will end up as a loss.

A “No Touch” is the exact opposite of the Touch. Here you are betting on the price action of the underlying asset not touching the strike price before the expiration.

There are variations of this type where we have the Double Touch and Double No Touch. Here the trader can set two price targets and purchase a contract that bets on the price touching both targets before expiration (Double Touch) or not touching both targets before expiration (Double No Touch). Normally you would only employ the Double Touch trade when there is intense market volatility and prices are expected to take out several price levels.

Some brokers offer all three types, while others offer two, and there are those that offer only one variety. In addition, some brokers also put restrictions on how expiration dates are set. In order to get the best of the different types, traders are advised to shop around for brokers who will give them maximum flexibility in terms of types and expiration times that can be set.

Mobile Apps

Trading via your mobile has been made very easy as all major brokers provide fully developed mobile trading apps. Most trading platforms have been designed with mobile device users in mind. So the mobile version will be very similar, if not the same, as the full web version on the traditional websites.

Brokers will cater for both iOS and Android devices, and produce versions for each. Downloads are quick, and traders can sign up via the mobile site as well. Our reviews contain more detail about each brokers mobile app, but most are fully aware that this is a growing area of trading. Traders want to react immediately to news events and market updates, so brokers provide the tools for clients to trade wherever they are.

Trading FAQ

What Does Binary Options Mean?

“Binary options” means, put very simply, a trade where the outcome is a ‘binary’ Yes/No answer. These options pay a fixed amount if they win (known as “in the money”), but the entire investment is lost, if the binary trade loses. So, in short, they are a form of fixed return financial options.

How Does a Stock Trade Work?

Steps to trade a stock via a binary option;

  1. Select the stock or equity.
  2. Identify the desired expiry time (The time the option will end).
  3. Enter the size of the trade or investment
  4. Decide if the value will rise or fall and place a put or call

The steps above will be the same at every single broker. More layers of complexity can be added, but when trading equities the simple Up/Down trade type remains the most popular.

Put and Call Options

Call and Put are simply the terms given to buying or selling an option. If a trader thinks the underlying price will go up in value, they can open a call. But where they expect the price to go down, they can place a put trade.

Different trading platforms label their trading buttons different, some even switch between Buy/Sell and Call/Put. Others drop the phrases put and call altogether. Almost every trading platform will make it absolutely clear which direction a trader is opening an option in.

Are Binary Options a Scam?

As a financial investment tool they in themselves not a scam, but there are brokers, trading robots and signal providers that are untrustworthy and dishonest.

The point is not to write off the concept of binary options, based solely on a handful of dishonest brokers. The image of these financial instruments has suffered as a result of these operators, but regulators are slowly starting to prosecute and fine the offenders and the industry is being cleaned up. Our forum is a great place to raise awareness of any wrongdoing.

These simple checks can help anyone avoid the scams:

  • Marketing promising huge returns. This is clear warning sign. Binaries are a high risk / high reward tool – they are not a “make money online” scheme and should not be sold as such. Operators making such claims are very likely to be untrustworthy.
  • Know the broker. Some operators will ‘funnel’ new customer to a broker they partner with, so the person has no idea who their account is with. A trader should know the broker they are going to trade with! These funnels often fall into the “get rich quick” marketing discussed earlier.
  • Cold Calls. Professional brokers will not make cold calls – they do not market themselves in that way. Cold calls will often be from unregulated brokers interested only in getting an initial deposit. Proceed extremely carefully if joining a company that got in contact this way. This would include email contact as well – any form of contact out of the blue.
  • Terms and Conditions. When taking a bonus or offer, read the full terms and conditions. Some will include locking in an initial deposit (in addition to the bonus funds) until a high volume of trades have been made. The first deposit is the trader’s cash – legitimate brokers would not claim it as theirs before any trading. Some brokers also offer the option of cancelling a bonus if it does not fit the needs of the trader.
  • Do not let anyone trade for you. Avoid allowing any “account manager” to trade for you. There is a clear conflict of interest, but these employees of the broker will encourage traders to make large deposits, and take greater risks . Traders should not let anyone trade on their behalf.

Which Are The Best Trading Strategies?

Binary trading strategies are unique to each trade. We have a strategy section, and there are ideas that traders can experiment with. Technical analysis is of use to some traders, combined with charts, indicators and price action research. Money management is essential to ensure risk management is applied to all trading. Different styles will suit different traders and strategies will also evolve and change.

There is no single “best” strategy. Traders need to ask questions of their investing aims and risk appetite and then learn what works for them.

Are Binary Options Gambling?

This will depend entirely on the habits of the trader. With no strategy or research, then any short term investment is going to win or lose based only on luck. Conversely, a trader making a well researched trade will ensure they have done all they can to avoid relying on good fortune.

Binary options can be used to gamble, but they can also be used to make trades based on value and expected profits. So the answer to the question will come down to the trader.

Advantages of Binary Trading

The main benefit of binaries is the clarity of risk and reward and the structure of the trade.

Minimal Financial Risk

If you have traded forex or its more volatile cousins, crude oil or spot metals such as gold or silver, you will have probably learnt one thing: these markets carry a lot of risk and it is very easy to be blown off the market. Things like leverage and margin, news events, slippages and price re-quotes, etc can all affect a trade negatively. The situation is different in binary options trading. There is no leverage to contend with, and phenomena such as slippage and price re-quotes have no effect on binary option trade outcomes. This reduces the risk in binary option trading to the barest minimum.

Flexibility

The binary options market allows traders to trade financial instruments spread across the currency and commodity markets as well as indices and bonds. This flexibility is unparalleled, and gives traders with the knowledge of how to trade these markets, a one-stop shop to trade all these instruments.

Simplicity

A binary trade outcome is based on just one parameter: direction. The trader is essentially betting on whether a financial asset will end up in a particular direction. In addition, the trader is at liberty to determine when the trade ends, by setting an expiry date. This gives a trade that initially started badly the opportunity to end well. This is not the case with other markets. For example, control of losses can only be achieved using a stop loss. Otherwise, a trader has to endure a drawdown if a trade takes an adverse turn in order to give it room to turn profitable. The simple point being made here is that in binary options, the trader has less to worry about than if he were to trade other markets.

Greater Control of Trades

Traders have better control of trades in binaries. For example, if a trader wants to buy a contract, he knows in advance, what he stands to gain and what he will lose if the trade is out-of-the-money. This is not the case with other markets. For example, when a trader sets a pending order in the forex market to trade a high-impact news event, there is no assurance that his trade will be filled at the entry price or that a losing trade will be closed out at the exit stop loss.

Higher Payouts

The payouts per trade are usually higher in binaries than with other forms of trading. Some brokers offer payouts of up to 80% on a trade. This is achievable without jeopardising the account. In other markets, such payouts can only occur if a trader disregards all rules of money management and exposes a large amount of trading capital to the market, hoping for one big payout (which never occurs in most cases).

Accessibility

In order to trade the highly volatile forex or commodities markets, a trader has to have a reasonable amount of money as trading capital. For instance, trading gold, a commodity with an intra-day volatility of up to 10,000 pips in times of high volatility, requires trading capital in tens of thousands of dollars. However, binary options has much lower entry requirements, as some brokers allow people to start trading with as low as $10.

Disadvantages of Binary Trading

Reduced Trading Odds for Sure-Banker Trades

The payouts for binary options trades are drastically reduced when the odds for that trade succeeding are very high. While it is true that some trades offer as much as 85% payouts per trade, such high payouts are possible only when a trade is made with the expiry date set at some distance away from the date of the trade. Of course in such situations, the trades are more unpredictable.

Lack of Good Trading Tools

Some brokers do not offer truly helpful trading tools such as charts and features for technical analysis to their clients. Experienced traders can get around this by sourcing for these tools elsewhere; inexperienced traders who are new to the market are not as fortunate. This is changing for the better though, as operators mature and become aware of the need for these tools to attract traders.

Limitations on Risk Management

Unlike in forex where traders can get accounts that allow them to trade mini- and micro-lots on small account sizes, many binary option brokers set a trading floor; minimum amounts which a trader can trade in the market. This makes it easier to lose too much capital when trading binaries. As an illustration, a forex broker may allow you to open an account with $200 and trade micro-lots, which allows a trader to expose only acceptable amounts of his capital to the market. However, you will be hard put finding many binary brokers that will allow you to trade below $50, even with a $200 account. In this situation, four losing trades will blow the account.

Cost of Losing Trades

Unlike in other markets where the risk/reward ratio can be controlled and set to give an edge to winning trades, the odds of binary options tilt the risk-reward ratio in favour of losing trades.

Trade Corrections

When trading a market like the forex or commodities market, it is possible to close a trade with minimal losses and open another profitable one, if a repeat analysis of the trade reveals the first trade to have been a mistake. Where binaries are traded on an exchange, this is mitigated however.

Spot Forex vs Binary Trading

These are two different alternatives, traded with two different psychologies, but both can make sense as investment tools. One is more TIME centric and the other is more PRICE centric. They both work in time/price but the focus you will find from one to the other is an interesting split. Spot forex traders might overlook time as a factor in their trading which is a very very big mistake. The successful binary trader has a more balanced view of time/price, which simply makes him a more well rounded trader. Binaries by their nature force one to exit a position within a given time frame win or lose which instills a greater focus on discipline and risk management. In forex trading this lack of discipline is the #1 cause for failure to most traders as they will simply hold losing positions for longer periods of time and cut winning positions in shorter periods of time. In binary options that is not possible as time expires your trade ends win or lose. Below are some examples of how this works.

Above is a trade made on the EUR/USD buying in an under 10 minute window of price and time. As a binary trader this focus will naturally make you better than the below example, where a spot forex trader who focuses on price while ignoring the time element ends up in trouble. This psychology of being able to focus on limits and the dual axis will aid you in becoming a better trader overall.

The very advantage of spot trading is its very same failure – the expansion of profits exponentially from 1 point in price. This is to say that if you enter a position that you believe will increase in value and the price does not increase yet accelerates to the downside, the normal tendency for most spot traders is to wait it out or worse add to the losing positions as they figure it will come back. The acceleration in time to the opposite desired direction causes most spot traders to be trapped in unfavourable positions, all because they do not plan time into their reasoning, and this leads to a complete lack of trading discipline.

The nature of binary options force one to have a more complete mindset of trading off both Y = Price Range and X = Time Range as limits are applied. They will simply make you a better overall trader from the start. Conversely on the flip side, they by their nature require a greater win rate as each bet means a 70-90% gain vs a 100% loss. So your win rate needs to be on average 54%-58% to break even. This imbalance causes many traders to overtrade or revenge trade which is just as bad as holding/adding to losing positions as a spot forex trader. To successfully trade you need to practice money management and emotional control.

In conclusion, when starting out as a trader, binaries might offer a better foundation to learn trading. The simple reasoning is that the focus on TIME/PRICE combined is like looking both ways when crossing the street. The average spot forex trader only looks at price, which means he is only looking in one direction before crossing the street. Learning to trade taking both time and price into consideration should aid in making one a much overall trader.

How To Win In Binary Options

Before we can discuss winning in binary options and applying the recommended steps outlined below, we need to establish the type of binary options traders out there.

Before you start conjuring up images of speedboats, palm trees and Miami, let me inform you that winning consistently in binary options is not easy. It requires careful optimization of your odds.

To understand this better, let’s look at a case study of Don Johnson, a professional Blackjack player who beat the casinos for millions on numerous occasions. He now works as a consultant to casinos all over the world.

Basically, he was able to beat the biggest casinos in Las Vegas because he found a way to increase his odds by meticulous planning and almost scientific attention to details of each deal.

How is this relevant to binary options and trading, you may ask. Trading is also a numbers game. One really needs to understand the numbers of potential risk and profit in order to build a winning trading strategy that can produce consistent profits.

For example, there is a big difference in numbers and profits when you win 75% of the time and when you win 80% of the time.

It’s all about understanding your risk exposure and profit potential and optimizing the conditions of your trades to achieve better results and stay on the winning side.

Just like Don would carefully study the casinos and the options offered by them, a binary options trader should study the brokers to see which broker will offer the best odds.

In addition, a binary options trader must look at trading strategies that minimize losses and gradually increase trading profits.

Depending on your broker set up, on average you need to have a trading strategy that gives you at least 60% of wins in order to make money in binary options.

What works for some users may not necessarily work for others. Moreover, not everyone will be committed to do what it takes to win because motivation and character play a big role in that.

So let’s first meet the people who play binary options, as they can be clearly divided into specific groups based on their desires, motivation, available free time, and patience.

Types of the most common binary options traders

What works for some users may not necessarily work for others. Moreover, not everyone will be committed to do what it takes to win because motivation and character play a big role in that.

So let’s first meet the people who trade binary options who are not professional traders or trade for a living. We can assume that professional traders know how to use binary options effectively to enhance and diversify their investment portfolios. However, with the exception of few countries, binary options is generally open to all members of the public who are of legal age and have some money to invest or play with.

The most common types of non-professional traders can be clearly divided into specific groups based on their desires, motivation, available free time, and patience.

Jack – The Gambler who just wants to gamble

Meet Jack with a gambling personality. He loves the odds of binary options and the rush from 60-second trades online. Jack trades by looking at the tick chart provided by his broker and his gut feeling. He doesn’t do technical or fundamental analysis but he just believes in his luck and intuition. Sure, it landed him in trouble before, but when he is on a winning streak he can make it all back and then some. He approaches binary options like a roulette table in a casino. ‘One must dream big’, he often says.

ADVICE TO JACK – Take all your winnings and run. The longer you play the more you will lose because the odds in binary options are in favor of your broker. If you are in profit than you’ve already won. Now it’s the perfect time to stop.

Lucy – The Bonus Taker who gave it a shot

Meet Lucy who was initially very interested in binary options and has invested some of her money on trades as advised by her broker on the phone. Unfortunately she lost half of her investment already and is now desperate to win in back. Lucy also accepted the bonus offer from her broker and her account is now locked until she makes more trades. She is much smarter with her money than the reckless gambler and she understands that there is more to binary options trading than meets the eye. However, she is still at a university completing her degree and has no time to learn trading now. She is worried that she will lose her money completely if she continues to trade herself.

ADVICE TO LUCY – At this stage your best option is to use a professional signal service and copy the trades of professional traders. Yes, it is a paid service but it will at least allow you to compete at a level where you can actually start winning. Compare binary options signals here. If you don’t have time to learn and to practice trading now, using professional signals is your best option.

Dennis – The Trader with a goal to win

Meet Dennis who found out about binary options and got really excited about this new investment opportunity. Unlike Jack or Lucy he does not jump in to start trading immediately. He first opens a free demo account and places some trades. However he quickly understands that trading binary options is not a game and needs a serious approach. Dennis knows that he needs to learn to trade if he wants to keep winning and that he can not rely on everything his broker tells him. He read a lot of sad stories of people who quickly drained their trading accounts by paying heed to their broker’s suggestions and he is smart enough not to make the same mistakes they did. Dennis understands that he needs to have an edge over his broker in order to win in binary options and be profitable.

ADVICE TO DENNIS – Although Dennis is new to trading he quickly grasped that it is much more difficult and challenging that he initially thought. The advice to Dennis is to try to learn directly from a professional trader or other reputable sources and to practice as much as possible before trading on a live account.

Ilona – The News Trader

Meet Ilona who is a very clever binary options trader. She works as a secretary for a mining company and follows world affairs very closely. Ilona knows the mining industry quite well and trades binary options on news and recommendations she hears in the office or the press. She understands the connections between certain current affairs and the prices of commodities. She finds binary options platforms very easy to use and convenient. Ilona trades commodities like Gold, Silver, and Copper but only when she is quite certain of the outcome. Most of her trades are entered via a mobile application and last a few days. She usually wins but suffers an occasional loss too.

ADVICE TO ILONA – As a professional directly involved in the commodity market she has very good access to information and she uses that to her advantage. This edge helps her to beat the broker and make a profit in binary options. Although Ilona’s system has value she could benefit from confirming her trades with technical analysis. However this requires more time and additional set of skills to learn.

There may be other types of binary options traders yet these four types of people generally sum it up. Although some of them may win a few times, all of them will benefit from the following advice.

How to Trade to Win

About 90% of traders lose. Trading is not easy and there is much more to it than placing trades. A lot of trading is psychological but it is also about optimising your odds and controlling your risk exposure.

Below are the steps that should be followed before committing to trade binary options online. More importantly they should be followed by anyone who is serious about winning.

Understand how binary options work

This may sound very obvious but many people trade binary options without actually fully understanding how they work.

In a common scenario of 80% payout to a 100% loss you need to win 55.55% of the time to break even .

If you lose your trade than you lose 100% of your traded amount.

The good thing about binary options is that the rules are clearly defined right from the outset and it is impossible to lose more than your traded amount.

This is different from Forex or stock trading where due to slippage or huge sudden price changes, the trader, if not protected by the broker, can actually lose a lot more than the traded amount.

In binary options however, the brokers are the market makers and they set the odds to their advantage, similarly to a casino.

Open a demo account with a regulated broker

Trading with a regulated broker is much safer and more secure, but the broker needs to be regulated in the country of your legal residence. If you’re in the USA your only option is Nadex exchange. Instead of using an unregulated and dodgy binary options broker that might steal your money, use a long-established and fully regulated CFD broker, such as EasyMarkets. For more information about brokers please read our guide on how to choose a broker.

Always, always practice your trading on a demo account. Not only will this improve your strategy, timing, and platform experience, it will also prepare you psychologically for the real thing.

Practice your best trading strategy on a demo as long as it takes until you become profitable (in theory at least) Our advice is not to trade on a live account until you’ve grown your demo account by at least 100% making at least 100 trades using your tested strategy.

If you can accomplish this with your strategy you might be ready for the real thing, but make sure that your broker is regulated.

Trading with a regulated broker is much safer and more secure, but the broker needs to be regulated in the country of your legal residence. If you’re in the USA your only option is Nadex exchange.

Instead of using an unregulated and dodgy binary options broker that might steal your money, use a long-established and fully regulated binary options of CFD broker, such as Binary.com or EasyMarkets.

Familiarize yourself with your broker’s trading platform

Once you open a demo account familiarize yourself with the trading platform and all of its functionalities. Make various trades on a demo to see how the platform behaves and how it performs. Also read your broker’s rules and conditions for withdrawal before you make any deposits and begin to trade.

BONUS OFFERS – If you decide to accept a bonus offer for your initial deposit understand that there will be certain limitations imposed on your account, such as minimum amount of trades before your first withdrawal.

Choose an appropriate trading strategy

In order to win at binary options you must follow a trading strategy. You will not win by guessing. Your strategy could be based on technical analysis (charts) or/and fundamental analysis (news).

There are many trading strategies available but unfortunately what works for some may not work for others. You can view examples of some strategies by looking at our Free trading strategies section. The strategy you choose should take into account your time availability, experience and your skill level.

Use professional charts for technical analysis

Your broker will most likely offer online charts but many traders prefer to use third-party superior charting software for technical analysis. These include free platforms such as MetaTrader or ThinkorSwim .

Using better charting software will allow you to be a better trader. One of the greatest advantages is that you can add indicators and draw your analysis to your charts and it will stay there until your remove it from your charts. Your broker’s charts do not offer this type of flexibility.

All professional traders use dedicated charting software because it is more reliable and it gives them more information and better tools for analysis.

You may find that in order to run those professional charting programs you will require to update your computer, or get a dedicated computer for trading.

Practice your strategy and signals on a demo account first

In order to become confident and test your trading strategy use a binary options demo account. Only proceed to trading on a real live account if you’re winning on a demo account! Otherwise do not proceed to trade with real money.

In addition to trading on a demo account every serious trader should keep a trading journal in which all taken trades are clearly registered, including the reasons for taking the trades and their results. This should be done with utmost care so that it can form a basis for your trading on a live account. If you choose to subscribe to professional binary options signals you should first test them on a demo account to see how and if they work.

Understand risk management/exposure

All professional traders will agree that risk management is the most important aspect of trading. It is also the main reason why even good traders can actually lose money and ultimately fail.

Risk management should be studied on its own but for the purpose of this brief guide, it must be said that you should never trade more on each position than 5% of your investment capital. Many professional traders use 1% or 2% for each position.

If you deposit $1000 into your broker’s account, the maximum amount you should place on a trade is $50, which is 5% of 1000. We use percentage to indicate the trade amount as it is a relative number and should be adjusted with your capital.

If your investment capital increases to $10,000 the maximum amount for each trade could be adjusted to $500. Subversively, if you account decreases to $500 the maximum amount put on each trade should not exceed $25. To learn more about the subject read Risk Management 101.

Create and follow your trading plan

In order to win consistently one should create and follow a trading plan. The plan is basically your trading manual which is custom prepared for you, and only you. Your trading plan should include your strategy, your goals and expectations, and clearly defined rules of behavior. The good trading plan will help you to become a disciplined and a profitable trader.

Before you venture into the world of binary options trading please remember that it can be risky to your capital. Simply put, do not trade what you can’t afford to lose.

Compare binary options signals

Trading and/or betting on financial markets is mostly a numbers game, but it also requires a lot of discipline, patience, and self control.

If you are not a trader or simply don’t have the time to do your own technical analysis, your best alternative is to use professional trading signals that will help you win in binary options.

To find the right binary options trading signal or strategy, please refer to our free online guide about binary options signals. This guide also contains reviews and a comparison of winning binary option traders and professional signal providers.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Top Binary Options Broker 2020!
    Perfect For Beginners and Middle-Leveled Traders!
    Free Education How To Trade!
    Free Demo Account!
    Big Sign-up Bonus!

  • Binomo
    Binomo

    Good Choice For Experienced Traders!

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