Binary trading allows you to make a profit of 80-100% in one minute. But most beginners lose money here.
See how to trade binary options for beginners, correct trading mistakes and make speculating on financial instruments your main source of income later in this article.
The principle of binary options trading
The essence of binary options trading for beginners is: determining how the price of an asset will behave over a given period. If the prediction is correct, you make a profit. If it’s wrong, you lose the value of your investment.
Some consider OB to be a game of chance. Others consider it a real business. Each of these opinions is partially correct. In principle, binary options are similar to sports betting and bookmakers can be compared to betting shops. Except that in the case of OB, the prediction is made not for a sporting event, but for the financial market. You can make trades at random, but it’s more efficient to do so by analyzing and predicting the market.
The difficulty is that it’s impossible to predict price movements with absolute precision. As well as profitable trades, there will also be unprofitable trades. The most important thing is to stay in the black after a period (month, quarter and year, for example).
The main advantages of binary trading
As with any activity, binary options trading has its advantages and disadvantages. The three main disadvantages are: the need to invest, the risk of losing capital and the trader’s emotional exhaustion. But the advantages are more numerous:
- Relatively simple working mechanisms. Even a beginner can easily figure out how to make trades and change the value of the investment, as well as which buttons to press. You don’t have to work with leverage, set stop losses and take profits like you do with Forex.
- Availability. You can register on the broker’s platform for free, and to start trading, all you have to do is deposit the minimum amount: R$ 50-60.
- High profitability. With a single option, you can get 70-85% of the net profit within a minute of the transaction. Some brokers offer returns of up to 95%.
- Ability to make money quickly. The minimum contract expiry period is 60 seconds, sometimes up to half a minute. What’s more, in order to achieve a positive result on the trade, it’s enough for the price to change in the desired direction by just one point.
- Low entry limit. To trade, you don’t need to have a lot of capital or even install a special program. You can work on the terminal provided by the broker.
The disadvantages of trading include tempting advertisements promising guaranteed profits made by scammers. However, this is a fact in any area associated with big money.
And these scammers may be more common than a novice thinks.
There are dozens of websites with supposedly useful but paid-for information: techniques, strategies, indicators and robots for automated trading. Sometimes they can even help with trading, but most are scams and are no guarantee of profit.
How much you can earn with binary options
It’s difficult to find a real answer to the question of a specific amount of income. A trader’s profit depends on three factors:
- Knowledge and practical skills to understand the market.
- Investment amounts.
- Return on assets.
The conditions for trading binary options can vary from broker to broker. There are companies on our site that offer assets with yields of up to 95%, generous bonuses and other privileges.
Binary options trading basics for laypeople
First, you need to choose a broker, register on the platform and fund your account. Then, the sequence of your actions will be as follows:
- Choice of asset: currency pairs, cryptocurrencies, shares, etc;
- Determining the rate of return: the minimum value depends on the broker you choose;
- Set the expiration – the time when the traded contract will be closed;
- Choosing the direction of the option: whether the value of the asset will go up or down.
Once a trade is completed, the speculator will make a profit or a loss.
Terminology
A trader is a participant in a trade who makes predictions about the rise or fall of asset prices.
A broker is a platform that provides access to these speculative operations.
An asset is an instrument for which a trader enters into contracts: currency pairs, cryptocurrencies, company shares, commodities, stock indices, investment fund shares.
Currency pairs – the relationship between the value of two currencies. In the pair, one asset is called the underlying asset and the other is called the quoted asset.
A quote is the price of a commercial asset.
A bull market is an upward movement of an asset.
Bear market – is the downward movement of prices.
Timeframe – the time period in which the candles on the chart are shown. Usually traders use timeframes from 1 minute to 1 month, but some brokers on their platforms set timeframes of 5 seconds.
Volatility is the rate at which the price changes. It can be strong or weak. It depends on how strong the supply and demand for the asset is in a given period. A large volume of activity usually occurs during the opening of the main trading sessions and when important news is published.
A trend is the movement of quotations in a certain direction. It can be up or down. The more stable and uniform the trend, the more likely it is to continue.
Correction is the state of the market against the trend, after which the movement continues in the original direction.
Choosing a strategy
Binary options trading must be based on clear rules. A strategy is a set of analysis methods that give a trader a signal to enter a trade. It’s best to have several trading methods in your arsenal to work in different conditions: along a trend, in a sideways trend, in a reversal, etc.
Newbies often look for a win-win system. But there’s no such thing. To make trading profitable, it’s enough to close six out of ten winning trades. To do this, the effectiveness of the strategy must be at least 60%.
There is no better strategy. A system may be effective for one trader, but it could bring losses for another. The most important thing is to understand the principles of the market and build a trading model based on this knowledge. This will increase your chances of a stable profit.
Signs
Trading in the binary options market is not a casino where a player places bets at random. In trading, all transactions must be opened by signals.
Signals are clear recommendations for entry that arise in the process of analyzing a situation. They are both paid and free. For example, Pocket Option publishes recommendations on its platform in the public domain. In addition, Investing.com provides free popular signals based on technical analysis.
There are no perfect signals or strategies on the market. Therefore, blindly believing and trading according to someone else’s recommendations is dangerous for your account.
Graphics
The graphs show price changes in the past and present. Used for price analysis and forecasting. The standard types of charts on any trading platform are: candles, bars, lines.
Japanese candlesticks are the most informative and understandable option for displaying quotes. They show four prices: the open, close, high and low of the period. Their combinations help to understand the direction of the market and predict future movement.
Indicators
An indicator is a graph of past price movements based on a mathematical formula to display the market situation. This data can indicate the current direction of the trend, asset overheating and possible reversal points. Indicators therefore help to analyze and predict price changes. But none of them guarantee the accuracy of the forecast and profit when trading binary options.
The most popular indicators:
- Trend: Moving Average (MA), the direction of the trend based on the smoothed price movement for a given period;
- Oscillators: Stochastic, RSI, overbought or oversold levels and conditions for an asset.
Please note: all indicators can be adjusted to suit your own operating system.
Trading through support and resistance levels
Supply and demand are the driving forces in the market. If interest in an asset increases, so does the price. Conversely, when buying interest falls, sellers are forced to lower the price. Graphically, this situation is displayed in the form of an uptrend or downtrend.
The maximum price values form a resistance level on the chart, while the minimum – a support line. By focusing on them, you can make trades.
If the price approaches the level, it can break through it or return to the price channel. Depending on the situation, the trader should buy a put or call option. Indicators and candlestick patterns will help confirm the signal.
Technical analysis patterns
The patterns reflect certain price movement patterns and signal a reversal or continuation of the trend. There are several dozen of the most frequently encountered graphical formations, such as: head and shoulders, a cup with a handle, pennant, wedge, flag, rectangle, among others.
How to trade binary options correctly: instruction for beginners
Strategy is an important factor that influences a trader’s success when trading binary options. But there are other key parameters: the choice of a place to work, the ideal deposit and discipline.
Choosing a broker
You can’t trade without a broker. Fortunately, the binary options market has a large number of financial institutions, providing a good number of options for a trader.
See how an online platform performs:
- doesn’t promise easy money;
- does not hide the log data;
- does not use quotation marks;
- provides a demo account for educational operation;
- withdraws funds for its customers properly.
But you can’t break the broker’s rules either. Therefore, before registering on the platform, you need to read the user agreement carefully.
Another thing to remember is that before a broker pays money to a client, they have to go through a verification process. To do this, the user must provide the company’s support service with their identity documents. Many people don’t like this rule, but it can’t be ignored.
Almost all brokers are guilty of slippage. These are delays that occur when opening a trade. This occurs on any trading platform.
Slippage is a serious disadvantage for scalpers. Therefore, if a trader works with options with an expiry time of 60 seconds, he needs to look for a broker with a minimum delay. Each company develops its own terminal for organizing trades and obtains quotes from a liquidity provider. Some use the live chart from the tradingview portal.
An important aspect in choosing a company is the display of a license. The largest regulators that certify binary brokers are the following bodies:
- CySEC – Cyprus;
- FSA SVG – Saint Vincent and the Grenadines;
- FinaCom – International Finance Commission;
- TsROFR – Russia.
Reading comments can also be useful, but it’s worth remembering that many of them are biased.
Types of options
Before trading binary options, you need to study the types of contracts the broker offers. On the platforms, you can often find options according to the classic principle: “Up/Down”. Under these conditions, the trader needs to calculate whether the price will fall or rise in relation to the initial quote at which the trade is initiated. But there are other types:
To touch or not to touch. In “Touch” options, you need to predict whether the price will break a certain level or not. Two lines are formed on the chart: initially above the price and below. The trade is closed automatically as soon as the quotes reach the desired level. The opposite situation is observed when trading “No Touch”. In this case, it is important that the price does not reach these certain values. These options are relevant when market volatility is low and are safer to use when the trading week is over.
Frontier. These contracts are also of two types: external and internal. The trader needs to determine whether the price will stay within the specified values or go beyond them.
Pairs. In this, the trader selects two currency pairs and must predict which quotes will change more strongly during the expiry period. This type of contract is more similar to sports betting.
Depending on the expiry period, it is common to distinguish between turbo options, medium-term and long-term transactions.
Beginners with no experience should first learn to work with classic contracts and only then try to work with exotic financial instruments.
Discipline
Any strategy will become unprofitable if the trader doesn’t follow the basic rules of discipline:
- Trading without enthusiasm. A trader will never become a successful trader if they are unable to identify and correct their mistakes.
- Operating strategy. You should not deviate from the chosen system when you are confident of its effectiveness.
- Operate with your own money. Taking out loans and credits to trade is a bad idea
- Controlling emotions. Any experience, even excessive joy, leads you to make rash decisions.
- Keep a diary – your trading history. Helps you analyze past transactions and find mistakes.
- Think like an analyst, not a gambler. Trading should be treated as a job.
For laypeople, it’s important to find out how to trade binary options correctly, but it’s important to accept the fact that losses and mistakes will still occur. You just need to keep them to a minimum.
Methods
You can make an entry decision based on technical or fundamental analysis.
Technical analysis is based on graphical work. The trader determines the trend, correction levels and the current state of the market. Based on the data, he tries to predict in which direction and how far the price will go and makes the decision to buy or sell an option.
Technical analysis is different. To do it, you usually need to draw lines on the terminal. You clutter up the chart with indicators and figures, often without the price being visible.
Fundamental analysis is based on working with macroeconomic and political data that can affect the financial markets. Instead of candles and indicators, traders use economic calendars and media publications.
Note: the methods can be used together.
Binary options trading rules
Profitable binary options trading is impossible if you just read a book or article, as it requires an understanding of the market that comes with time. However, you can get started the right way. This requires:
- choose a reliable broker;
- invest an amount that you don’t mind losing;
- learn to analyze and predict the market using technical or fundamental analysis;
- don’t look for a system with guaranteed profitability;
- be careful when choosing signs;
- not trying to recoup losses by increasing investments.
The main secrets of success
In order for binary options trading to become a profitable profession, and not a disappointment, don’t forget a few nuances:
- On the platform, the trader always plays against the broker. The operation (trade) on the binary options market is not listed on a real stock or currency exchange. When closing a deal, the user is neither buying nor selling anything. Roughly speaking, you’re just placing bets and the broker offers you a service to access the quotes.
- Binary options are based on the principle of trading with a negative outcome. When a trader loses a trade, the broker takes 100%. If successful, the speculator will receive 70-85% of the profit back, not 100%. It is therefore important to keep a trading journal and monitor the state of the account.
- Turbo options are not a guarantee of profit. The ability to double your investment in 60 seconds is often tempting for many newcomers. But with this type of trading, there is noise in the market and the probability of a negative outcome is high. Experienced traders say that 60-second options are bad, so you need to be careful when working with small time frames.
- Psychology is more important than strategy. Without patience and discipline, even the most efficient trading system will fail. A trader’s psychological task is to control their emotions, reduce the number of failures and manage to survive a long losing streak. To do this, you need to analyze the market and correct mistakes.
Operation training
An integral part of any job is training, and it will take many hours to understand all the nuances of binary options trading. You can learn to trade on your own or with the help of experts. Self-study takes time and also requires money. Our website has a lot of free information, after studying which you can decide whether paid courses are necessary or not.
