All You Need To Know About Binary Option Trading

binary option trading

Binary option trading is simply a derivative that can be traded on any instrument or market which is why everyone wants to trade them, and they are straight forward, that’s why this guide on what you should know about binary option trading is very necessary. I love binary trading because I know exactly how much I could win or lose before making any trade. Like every other thing in life, this is why you either win or lose, but your loss is specified and ok with you, same as your wins.

Binary option comes with a lot of derivatives to choose between, ranging from commodity values such as crude oil and rice, you can speculate on stock prices like Apple stocks and Amazon stocks, even Facebook stocks, Forex rate options is there as well, I can’t fail to mention the different cyrptocurrencies such as Bitcoin, Ethereum, Litcoin, etc the list is endless. Enough already let’s look at a brief history on binary option trading.

A Brief History Of Binary Option Trading

binary option trading

Binary or digital options have been around for decades, but were only accessible to some elites and the general public was restricted from participating in it. These elites are large institutions and wealthy people that have access to trading binary options.

In 2008, the US Securities and Exchange Commission open the floor by allowing binary options to be traded through an exchange, this gave other participants of the market a way to come in and play with the big boys.

With the help of the internet and technology, the world has gotten access to binary options trading and more traders are springing up as a result of this access.

Binary Option Types

Option types are more than one to choose from. We will only concern ourselves with the most popular ones used by every day traders.

  • Up/Down (High/Low) – The most simple and prevalent binary option. Will the price be higher or lower than the current price when the expiry time comes?
  • In/Out (Range or Boundary) – A ‘high’ and ‘low’ figure will be set. You are then making a determination as to whether the price will finish within or outside of these boundaries.
  • Touch/No Touch – Levels will be set that are either higher or lower than the current price. You then enter a position as to whether the price will ‘touch’ these levels between the time of trade and expiry. Payout will come as soon as the touch takes place.
  • Ladder – These are similar to up/down trades. However, instead of using the current price, the ladder will have pre-determined levels that are staggered up or down. These normally demand a substantial price move. The flip side of this is returns will frequently exceed 100%. Although it is worth noting, both sides of a trade are not always available.

 

Binary Option Expiry Times

Another important component of binary options is expiry times. This is when the trade will end and the point that determines whether you have won or lost. These times can range from 30 seconds and 1 minute (turbos) to a full day (end of day), and even up to a whole year.

As an intraday trader though, you will be more concerned with trading 5 and 30-minute binary options. Opt for binaries with 1 minute expiry times though and you have the ability to make a high number of trades in a single day.

Is Binary Options Different From Contract For Difference (CFD)?

CFD Vs Forex

Although in some ways they are similar, but are some crucial differences between binary options and CFDs. With CFDs, you have potentially unlimited risk. If the price of the asset moves significantly, the value of the trade can grow very large, very quickly – for better or worse, it works both ways.

Whereas, binary options work slightly differently. Whilst you are still investing without owning the asset in question, the gain and loss rate is fixed. With a call option, it doesn’t matter if the price rockets, you retain the same percentage as if it rose by just a couple of pips.

Likewise, if the price sinks to zero, you’ll only lose what you put in. So, to define the difference – with binary options you get fixed risk.

Just as if it was binary options versus forex trading, you are restrained in your profit potential.

Binary option is more suitable for people who enjoys quick gains, but is also available for people that prefer long term gains too.

Advantage And Disadvantage Of Binary Option Trading

advantage

It will be of your own interest to know and understand the pros and cons of trading binary options. You must be certain that option trading suits your trading style, risk tolerance, capital investment, and personality.

Advantages (Pros) 

The listed advantages are generally voted by traders, there are still more which are peculiar to each trader and what they have experience from the binary options market which may not be on this list. Fill free to add yours.

  • Simplicity – Because you are making a determination on only one factor, direction, your bet is straightforward. The price can only go up or down. You also don’t need to concern yourself with when the trade will end, the expiry time takes care of that. Whereas in other markets, you may need a system to limit your losses, such as a stop-loss.
  • Fixed risk – Trade stocks, gold, and crude oil and you’ve got a vast number of factors to contend with, from slippage and margin to news events and price re-quotes. With binaries, your risk is kept to a minimum with far fewer parameters.
  • Trade control – Because you know what you may make or lose before you enter the trade, you have greater control from the start. Trade in stocks, for example, and you have no guarantee that your trade will make the entry price.
  • Profit potential – Compared to other trading, the returns in binaries are extremely attractive. Some brokerages promise payouts of up to 90% on a single trade. If you’re looking to make simple trades with large profit potential, especially in very short amount of time, binaries could well be worth a look in.
  • Choice – Rather than being constrained to a specific market, e.g. cryptocurrency or stocks, binary options gift traders the opportunity to trade instruments across virtually all markets, allowing you start currency, indices, and bonds trading if you so wish.
  • Accessibility – In the binary options game, it’s always the best trading hours somewhere on the globe. So, you can login at night, or on the weekends and join the groups of avid traders attempting to turn daily profits. Real-time charts are available for every market so if you’ve got the time you can invest 24 hours a day.

Disadvantages (Cons/Risks)

There are plenty of reasons to delve into trading on binary options, but also there are several downsides worth highlighting for you:

  • Reduced trading odds – While you can benefit from trades that offer in excess of 90% payouts, these are often when the expiry date is some time away from the trade time/date. If the odds of your binary trade succeeding are extremely high you may have to make do with reduced payout odds, sometimes as low as 50%.
  • Limited trading tools – Most brokerages firms offer advanced charting and analysis capabilities, trading tools for binary traders often fall short of the mark. This can be seen as most binary option brokers don’t allow the ue of custom indicators. Fortunately, there are other online sources for these graphs and tools, a good example will be trading view.com, plus brokers are working swiftly to increase their offerings.
  • Price of losing – Your odds are tilted in favour of losing trades. Approximately for every 70% profit, the corresponding loss of the same trade would result in an 85% loss. This means you need a win percentage of at least 55% to break-even.

Is Binary Option Legit Or Scam?

scam or legit

Despite the somewhat negative reputation going on about binary option trading, the reality is binary options are legal. The majority of companies operate fairly. Opinions have been split because there are some out there that operate scams.

The binary reputation has suffered from dishonest marketing and cybercrime. Too many unregulated brokers promise quick cash, whilst operating frauds. Regulators are on the case and this concern should soon be alleviated.

Binaries themselves are perfectly legitimate, but steer clear of ‘instant money’ promises, broker that cold call, and celebrity endorsements, plus any claims that you can ‘start trading binary options for free’.

So it isn’t a question of legit or scam, it’s simply a question of being alert to the dangers and knowing what to look out for by equipping yourself with the necessary knowledge before making any investment in the financial industry. If you’re unsure about a broker, ask the question in a live trading room to check they’re properly regulated. You can also check binary option brokers reviews to know what other traders are saying about them. Personally I trade with just two binary options brokers, they are: binary.com and iq options for now, there are other great binary option brokers out there, but these two are my best pick.

How do I open an account with binary options brokers?

binary option trading

In this section, we will be looking at two binary option brokers that I mention earlier (binary/com and iq options).

I personally use them and trust their services.

This is one of the most important decisions you will make. You need a broker that meets all your requirements and who will enhance your trade performance. But with so many options out there, how do you know what to look for? You can choose between this two binary option brokers that have used over time and am satisfied with their services.

Click this link to open an account with binary.com

Click this second link to open an account with iq options.

Things to acquaint yourself with before creating an account with any broker:

Regulation

With scams out there it’s important you check if the broker you want to open an account with is properly regulated by the relevant financial body, e.g. FCA, CySec, CFTC. Trading with 247 Binary Options, IQ option, and Binary.com are all safe bets with proper regulation certifications.

Deciding What Account Type To Create

There are two types of binary options accounts offered by brokers. One is the real money account that will require traders to make a real money deposit. Using this account type, traders will have the possibility to win real money by trading financial assets.

However, brokers also offer demo accounts that allow traders to trade with “play money” without making a real money deposit. Naturally, this way, traders won’t be able to win real money but they will be able to test all the features and tools offered by brokers.

Before registering at a broker, traders will have to choose one of the two account types. The rule is that if you choose a real money account you won’t be able to create a demo account later on. However, if you create a demo account first, then you’ll be able to upgrade this to a real money account later on.

I recommend you choose a demo account first and upgrade it later in case you like the broker.

Submitting Your Personal Details

When you create your account, the broker will ask you to submit your personal details such as name, address, and similar. It’s extremely important to only submit real personal information. This is because legitimate binary options brokers are forced by the law to verify traders’ identities.

This verification process will involve traders having to scan either their ID cards or one of their utility bills. The point of this is to verify if the name and address submitted by traders coincides with the ones shown on their ID cards and/or utility bills.

If those details won’t coincide then the broker might think that you are defrauding them or you intend to conduct money laundering and the broker will close down your account. Likewise, if you won’t be able to prove your identity then you won’t be able to seek help from authorities at the unlikely event that the broker will abuse you.

Traders often ask me why brokers request scans on passports or utility bills. Please note that these are in accordance with regulatory compliance and various trading laws. Traders are obliged to gather this information in order to prevent money laundering.

Obviously, you should only give away this kind of information to regulated binary options brokers. But then again, you should also never register at unregulated binary brokers in the first place.

Confirming Your Account

After everything is set up, you will most of the time receive an email from the broker. That email will contain a special link that you will have to follow in order to confirm your account. Clicking on that link will activate your account and permit you to make a deposit and begin trading.

Assigning A Payment Processor To Your Account

In case you have registered a real money account or upgraded your play money account to a real money account you will have to add a payment processor in order to make a real money deposit. Binary trading brokers allow you to make deposits using a large variety of tools such as credit cards, Money bookers, wire transfer and more.

In order to link a payment processor to your trader account you will have to access the banking page of your account. Here, you will have to choose your payment processor and submit your payment details (Money bookers email, credit card details etc.)

Making A Deposit

After you have registered at a binary options broker and submitted your payment details, you’ll be ready to make a real money deposit. In order to do this you just have to enter the desired amount. Once you complete the deposit, your money will immediately appear in your account.

binary.com

Steps To Open Binary.Com Trading Account:

  • Click on this link here: Binary
  • Put down your email in the space provided when the link open
  • Go to your email and click on the link sent to you by binary.com 
  • When the link sent to your email open, fill and complete the forms with the appropriate details, fill them the way they appear on your Identity cards and bank statement to avoid any form of error.
  • When done, you will have to verify your account by submitting two important documents: the first is your proof of identity which can be a passport or any other internationally recognize document. The second is your proof of address which can be bank statement. 
  • Once done, you can proceed to open more accounts, especially for binary.com, they offer mt5 trading platforms to their users and it comes handy when you are the type that likes trading on mt4 platforms.  

Steps to open iq options trading account:

  • Click on this link here: iq options
  • Put down your email in the space provided when the link open
  • Go to your email and click on the link sent to you by binary.com 
  • When the link sent to your email open, fill and complete the forms with the appropriate details, fill them the way they appear on your Identity cards and bank statement to avoid any form of error.
  • When done, you will have to verify your account by submitting two important documents: the first is your proof of identity which can be a passport or any other internationally recognize document. The second is your proof of address which can be bank statement. 
  • Almost the same process as with binary.com, the difference here is that, iq options does not have an mt5 platform for its traders as of when writing this tutorial. If they in the future I will update accordingly. 

How To Fund/Withdraw From Your Binary Option Brokerage Accounts

what you should know about binary option trading

Most binary options brokers will offer you different means to fund your accounts, ranging from local transfer, master/verve cards, merchant/vendors payment gateways, etc. I will not leave out cryptocurrencies funding option here, which is very fast and easy to do without waiting for ages. 

To fund your binary.com option account, login to your account and click on cashier. Now click on deposit and select your deposit option.

To also withdraw, click on cashier and hit the withdraw button, select your means of withdrawal.

The above process is applicable to iq options deposit and withdrawal.

How To Setup Mt5 Account With Binary.Com

what you should know about bianry option trading

Just like I mention before now that you can only have access to mt5 platform on binary.com, iq option are yet to join suit. So this step will not be applicable to iq option but for binary.com broker.

Let’s get on with it, follow the steps below to set up your mt5 account on binary.com:

  • Login to your binary account
  • Click on the drop down arrow located at the right hand corner of your account dash board as shown in this pix below:

Image

  • Select meta trader and click on new account

image

  • Choose real or demo and click on synthetic option.

image

  • Click on next and fill the form with your details for the account opening.

image

  • When done, click on create account. 

How To Trade Forex Pairs On Binary.Com

what you should know about binary option trading

In order to trade forex pairs on binary, you will have to create a separate account; this account is called standard account.

However to create a standard account, you will have to submit your TIN umber which is Tax Identification Number. Depending on the country you came from or reside, you can google to know how to get your TIN number and use it to open the standard account.

 Before you proceed to open the standard account, make sure you update your TIN number and then follow the below process to create your standard account:

  • Login to your binary account
  • Click on the drop down arrow located at the right hand corner of your account dash board as shown in this pix below

Image

  • Select meta trader and click on new account

image

  • Choose real or demo and click on synthetic option.

image

  • Click on next and fill the form with your details for the account opening.

image

  • When done, click on create account. 

Contact MrBest here if you are new to binary option trading for help or you have any challenge while creating your binary options account.

I will be glad to hear from you, especially to assist you if you are new to binary options trading or you are having challenges in creating your account either on binary.com or on iq options platforms.

all you need to know about binary option trading

I hope this tutorial helps, let me know if I innocently omit any useful steps or information that will be useful to other readers and traders by leaving a comment below in the comment box.

Useful resources and tools to boost your trading journey.

IQ Option Registration link: https://bit.ly/2WQMjWy

Binary Option Trading Link: https://bit.ly/2WJRfwR

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