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How to Succeed with Trading Binary Options 2020

Welcome to the largest expert guide to binary options and binary trading online. BinaryOptions.net has been educating traders globally since 2011 and all our articles are written by professionals living in the financial and online trading industry. We have nearly a thousand articles and reviews to guide you to become a more profitable trader in 2020 no matter what your current level of experience is. If you want to discuss trading or brokering with other traders, we also have the largest forum in the world with more than 20 000 members and lots of daily activity. Read on to start trading today!

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

Binary options are fast and very simple financial instruments that allow investors to speculate whether the price of an asset will rise or fall in the future, for example the price of Google stock, the price of Bitcoin, the USD / GBP exchange rate, or the price of gold. The duration can be as little as 60 seconds, making it possible to trade hundreds of times per day in any global market.

Before you make a trade, you know exactly how much you will earn if your prediction is correct, usually 70-95% – if you invest $100, you will receive $170 – $195 credit on a successful trade. This makes risk management and trading decisions easier. The result is always a Yes or No answer – you either win it or you lose it all – so it becomes a “binary” choice. Risk and reward are known in advance and this structured reward is one of the attractions.

Traded binaries are also now available, meaning traders are not trading with a broker.

To start trading you first need a regulated (or licensed) broker account. Choose one of the list of recommended brokers, where only brokers who have shown themselves to be reliable are included. The top brokers have been chosen 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 is like to trade before you deposit real money.

Introduction Video – How to Trade Binary Options

This video will introduce you to the concept of binary options and how trading works. If you want to know more details, please read this page and follow the links to all the more in-depth articles. Binary trading doesn’t have to be complicated, but like any topic you can educate yourself to become an expert and perfect your skills.

Option Types

The most common type of binary options is a simple “Up/Down” trade. However, a wide variety of options. One common factor, is that the result 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. Is the finished price higher or lower than the current price at the time of expiration.
• In / Out, Range or Boundary – These options set the “high” and “low” numbers. Traders predict whether the price will finish inside or outside this level (or ‘boundary’).
• Touch / No Touch – This has set a level, higher or lower than the current price. Traders should predict whether the actual price will ‘touch’ that level at any time between the trade’s expiry times.
  Note with touch options, that the trade can be closed before the expiration time – if the price level is touched before the option expires, then the “Touch” option will be paid immediately, regardless of whether the price moves from the touch level afterwards.
• Ladder – This option behaves like a normal Up / Down trade, but using the current strike price, the ladder will have a preset price level (‘stepped’ up or down). This can often be a way from the current strike price. As this option generally requires a significant price move, the payout will often exceed 100% – but both parties may not be available.

How to Trade – Step by Step Guide

Here is a step-by-step guide to placing binary trades:

1. Choose a broker – Use our broker reviews and comparison tool to find the best binary trading site for you.
2. Choose an asset or market to trade – The list of assets is huge, and covers Commodities, Stocks, Cryptocurrency, Forex or Indices. The price of oil, or the price of Apple shares, for example.
3. Choose an expiration time – Options can expire anywhere from 30 seconds to a year.
4. Setting the trade size – Remember 100% of the investment is at risk so consider the trade volume carefully.
5. Click Call / Put or Buy / Sell – Is the asset going up or down in value? Some broker label buttons are different.
6. Check and confirm trades  – Many brokers give traders the opportunity to make sure the details are correct before confirming the trade.

Choose a Broker

Option fraud has been a significant problem in the past. Fake and unlicensed operators exploit binary options as new exotic derivatives. These companies are diligently disappearing as regulators finally start to act, but traders still need to find regulated brokers.

Notes! NEVER trade with brokers or use services found on our blacklist and scam pages, stick to the recommendations we recommend here on this site. Here are some shortcuts to pages that can help you decide which broker is right for you:

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

Asset Lists

The amount and variety of assets you can trade varies from broker to broker. Most brokers provide options on popular assets such as major currency exchange pairs including 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 can also be traded through many binary brokers. Not all stocks are available though, but generally you can choose from about 25 to 100 popular stocks, like Google and Apple. This list is growing all the time as demand demands.

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

Expiry times

Expiration time is the point at which the trade is closed and settled. The only exception is where the ‘Touch’ option has hit the preset level before expiration. Expiration for any given trade can range from 30 seconds, up to a year. Although the binary was initially launched with a short expiration, demand has ensured that there is free time available. Some brokers also give traders the flexibility to set their own expiration times.

Expiries are generally grouped into three categories:

• Short Term / Turbo – This is usually classified as under 5 minute expiration
• Normal – This will range from 5 minutes, until the end of the ‘end of day’ which ends when the local market for the asset closes.
• Long-term – Any expiration beyond the end of the day will be considered long-term. The longest expiration period may be 12 months.

Regulations

Although slow to react to binary options at first, regulators around the world are now beginning to regulate the industry and make their presence felt. Key regulators currently include:

• Financial Conduct Authority (FCA) – UK regulator
• Cyprus Securities and Exchange Commission (CySec) – Cyprus Regulator, often a ‘passport’ across 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 interest in binaries in particular, particularly in Europe where domestic regulators are keen to improve CySec regulation.

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

ESMA

Recently, ESMA (European Securities and Markets Authority) moved to ban the sale and marketing of binary options in the EU. However, this ban only applies to brokers regulated in the EU. This leaves traders with two options to continue trading: First, they can trade with unregulated firms – this risk is very high and is not recommended. Some irresponsible companies are responsible and honest, but many are not.

The second option is to use a firm controlled by a body outside the EU. ASIC in Australia is a strong regulator – but they won’t enforce a ban. This means ASIC-regulated firms can still accept EU traders. See our list of brokers for regulated or trusted brokers in your region.

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

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

Strategies and Guides

We have many detailed guides and strategy articles for both general techniques and specific trading techniques. Here are a few to get you started if you want to learn the basics before starting to trade. From Martingale to Rainbow, you can find more on the strategy page.

• The best binary options book
• Goals for New Binary Traders
• Binary Options Binaries You Need to Know
• How To Become A Binary Options Millionaire
• Trading time
• How to Trade Stocks
• Simple Strategies for Beginners
• Post Time Trading Strategy
• Simple Balanced System
• Traders Beware! Is It A Tool Or A Strategy?
• Introduction to trends and time periods
• Trend analysis for short-term traders
• Three Tools All Traders Should Know
• How to Trade Butterfly Patterns
• Binary Options Market

Signals and Other Services

• What should you look for when looking for a strategy, system or service?
• Even Good SSP Is Not Worth Your Time

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

How to Set Up a Trade

The ability to trade various types of binary options can be achieved by understanding certain concepts such as strike prices or price barriers, settlements, and expiration dates. All trades have a date on which they expire.

When the trade ends, the behavior of the price action according to the chosen type will determine whether a profit (in-the-money) or in a loss position (out-of-the-money). In addition, the price target is the main level defined as a benchmark to determine the outcome. We will look at the application of price targets when we explain the different types.

There are three types of trading. Each of them has a different variation. This is:

1. Low height
2. In out
3. Touch / No Touch

Let us take them one by one.

Low height

Also known as Up/Down binary trading, the essence is to predict whether the asset’s market price will end higher or lower than the strike price (selected target price) before expiration. If the trader expects the price to go up (“Up” or “High” trade), he buys a call option. If he expects the price to go down (“Low” or “Bottom”), he buys an option. Timeout can be as little as 5 minutes.

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

In exit

The In / Out type, also known as “tunnel trading” or “border trading”, is used for trading price consolidation (“in”) and tracking (“out”). How does it work? First, the trader sets two price targets to form a price range. He then buys options to predict whether the price will remain in the price range / tunnel until the end (In) or if the price will decline the price range in either direction (Out).

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

Touch / No Touch

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

A “No Touch” is the opposite of Touch. Here you bet on the price action of the underlying asset that does not touch the strike price before expiration.

There are variations of this type where we have Double Touch and Double No Touch. Here the trader can set two price targets and buy a binding contract at the price touching both targets before expiry (Double Touch) or not touching both targets before expiry (Double No Touch). Normally you would only use Double Touch trading when there is intense market volatility and the price is expected to take several price levels.

Some brokers offer all three types, while others offer two, and some offer only one type. In addition, some brokers also place restrictions on how the expiration date is set. To get the best out of the different types, traders are advised to shop around for a broker that will give them maximum flexibility in terms of the types and expiration times that can be set.

Mobile Apps

Trading through your mobile phone has been made very easy as all major brokers provide fully developed mobile trading applications. 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 website.

The broker will accommodate both iOS and Android devices, and produce versions for each. Downloads are quick, and merchants can sign up through the mobile site as well. Our reviews contain more detail about each broker’s mobile application, but most recognize that this is a growing area of trading. Traders want to respond immediately to market news and updates, so brokers provide tools for clients to tradewherever 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 is lost. So, in a nutshell, they are a form of fixed return financial option.

How Does a Stock Trade Work?

Steps to trade stocks through binary options;

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

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

Put and Call Options

Calls and Puts are simply terms given to buy or sell options. If a trader thinks the current price will go up in value, they can open a call. But where they expect the price to drop, they can place a trade.

Different trading platforms make their trading labels different, some switch between Buy / Sell and Call / Put. Others dropped the phrase and called it. Almost every trading platform will make it completely clear in which direction the trader opens the option.

Are Binary Options a Scam?

As financial investment tools themselves are not scams, but there are unreliable and dishonest brokers, trading robots and signal providers.

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

This simple check can help anyone avoid scams:

• Marketing promises huge returns . This is a clear warning sign. Binaries are high / high risk tools – they are not “make money online” schemes and should not be sold as such. The operator making the claim is very likely not to be trusted.
• Get to know the broker. Some operators will ‘roll out’ new customers to a broker they share, so that person doesn’t know who their account is. A trader needs to know the broker they will be trading with! This funnel often falls into the “get rich quick” marketing discussed earlier.
• Cold Calling . Professional brokers won’t make cold calls – they don’t market themselves that way. Cold calls will often be obtained from unregulated brokers who are only interested in getting an initial deposit. Proceed with caution when joining companies that contact in this manner. This includes email contacts too – any form of contact out of the blue.
• Terms and Conditions . When taking a bonus or offer, read the full terms and conditions. Some include locking the initial deposit (in addition to bonus funds) until a high volume of trades has been made. The first deposit is a cash trader broker – a legitimate broker will not claim it as theirs before any trade. Some brokers also offer the option to cancel the bonus if it does not suit the trader’s needs.
• Don’t let anyone trade for you. Avoid allowing any “account manager” to trade for you. There is an obvious conflict of interest, but these broker employees will encourage traders to make large deposits, and take greater risks. Traders cannot 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 for what traders can do. Technical analysis is used for several traders, combined with charts, indicators and price action research. Money management is important to ensure risk management is applied to all trades. Different styles will suit different traders and strategies will also change and change.

There is no single “best” strategy. Traders need to ask about their investment goals and risk appetite and then learn what works for them.

Is Binary Options Gambling?

This depends entirely on the trader’s habits. With no strategy or research, any short-term investment will win or lose based on luck alone. On the other hand, a trader who makes a well-researched trade will make sure they have done everything they can to avoid relying on luck.

Binary options can be used for gambling, but they can also be used to make trades based on value and expected profit. So the answer to that 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 trading structure.

Minimal Financial Risk

If you’ve ever traded forex or its more volatile cousins, crude oil or spot metals like gold or silver, you’ve probably learned one thing: these markets carry a lot of risk and are very easy to get blown out of the market. Things like leverage and margin, news events, price declines and quotes, etc. can negatively affect trading. The situation is different in binary options trading. There is no leverage to contend with, and phenomena such as price slips and reprices have no effect on binary trading results. This reduces the risk in binary options trading to the lowest possible minimum.

Flexibility

The binary options market allows traders to trade ifinancial instruments spread in currency and commodity markets as well as indices and bonds. This flexibility is unmatched, and provides traders with knowledge of how to trade these markets, a one-stop shop to sell all these instruments.

Simplicity

Binary trading results are based on only one parameter: instructions. Traders are essentially betting on whether a financial asset will end up in a certain direction. In addition, the trader is free to determine when the trade ends, by setting an expiry date. This gives trades that initially start badly a chance to end well. This is not the case with other markets. For example, loss control can only be achieved by using a stop loss. Otherwise, a trader has to hold the pullback if the trade takes a bad turn to make room for profit. The simple point made here is that in binary options, the trader has less to worry about than if it were to trade other markets.

Greater Control of Trades

Traders have better trading control 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 guarantee that the trade will be filled at the entry price or that the losing trade will be closed at the stop loss exit.

Higher payouts

The payout per trade is usually higher in binary than with other forms of trading. Some brokers offer payouts of up to 80% on trades. This can be achieved without affecting the account. In other markets, such payouts can only happen if the trader ignores all money management rules and exposes a large amount of trading capital to the market, hoping for one big payout (which never happens in most cases).

Accessibility

To trade the highly volatile foreign exchange market or commodity market, a trader should have a reasonable amount of money as trading capital. For example, trading gold, a commodity with intra-day volatility of up to 10,000 pips at times of high volatility, requires trading capital in the tens of thousands of dollars. However, binary options have lower entry requirements, as some brokers allow people to start trading with as little as $10.

Disadvantages of Binary Trading

Reduced Trading Odds for Sure-Banker Trades

Payouts for binary options trading drastically decrease when the chance of the trade being successful is very high. While it is true that there are some trades that offer as much as 85% payouts per trade, high payouts are possible only when trades are made with expiration dates set far away from the trade date. Of course in such a situation, trading is more unpredictable.

Lack of Good Trading Tools

Some brokers do not offer really helpful trading tools such as charts and features for technical analysis to their clients. Experienced traders can get around this by looking for tools elsewhere; Inexperienced traders new to the market are not so lucky. This is changing for the better though, as operators mature and realize the need for these tools to attract traders.

Limitations in Risk Management

Unlike in forex where traders can get accounts that allow them to trade mini and micro at small account sizes, many binary options brokers set trading levels; the minimum amount that traders can do in the market. This makes it easier to lose too much capital when trading binaries. As an illustration, a forex broker can allow you to open an account with $ 200 and micro trade, which allows the trader to disclose the amount of his capital that is acceptable only to the market. However, you will be hard pressed to find many binary brokers that will allow you to trade below $50, even with a $200 account. In this case, four petrading will blow the account.

Cost of Losing Trades

Unlike in other markets where the risk/reward ratio can be controlled and set to favor winning trades, it is possible that binary options will lower the risk-reward ratio in favor of losing trades.

Trade Corrections

When trading markets such as the currency exchange or commodity markets, it is possible to close a trade with a minimal loss and open another profit, if repeated analysis of the trade reveals the first trade to be a mistake. Where binaries are traded on an exchange, this can be reduced.

Spot Forex vs Binary Trading

These are two different alternatives, traded with two different psychologies, but both can make sense as investment tools. Another TIME centric and the other is more PRICE centric. They both work on time/price but the focus you get from one to the other is an interesting split. Spot forex traders may overlook timing as a factor in their trading which is a huge mistake. A successful binary trader has a more balanced view of time/price, which makes him a better trader. Binary by nature they are one to exit the position in a determined time win or lose which instills a greater focus on discipline and risk management. In forex trading this lack of discipline is the #1 reason for failure for most traders because they will only hold losing positions for longer periods of time and cut winning positions in shorter periods of time. In binary options it is not possible because of the expiry time of your trade win or lose. Here are some examples of how this works.
Above is a trade made on buying EUR/USD in the lower 10 minute window of price and time. As a binary trader this focus will naturally make you better than the example below, 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 multiple pivots will help you become a better trader overall.

The advantage of spot trading is the same failure – exponential expansion of profits from 1 price point. This is to say that if you enter a position that you believe will increase in value and the price does not increase but accelerates downwards, the normal tendency for most traders is to wait or add worse to the position that the lost figure will return. The acceleration of time in the opposite desired direction causes most traders to be stuck in an unfavorable position, all because they do not plan the time in the direction of their reasoning, and this causes a lack of trading discipline.

The nature of binary options forces one to have a more complete mindset to trade from both Y = Price Range and X = Time Range because limits are used. They will only make you a better overall trader from the very beginning. On the other hand on the flip side, they by their nature need a bigger win rate because each bet means a 70-90% profit vs a 100% loss. Therefore, your win rate needs to average 54%-58% to break even. This imbalance causes many traders to skip or revenge trades that are just as bad by holding/adding to lost positions as spot forex traders. To be successful in trading you need to practice money management and emotional control.

In conclusion, when starting out as a trader, binaries probably offer a better foundation for learning to trade. The simple reasoning is that focusing on the TIME / PRICE combination is like looking both ways when crossing the street. The average forex trader only looks at the price, which means he only looks in one direction before crossing the street.  Learning to trade by taking time and price into consideration should help in making a more well-rounded trader.