Binary Options Trading Strategy: Reduce Risk and Increase Profits.
Binary options are the simplest financial assets for trade. This simplicity stems from the binary proposition at their heart - you either make a profit if you made the correct prediction or lose your initial investment if you did not.
Since binary options function in such a straightforward manner, and both the potential profits and losses are predetermined and capped, binary options trading has become incredibly popular among beginner investors.
However, while the risks are limited, they’re still there, which is why you need a solid binary options trading strategy. Many inexperienced traders lost their money to volatile markets, lack of knowledge, or trading with illegitimate brokers. The right tactic can’t eliminate the risks altogether, but it can significantly reduce them.
What Are Binary Options and How to Trade Them.
Binary options are simplified options contracts that turn every trade into a "yes or no" proposition: The parties involved predict whether an asset will be above or below a certain price at a specific date.
Consequently, you can either earn a payout or lose the money you’ve invested, depending on whether your prediction was correct - there’s no third result. Hence the name "binary."
Before choosing a binary options strategy, you have to know the basic ins and outs of this trading type. First of all, binary options don’t give you an asset: You do not own the stock you’re trading on, nor do you get dividends or voting rights like actual stock owners do.
Find a Binary Options Broker You Can Trust.
On Official Website.
Risk Warning: YOUR CAPITAL MIGHT BE AT RISK.
Best for: High return rates.
Pocket Option.
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
Pocket Option is a Marshall Islands-based binary investment options broker that was established in 2017 and is regulated by IFMRRC. It lets you trade over 100 global assets using more than 50 trading methods, with a low minimum deposit requirement and high payout rates.
• $10,000 on a demo account • Over 50 trading methods • High return rates.
On Official Website.
Risk Warning: YOUR CAPITAL MIGHT BE AT RISK.
Min Deposit:
Max Returns:
Min Trade Amount:
Demo Account:
On Official Website.
Risk Warning: YOUR CAPITAL MIGHT BE AT RISK.
Best for: First-time traders.
Quotex.
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
Quotex entices novice traders with a user-friendly platform, low minimum deposit, a demo account, and a first-deposit welcome bonus. It offers more than 100 tradable assets across commodities, indices, cryptocurrencies, and forex, as well as a myriad of trading tools.
• First deposit bonus of 30% • Over 410 trading instruments • Fast deposits and withdrawals.
On Official Website.
Risk Warning: YOUR CAPITAL MIGHT BE AT RISK.
Min Deposit:
Max Returns:
Min Trade Amount:
Demo Account:
On Official Website.
Risk Warning: YOUR CAPITAL MIGHT BE AT RISK.
Best for: User-friendly platform.
IQ Option.
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
IQ Option is a tried-and-true broker that has been around since 2012 and has accumulated a base of over 40 million members. It is one of the most user-friendly binary options trading platforms with more than 250 instruments that enables hassle-free trading of forex, stocks, crypto, commodities, and ETFs.
• Robust technical indicators and widgets • Easy-to-use trading platform • 24/7 multilingual support.
On Official Website.
Risk Warning: YOUR CAPITAL MIGHT BE AT RISK.
Min Deposit:
Max Returns:
Min Trade Amount:
Demo Account:
On Official Website.
Risk Warning: YOUR CAPITAL MIGHT BE AT RISK.
Best for: Trading weather derivates.
CX Markets.
Fortunly's Rating: Our editorial team determines the rating based on a set of evaluation criteria developed for each product and service category.
Regulated by the US CFTC, CX Markets is a reliable and secure binary options trading platform that offers advanced features and a user-friendly interface. You can trade a wide range of assets across multiple markets, including binary options, forex, precious metals, and even weather derivates, with low fees, high payouts, and helpful customer service.
• Tropical storms market • Regulated by the CFTC • Low fees and commissions.
On Official Website.
Risk Warning: YOUR CAPITAL MIGHT BE AT RISK.
Min Deposit:
Max Returns:
Min Trade Amount:
Demo Account:
If you plan to head into binary options, one of the most important terms to familiarize yourself with is the so-called "strike price." This refers to the price against which you trade by deciding whether to place money on the asset going above or below that level.
When investors feel bullish about an asset, they’ll buy a binary option. On the other hand, when they think the price of a particular asset will go down, they sell. These two choices are also referred to as "call" and "put."
Another bit of binary options basics to remember is that you’re not trading against the binary options broker, but against other traders. The traders themselves determine the bid and ask prices, although the value always sits between $0 and $100.
As we mentioned, all trades end in either a yes or no result. More specifically, each trader will either earn $0 or $100 (minus the option's price and fees) from a particular trade.
For example, you want to predict whether silver will be worth more than $1,000 at 5 p.m. tomorrow. Every binary trade has a determined expiry date which can be hourly, daily, or weekly.
If you think silver will be worth over $1,000 before expiration, you’ll buy that
binary option for $60. On the other hand, person B thinks silver will be at or fall below the $1,000 threshold and sells the option for $40.
In case silver does indeed go over the strike price at 5 p.m. tomorrow, you’ll earn $100, with the profit being $40 ($100 minus the $60 you invested). This situation is called being "in the money." Alternatively, if the price of silver is below $1,000 tomorrow, you’ll lose the $60 you invested, leaving you with $0; proverbially, you will be "out of the money."
Keep in mind that binary options brokers also charge fees for trades, regardless of the result of the trade, so if your luck doesn’t hold, you’ll actually end up below $0.
Assessing the Risk of Binary Options Trades.
A central part of every binary options trading strategy is risk assessment. The good thing about this financial instrument is that the risks and profits for each trade are capped and known in advance. There’s no possibility of you losing a small fortune overnight just because the stock price for an asset dropped.
Still, you can lose a lot of money if you’re not careful. While a singular Bitcoin options trade is capped at $100, you can trade multiple options at the same time. While your potential for profit increases, depending on the payout percentage, you stand to lose a higher sum of money as well.
There’s no binary options trading guide that can help you remove these risks, as they’re intrinsic to how the markets operate. However, a good marker of whether a particular binary options trade is safe is the bid and ask prices. As these prices are determined by the traders, they reflect the probability of the binary options trade in question coming to fruition.
Hence, binary trades that are most probable to happen based on various technical indicators will have a high bid/ask price, often over $80.
