Beginning the Journey of a Binary Options Trader!

Published:8 April 2016 Updated:4 January 2024

Hello again, dear fellow traders! Binary options Binary options are a type of options where traders operate (open or abstain from opening positions) at the price of financial assets, and they will either make a profit or, on the contrary, a loss. Therefore, operations with binary options are easy to understand, much easier than with other types of options.

Binary options are, in fact, settlement contracts, because they are executed only on the day of expiration of the specified term. If at the end of it, they turn into “options in the money”, the seller or the buyer is charged a certain, specified in advance, the amount in U.S. dollars. When binary options turn into “options out of the money”, none of the participants get anything. This is the simplicity that makes it relatively easy to assess the level of risk and the potential amount of profit. The full payout of this type of option is assured, regardless of the absolute value of the upside, relative to the strike price of the option. There is another common name for binary options – “digital options”. It is mainly used in the foreign exchange market.

Beginning the Journey of a Binary Options Trader!

 

Steps

1) Two varieties of options should be studied

The trader working in this market is obliged to predict the expected direction of the price movements of the underlying assets. In most platforms, these two varieties are referred to as “call” and “put”. A “put option” is the prediction of a decrease in the price of the asset, while a “call option” is, on the contrary, a forecast of the increase in its price. The magnitude of the movement, unlike conventional options, you do not need to know at all. It is sufficient to make a correct prediction as to whether the finish price of the asset will be lower or higher than the strike price. Any investor can trade binary options today.

2) Define your position

You should assess the current market situation with respect to the asset you have chosen and predict whether its price will rise or fall. If your intuition or logical thinking helps to make a correct prediction, you will get the credit price of your contract on your deposit. The level of profitability of a completed transaction is determined by brokers and is always known in advance.

3) Find out the methods of determining the price of the contract.

The price of a particular contract in an approximation reflects the market’s perception of the probability of the occurrence of a given event. Let’s say that with a price of a hundred dollars and a last trade position of $96, we can say that 96 percent of market participants predict that the event will occur and that the contract will be “in the money.

4) Find out the advantage of operations with binary options compared to traditional options.

  • Trading binary options is easier because it is sufficient to correctly predict the directrix of price movements of the underlying assets selected by the trader. For traditional options it is also necessary to guess the magnitude of this movement. The actual assets do not change their owners, so placing stop-losses and changing the owners is not part of the process.
  • Binary options always give the trader the opportunity to control the risks and profits, their ratio, these indicators are known in advance, at the time of purchase of the contract. Traditional options have no rigid limits of risk or profit, so losses can have any volume.
  • When working with binary options, all kinds of hedging and trading strategies that are also used in operations with traditional options are available. The use of technical and fundamental analysis contributes to increasing the accuracy of price movement forecasts.
  • Before you open a position, be sure to analyze the market. When deciding on a rise or fall in the price of the selected asset at a certain point in time, you should take into account a large set of factors. Without analysis, the risk of losing money increases significantly.
  • It is necessary to understand the interpretation of the price of a binary option. The one at which it is traded reflects the chances of a successful contract execution.
  • Before making the final choice, you should familiarize yourself with all brokers offering their services. Attention is paid to the type of trading platform, the duration of the concluded contracts, the rate of return, the variety of assets used, the availability and quality of training materials. Any of these elements are significant for the possibility to make profit in the future.
  • Clearly understand the relationship between profit and risk – in operations with binary options, they exist inextricably. The lower the probability of successful option execution, the higher the profit. A rational and experienced investor before opening a position will always evaluate a new contract based on these two parameters.
  • Correctly determine the right moment to exit a position at the right time. Otherwise you won’t be able to avoid serious losses. A trader who works on intuition usually acts quickly.
  • Get as much detailed information as possible about the underlying asset of your choice. After all, the financial performance of binary options is derived precisely from the underlying asset. Before you start investing in binary options, you must make sure that you have complete and accurate information regarding the selected assets, the current market situation in the sector in which this type of asset is traded.
  • Unlike traditional options, binary options do not have a payout proportional to the strike rate of the contract. Even with the completion of the “one tick”, the successful trader becomes the owner of the entire fixed amount of profit.
  • Binary options involve contracts of short duration. There are markets in which contracts are completed many times within a day, some may have an annual duration. There are even brokers providing contracts of half a minute duration. This expands the range of investment opportunities and their flexibility because markets are inherently time-varying.

5) Make an accurate calculation of your operating costs.

Binary options brokers don’t charge commissions for opening positions, and they don’t charge any other commissions either. You will have to decide which time frame is the most suitable for you to make a profit on your binary options transactions. How do the terms differ, say, the “strike price” for each side of the transaction. If the differences are large enough, then it can be reasonably assumed that the movement of the underlying assets will turn out to be significantly different, from what is assumed by the seller’s forecast. In extremely rare situations the market turns out to be quite capable of outperforming such a forecast, and for the trader it means that considerable transaction costs may well “eat up” all his profits completely or to a considerable degree.

 

Warnings

1) In binary options trading you should definitely avoid various “bonuses”. The practice of such operations has repeatedly demonstrated that a broker in such a situation is able to completely block your finances until you make a profit that exceeds a certain lot of the amount of your deposit combined with the size of the “bonus”.

2) It should be remembered that this type of financial operations under discussion is absolutely inextricably linked with a certain level of risk. No one is going to guarantee that by trading binary options, you will definitely earn any specific amounts of money.

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Reviews

  • Being a good binary options trader is not as easy as everyone thinks. In order to earn good money, you need to work well, just like everywhere else. Therefore, only by doing all these steps, you can achieve something.

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  • On the contrary, I like it when they give bonuses. Of course, I never register just to get a bonus, but it’s still nice to receive such gifts.

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  • What connects binary options and the Forex market? In essence – they are almost identical things, just have their own nuances. Can a trader who has achieved success on Forex, quickly achieve on binary options?

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    • Rusa der 24 April 2016 at 14:16

      I believe that a person who has achieved good results in anything can succeed in any business. Successful people do not just become and are not born.

  • Right, you need to treat this money a little easier and only then you will be able to gradually increase your deposit to the size you need. And if you worry about every penny in your account, you will end up with the same deposit.

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  • Bonuses are not always bad, you can take them and work on them. It’s probably about those bonuses when they give you a lot of virtual money, and then you have to deposit $ yourself.

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  • As for the risk, everything is right, it is mentioned on many option sites. The bonuses are not all smooth sailing either, you will have to work them out well to withdraw and cash them out.

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    • Oleg menshov 10 April 2016 at 02:49

      He who does not take risks does not drink champagne. Risk should be considered, both for beginners and pros. You should not waste money if you are not sure what you are doing on options.

  • Tell me, in order to succeed on binary options is it necessary to have good mathematical abilities or financial education? If nature has not endowed you with such a gift, what then?

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    • leontov f 9 April 2016 at 07:56

      Not necessarily, but certainly desirable. People who are predisposed to it statistically achieve good results faster.

    • Vitoa an 10 April 2016 at 19:11

      But it is not a hindrance to take and start trying your hand without a specialized education, is it? Does it make sense to go to school? Will it bring results?

    • vasea cernii 9 April 2016 at 20:38

      All it takes is a persistent desire to make money, as well as the ability to study and read. You can even work here with a 9th grade education, like me. 🙂

    • Agnessa Vertinskaya 10 April 2016 at 03:48

      You are somewhere right, as some people are given to binary options without any financial education. And it happens that after several years of studying in the economic academy, you can’t close a few successful trades.

    • ser ser 10 April 2016 at 14:47

      It is not easy to learn how to trade with binary options. Personally, it was not easy for me at first, I even almost gave up on it, falling into despair. It is good that I continued to believe in myself and eventually I succeeded.

    • Vitoa an 10 April 2016 at 18:14

      What results can you already boast about? How much money have you made in the last month on binary options? How long have you been trading?

    • Dyumin Ivan 10 April 2016 at 18:53

      Education does not play any role at all now and even if you have 9 grades, you can achieve more than a person who has 2 higher education, for example.

    • Rusa der 24 April 2016 at 10:32

      I also have no education, because unfinished higher education is equivalent to secondary education. This is the moment when you can prove to everyone that it is not education that is important in life, but how you know how to use your knowledge.

    • Rusa der 23 April 2016 at 19:06

      Not necessarily. I am telling you this on my own example. I don’t have a higher education, my math was not very good either, but thank God everything with binary options is going even better than I could have expected.

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