User Rating: 0 / 5

Star InactiveStar InactiveStar InactiveStar InactiveStar Inactive
 

Binary Options Trading Tips

 

Binary options offer the easiest way to trade the global financial markets. You can trade any financial asset in multiple expiries with a few clicks. These are some basic trading tips and some simple rules for binary options traders.

 

Basic Binary Options Trading Tips

(1) Trading Binary Options incorporates an enormous level of risk, so it is strongly recommended to open a demo account and practice hard before trading for real money.

(2) Be cautious with expiry times, 60 sec options seems a great way to make easy money, but actually, trading in short-periods increases your portfolio risk furthermore. It is better to choose a longer expiry time because that will reduce your market risk.

(3) Learn to use the ‘Early Closure’ Feature, which is very important. Market volatility is the key for deciding when you should run your profits and when you should take earlier your profits using the ‘Early Closure’ Feature.

(4) Prefer to trade popular assets. Popular assets like Gold, Oil or EURUSD enjoy good information and offer better payouts.

(5) Choose binary options brokers wisely:

-Don’t get too enthusiastic with deposit bonuses and risk-free trades. Instead, give weight upon Payout Rates and the availability of basic trading options

-In addition, choose only among regulated binary options brokers, use the BinaryValue.com ratings to find reliable binary options brokers. 

-Don’t hesitate to use the Live Chat Customer Service. Use Live Chat and get accurate answers before opening a new account.

 

 

MT4 Trade Signals Generator

 

Basic Types of Binary Contracts, Likelihood of Winning, and Payout Rate

 

Binary Options Profit/Loss Mechanism

The profit of any trade is based on the Payout Rate. If the trade is lost, some brokers offer a Refund Rate as compensation:

■ Profit = Invested Amount + (Invested Amount X Payout Rate)

■ Loss = Invested Amount - (Invested Amount X Refund Rate)

 

There are many different types of binary options, these are the main types:

(i) Classic High / Low Options

They are offered by all binary options brokers and offer a fixed rate (Payout Rate) between 65-90%. Some brokers offer also a Refund Rate of 5-15%. If you want to compare the profitability of different assets or different brokers you may sum these two rates, check this example:

■ Payout Rate A (70%) + Refund Rate A (15%) = 85%

■ Payout Rate B (75%) + Refund Rate B (5%) = 80%

In this example, the Binary Option A is more profitable than Binary Option B although the Option B offers higher Payout Rate. This is due to the fact that the likelihood of winning and losing for UP & DOWN options is always 50%.

■ Likelihood of Winning: 50%

■ Likelihood of Losing: 50%

(ii) Range or Boundary Options

Range Options are offered within two price lines. Traders must forecast if the price of an asset will stay in these two lines or it will breach one of these lines at the expiry time.

■ Payout Rate 50-350%

■ Likelihood of Winning: Variable

■ Likelihood of Losing: Variable

(iii) Touch / No Touch Options

These binary options contracts offer traders the chance to forecast if the price of an asset will reach (touch) a predetermined price level. If that predefined price level is reached (touched) then the trade is closing profitable. No Touch options are profitable under the exact opposite conditions.

■ Payout Rate 50-350%

■ Likelihood of Winning: Variable

■ Likelihood of Losing: Variable

» All Types of Binary Options Contracts

 

Binary Options and Money Management

Binary options offer the easiest way to trade the global financial markets.Money management is everything when you trade the world’s financial markets no matter the asset you are trading and the financial instrument you are using. Even the best trading strategies will not prove profitable in the long-run without the right money management techniques. Binary Options Platforms offer an easy framework for managing your trades and your funds relative to more sophisticated trading platforms such is the popular MetaTrader4 by Metaquotes.

 

Money Management Rules

There are some basic Money Management rules that you should constantly follow when you trade binary options:

1) Portfolio Diversification

The golden rule of investing is portfolio diversification. Don’t trade with all your available funds. In addition, don’t put all your available trading funds in one or in a couple of trades. Wise traders never put more than 5% of their trading funds in a single position. In large portfolios, that percentage is reduced even to 1-2%. Never forget that golden rule, because if you will forget it, it is a matter of time (weeks or months) to lose all your funds.

2) Don’t Get Emotional with Trading

Our prehistoric emotional brain counts about 90% of our overall brain. Humans tend to become emotional in every action of their everyday life. Unfortunately, humans are also becoming high emotional when they are trading. The rule here is not to let your prehistoric brain prevail your logical brain. This battle is hard for your logical brain that counts as little as 10%, but it is a battle that must be won if you want to evolve as a successful trader.

3) Limit Your Losses

When trading the global financial markets there are good and bad days. Wise traders have an early understanding of their bad days and they stop trading instantly. Some money management rules here may concern:

■ Stop Trading the day that you have lost 3 Trades is a row

■ Stop Trading the day that you have lost more than 5% of your available funds

4) Withdraw some of your Profits

Don’t forget that the ultimate goal of trading is making real money. Therefore, if and when you have doubled your funds (100% return) withdraw a great part of it. My suggestion is to withdraw 2/3 of your total profits. If your initial capital was $1,000 and now it is $2,500, then withdraw $1,000.

(5) Expiry Periods

Binary options expiries start from 30 seconds or 60 seconds and they can last for hours, days or even months as concerns long-term binary options. Prefer expiries of at least 1 hour in order to avoid the market noise.

 

 

Choosing Binary Options Brokers Wisely

The selection of a binary options broker is very crucial and it should be based on research and reviews.

The Essence of Reliable Binary Option Brokers

First of all, you need a reliable broker. The safety of your money is priority number one. Prefer binary options companies that are situated in reliable countries where the legislation is strict regarding financial companies. Moreover, prefer regulated brokers (even CySEC Cyprus). Finally, prefer popular binary options brokers. In order to define online popularity, I use common internet tools and rankings. To be more specific, when I choose brokers I always review their Google PR ranking and even their Alexa ranking. Brokers with Google PR=0 and Alexa ranking more than 3 million are extremely unpopular to internet users or extremely new companies. In both cases, I want to avoid them.

» Binary Options Broker's Regulators

Trading Account Aspects

Before starting to trade in any broker you must open a real account. Therefore you should examine and review aspects such is the minimum account, fund methods, withdraw commissions, welcome bonus etc.

Asset Index

The available asset index of any binary options broker is a very important factor for most traders. Assets such is EURUSD, GBPUSD, Gold, Brent and Nasdaq Composite are offered by all binary options brokers nowadays. Specialized traders need the availability of more unpopular assets. For example, traders specialized in Forex may wish to trade Forex Minors or even Exotic Currency Pairs. Traders specialized in Stocks may wish to trade shares such is the Banc of America, General Electric, DIS, Alcoa etc. If you are specialized in a specific market you should always check for the available asset index before depositing any funds.

Payout and Refund Rate

Last but not least is the Payout and Refund Rate. Given that you have to choose among reliable brokers offering a good asset index this is the most important issue. As we have stated before you may sum the Payout and the Refund Rate in order to compare brokers.

■ Total Earnings Ratio A = Payout Rate A + Refund Rate A

■ Total Earnings Ratio B = Payout Rate B + Refund Rate B

If you are going to trade specific assets such is Gold or EURUSD or Nasdaq you should compare the Earnings Ratio of any broker based on these specific assets.

Use BinaryValue.com ratings to find reliable binary options brokers. 

» BinaryValue.com Ratings

 

 

 

 

Binary Options Glossary –Basic Terms of Binary Options Trading

 

  • What is an American Option?

An American Option means an options contract that may be exercised before its expiration. This type of contract in the Binary Options Industry is incorporated with the popular feature of Early Closure.

  • What is an Asset / Underlying Asset?

Any financial instrument can be the underlying asset of a binary options contract. It may be a Forex currency, a share, an index or a commodity (metals, energy, etc).

  • What is an Asset Class?

An asset class is the general category of a financial instrument. Asset classes include stocks, currencies, commodities etc.

  • What is an At-the-Money Option?

It is the situation when the strike price of a binary option contract and the price of the underlying asset on are found exactly at the same price level.

  • What is the Bid Price?

The bid price is the price at which a trader can sell an asset in any financial market. Any financial asset has a bid and an ask price.

Bid Price: Closer Sell Price

Ask Price: Closer Buy Price

  • What are Binary Options?

Binary options or digital options are contracts which have only two possible outcomes {win or loose}. A binary options contract is based on the price changes of an underlying asset which may be a share, an index, a Forex currency etc. Binary options contracts have a pre-determined duration (expiry) and offer a fixed payout to its holders. If the holder of a binary option predicts the future price movement of a financial asset correct then he earns a fixed return, if not he loses his trade.

Duration: Pre-determined (from 1 minute to several months)

Outcome: Win or Lose

Strike Price: The Current Price of the Underlying Asset

Return: Pre-determined Fixed Return (65-93%) if the contract ends above the Strike Price

Call Option (↑)

A Binary call option is a contract that gains value when the price of an underlying asset rises above the strike price at expiration. A Binary Call predicts an upcoming rising market (uptrend).

Put Option (↓)

A Binary put option is a contract that gains value when the price of an underlying asset moves below the strike price at expiration. A Binary Put predicts an upcoming bearish market (downtrend).

In-The-Money Option (Trade is profitable)

An in-the-money contract means a binary option that expires profitably for its holder.

In case of a Call option, the underlying asset ends higher than the strike price

In case of a Put option, the underlying asset ends lower than the strike price

Out-The-Money Option (Trade is lost)

An out-of-the-money contract means a binary option that expires with a loss for its holder.

In case of a Call option, the underlying asset ends lower than the strike price

In case of a Put option, the underlying asset ends higher than the strike price

Hotforex Benefits

 

  • What is a Binary Options Broker?

A binary options broker operates as the middleman for trading financial markets via binary options and provides its clients with a trading platform specially designed for binary options trading.

  • What is Ceiling?

Ceiling refers to the maximum gain that can be achieved in a single binary options contract trade. This is valid for classic up and down options, 60-sec options etc but it is not valid for range or boundary binary options

  • What are Commodities?

Commodities are tradable Physical Goods such is gold, silver, oil, natural gas, corn, weed, coffee etc. Fluctuations in the commodity market can be traded using several financial instruments including futures, CFDs and Binary Options.

  • What are Currency Pairs?

Global currencies are quoted and traded in pairs. Currency pairs are divided into three categories: majors, minors and exotic currency pairs. The majors are the most popular pairs to trade and therefore enjoy the best terms (payout rates).

  • What is an Execution Rate?

An execution rate is the underlying asset’s current price when a binary options contract is purchased. It is usually the same with the Strike Price.

  • What is an Expiry date?

An expiry date determines the duration of a binary options contract. The expiry may include minutes, hours, days, weeks and up to 3 months.

  • What is the Extend Feature?

The extend feature enables traders to expand the expiration date of a binary options contract in order to gain a greater chance for an expiry in-the-money. The extend feature offers an extra advantage and thus adds additional trading cost to the contract.

  • What is Fundamental Analysis?

Fundamental analysis is a common investing practice that is used for the evaluation of several macroeconomic figures and events and their effect on financial markets and assets. Fundamental factors include the level of interest rates, GDP changes, the level of inflation, unemployment rate etc.

  • What is an In-the-Money Binary Option?

It is a contract that trades in a price level favor to a binary options trader. That means that the current price is higher than the strike price in case of a Long position (call option) and lower than the strike price in case of a short position (put option).

  • What is an Out-of-the-Money Binary Option?

It is a contract that trades ‘out’ of its strike price and that means that currently does not worth any money. Out means lower than the strike price in case of a Long position (call option) and higher than the strike price in case of a short position (put option)

  • What is Payout Rate?

It is the amount of money earned from a trade measured as a percentage (%). For example, if the initial investment was $1,000 and the Payout Rate 85%, then the profit realized was $850.

  • What is a Range Option?

A Range Option is a binary options contract type that allows traders to forecast if the price of an asset will end In -or- Out of a pre-determined price range.

  • What is Refund Rate?

The Refund Rate is an account protection strategy offered by some binary options brokers. Practically a Refund means that if a trade ends out-of-the-money an amount is given back to traders as compensation.

  • What is ROI?

ROI means Return on Investment and it is a very popular financial term that describes the profit potential of any investment. The ROI in binary options industry is basically fixed and synonymous to Payout Rate.

  • What is Reuters?

Reuters is a very popular financial news agency that publishes accurate asset values. Many binary brokers use Reuters Asset Pricing within their trading platform. Visit Reuters Financial Markets

  • What is the Settlement Value?

Settlement Value refers to the price of a binary option contract at its expiration.

  • What is the Spot Forex?

Spot Forex means Foreign Exchange. A Spot Market is a market that deals based on the current price of a financial instrument.

  • What is a Strike Price?

The strike price determines the price levels of an underlying security at which a trade will end profitable. When a binary option contract expires, the current price of the underlying asset is instantly compared to the strike price in order to be defined if the contract is profitable {in-the-money} or not {out-of-the-money}.

  • What is Technical Analysis?

This type of investing analysis is based on the observation of historical price movements and aims to forecast future price behavior. Technical analysis uses charts, statistics and several tools such are indicators, oscillators etc.

  • What is Time Value?

Time value is the total amount of time left until a binary option gets to expiration. The more time the better for an out-of-the-money option. The less time the better for an in-the-money binary option.

  • What are Trading Hours?

Trading hours are the hours that an underlying asset of a binary options contract can be traded (usually the business hours in case of a share or 24/5 in the case of a Forex Currency).

  • What are Touch Options / No Touch Options?

This is a very popular binary options type. A Touch Option get profitable if the price of an underlying asset touches a predetermined strike price before the expiry time. No-Touch Options get profitable under the exact opposite conditions. In other words, No-Touch Options end profitable if the price of an underlying asset doesn’t touch a predetermined strike price before the expiry time.

  • What is the Underlying Asset?

The underlying asset is the financial asset on which a binary option contract is based, for example, a Forex currency, a share, a stock-market index or a commodity.

 

READ MORE

■ COMPARE PROVIDERS

Forex Brokers

Trade Signals ► CFDs Brokers        
■ TREND INDICATORS Trend Indicators

» Standard Deviation

» Bollinger Bands

» Parabolic SAR

» Ichimoku

» Moving Averages » Fibonacci Trading
■ TRADING OSCILLATORS Oscillators

» Rate of Change

» RSI

» Williams %R

» Stochastic

» Gator

» Momentum

   

» MACD

» Awesome

» DeMarker

» DMS System

» CCI

» StochRSI
■ NEWS INDICATORS News Indicators

» Interest Rates

» GDP

» US NFP

» Consumer Price Index

» Retail Sales

» Trade Balance
   

» Purchasing Manufacturing Index

» Consumer Confidence Survey    

 

 

 

Binary Options Trading Tips for Beginners

WebForex.net (c)