Before you even dabble in binary trading, it’s worth learning as much as you can about the ins and outs of both binary options and the various strategies you can employ to make a profit. The most important element though is that you ensure you’re dealing with a reputable binary options broker. Betopin has put together reviews of the best binary options brokers around. You can compare brokers her.
The Risks and Rewards of Binary Trading
By far, the biggest benefit of binary betting is that your losses remain limited to between 0 and 100 points. This is based on the size of your stake. Overall, though, binary trading can be considered a high-risk and low return bet since odds are not likely to be in your favour. Let’s look at an example. Let’s say an event looks probable. In this case, the reward will be rather less than if the market should reverse. On the other hand, if you bet on a higher risk side, that risk-reward ratio will be reversed. So, if your binary online betting bookie quotes 5-10 as an even seems unlikely and you buy at 10, then the market reverses, your potential profits will sit at 90 points. This is highly unlikely, though. It’s also worth understanding that there is a spread between a buy and sell price. This is the broker’s edge. However, it’s only the case if everyone’s bets net off against one another. Are you noticing a familiarity here? That’s because binary options are really fixed odds betting in the broker’s favour. Basically, binary trading is an up or down bet where you predict where the market will go short-term. Considering this, it should come as no surprise that there’s a big emphasis on risk management, technical analysis and execution.
Risk Management and Binary Options
Risk management is a core element when it comes to binary betting. With, for example, forex trading or spread betting, your profit and loss are almost unlimited. With binary options, your risk is actually limited. The reason binary options are a limited risk product is that you trade is always going to settle at either 0 or 100, as we mentioned earlier. That means the most you can make or lose is your buy or sell price times your trade size. Of course, diversification is the key if your aim is to profit from binary options trading.
Executing Your Binary Options Trades
One of the best ways to learn how to dabble with binary options trades is to use a binary options demo account. The sites on our top list allow you to create a demo account, provide virtual money and then let you test the platform and get used to puts, calls and the entire nature of trading the markets. It’s the best way to hone your trading skills and get the hang of trading before risking your own money.
How Binary Options Betting Works
As you may have gathered, binary options are a type of speculating on the financial markets. Essentially, they are a short-term limited risk option you can use to bet on short-term price movements in markets such as foreign exchange, indices and even fixed income markets. When you’re ready to start betting, a binary options broker will quote their price between 0 and 100 based on what could be a profitable outcome for them. There’s also a spread between the buy and sell price. Typically, the time scale of a binary bet ranges from 1 to 60 minutes but it has been known to be longer. Let’s look at an example of an FTSE binary bet. You start off with the FTSE trading at 6650 There’s a 5-minute time scale The binary options price is 6655 Your broker quotes 80 – 85 that the FTSE’s going to remain above 6650 in the next 5 minutes If that’s the case, the bet closes at 100. If the FTSE is below 6650, your bet closes at 0 So, if you buy at £1 at 85 and the price is above, you make £15 (that’s £1 x 15 points) But, if the price ends up being below, you lose £85 (that’s £1 x 85)
It’s All About Probability and Trend
On the whole, binary options are based on probability and trend. They’re all generated by computer algorithms. Since the time scales are incredibly short, there’s hardly any time for human interaction from the side of the broker. So, if you’re keen to place short-term limited risk bets on the markets, binary trading might just be for you. Especially if you like the idea of placing “will it, won’t it” types of bets on liquid markets. Contrary to CFD trading and spread betting, where the losses and profits are unlimited when you use binary options brokers, you get to set your capital risk for each trade from the start. The downside, though, is that if you manage to call the market right, you’re only going to get a limited return. That’s because the majority of brokers give you a return of up to 95%. As for those fast and furious time scales, it differs. You can bet on anything from a minute to six months. Most business, though, is done over the short time frames. Traders who are familiar with the ins and outs of binary options trading prefer to look at technical trends will either be followers – those who think a trend will carry on, or contrarians – those who assume a trend is on the way to an end and is sure to reverse. In terms of binary options, there’s very little point trying to speculate. The fundamental data tends to be long term. Of course, there are exceptions, like placing binary bets right before certain economic events are released.
Does Doubling Down Work?
The next thing to consider is whether or not doubling down on binary options actually works. Typically, doubling down on anything is often a bad idea. That’s because the odds are usually stacked against you and you’re likely to end up losing in the long run. If you consider traditional online roulette. The odds are completely random for every spin. There are zero contributing factors and there’s nothing other players around the table can do to influence the outcome. Yet, when we look at binary options, betting on the major pairs, such as the USD/EUR, there is a list of contributing factors that tend to play a part in whether the price goes up or down in a few minute’s time. If we consider foreign exchange, price action is mostly influenced by trend, economic events, liquidity and order flow. Of course, there’s really no way to predict with absolute certainty where the price will land up. But what you can do is implement a little common sense. Take a look at historic charting patterns and you should be able to take a decent educated guess. This type of guessing is known as technical analysis. It’s filled to the brim with mathematic principles and complicated terms. So, if you are any good at technical analysis, you might just have a better chance than others when it comes to guessing where a price may be. This turns the odds ever so slightly in your favour. Then, if you win, that’s great, but if you lose you could double down since price direction doesn’t go on indefinitely. It’s the basic law of what goes up must come down. As with any type of betting, and especially when it comes to the markets, there’s going to be a phase you might hit a losing streak. Binary options brokers provide a rather limited risk for betting on short-term price movements.
How to Open a Binary Account
The first step is to go through our list of top binary trading brokers. Once you’ve chosen one that suits you, sign up and try the demo account. Take some time getting to grips with binary trading before you’re ready to risk real money. Avoid accepting advice or letting someone else manage your trading account. On the whole, binary options are unregulated and there are enough underhanded people out there trying to get a piece of the pie with the promise of massive returns. If you can help it, don’t take a deposit bonus. When it comes to binary trading, these can end up doing more harm than good as it can get confusing. Rather go with a broker that offers you a deposit bonus once you’ve done a number of trades. Then, you can withdraw it whenever you want to and it works out as more of a rebate on trading costs as opposed to free money. Finally, bet small and enjoy the action. Binary betting options are just that – bets. They’re not long-term investments.
Find A Reputable Broker Today
Betopin has done the legwork for you to bring you the best binary options accounts around. Take a look at our reviews and comparisons to find out which broker is for you and which offers the best deposit bonuses for your trading needs. One thing you need to be aware of, though, when choosing the right binary options broker is that even though risk might be limited, it’s still a rather high-risk form of trading. What’s more, binary options are only an execution product, so only ever make trading decisions and never list to broker’s trading ideas. If you’re in the UK, you should be aware that UK regulations don’t permit giving advice on binary bets. Finally, despite some suggestions you may have come across, binary options are by no means investing. They are purely speculation. They are high-risk! Think of it as betting red and black when you’re at the roulette table. If all this still appeals to you, take a look through our binary trading broker reviews and try your luck today!