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The factor that is most important when choosing the desired binary options broker is a combination of the best features. You will want to commence trading with a broker that offers you the highest returns and attractive bonus offers. This will create more possibilities of trading in the live market environment.
You’ll need to find the right broker that will help you make the profits that you deserve. Signing up with a binary options broker is free, so this is a plus from the start. If you have the right amount of patients this will make finding the right broker straightforward. Do your research by making sure that the binary options broker that you do trade with has a good reputation.
The quality of the binary options broker’s software is one of the crucial aspects in choosing the preferable broker. Therefore, you will have to do your research from now because the more research you do in this aspect the happier you will be once you trade binary options for real. Make sure the broker’s software has been tested and is virus free before trading. This will guarantee a stress-free trading experience.
Forex trading, by definition, is the buying and selling of currencies of different countries. For those who are new to the financial market, when we talk about Forex trading, we are always talking about dealing with a “Pair” of currencies. In other words, it is about buying a currency and selling another currency simultaneously.
For example, when we buy the EUR/USD currency pair, we are buying Euros and selling U.S. dollars at the same time. Conversely, when we sell EUR/USD, we are selling Euros and buying U.S. dollars simultaneously. The exchange rate of these two correlating currencies is determined by the market.
The way which Forex traders earn is by pocketing the differences between the prices they paid for a currency pair to that of the prices which they get when they liquidate their market position. Basically, there are two ways to go about trading Forex. The first way is by dealing directly in the currency pairs themselves.
If a Forex trader feels that the U.S. dollar is going to rise against the Euro, in this scenario to profit for the upward fluctuation of the U.S. dollar, the Forex trader will need to hold a “long” market position on the EUR/USD currency pair.
In other words, the Forex trader needs to sell Euros and buy U.S. dollars and hold this position until the U.S. dollar exchange rate rises in relation to the Euro. Once the trader feels that the rise has plateaued, he can then liquidate his market position to realize his gains.
When trading in Forex, a trader will be required to hold or sell his asset until:
1. He liquidated his market position manually to realize his profit or minimize his loss.
2. His trade is closed automatically due to a “Stop Loss” or “Take Profit” order.
3. His trade is closed due to a “Margin Call”. A margin call occurs when the balance in the trader’s account falls below the broker’s required minimum deposit.
Forex traders utilize the margin facility provided by their brokers to leverage their investment capital a few hundred folds in order to maximize their profit potential. Nevertheless, the risk pertaining to a Forex trader’s transaction is also magnified many folds to the extent that a trader can lose his entire trading capital in his trading account if the market moves against him. This is the main reason why Forex trading in itself is extremely risky.
The second way to trade Forex is with binary options. With binary options trading, the risk is lowered significantly to the extent of a trader’s investment and not to the extent of his entire trading account capital. It is just like purchasing any options as the trader can only lose the actual amount invested.
Besides having lower risk, a trader can have more control over the level of risk he wants to undertake. Furthermore, even if the binary option expires “out of the money”, the trader can still recoup back a portion of his initial capital investment (normally around 10% to 15% depending on the broker).
In addition, with binary options trading, traders have at their disposal more asset types to take advantage of the various market situations. For example, let’s say the market is ranging, with normal Forex trading; a trader is likely to incur losses due to his stop loss orders catching. With binary options trading, a trader can use “Range Binary Option” to profit from the market when the market is within a range as well as outside a range.
Another type of asset which is available with binary options trading but not normal Forex trading is “Touch Binary Options”. With this type of binary options, traders can profit from a situation where the market is “testing” the support and resistance lines but doesn’t breach them.
With normal Forex trading, a trader can only trade in one direction and when the market is volatile with strong fluctuations; such situations tend to result in Forex traders suffering losses. This is another area where binary options trading reign supreme.
In summary, although the level of possible profits achieved is higher with normal Forex trading, the risk level is also very much higher as well. With binary options trading, the risk level is lowered significant while still allowing traders to reap a respectable amount of profits. In short, binary options trading is ideal for those traders who are just getting their feet wet in the financial market.
This article is designed to educate traders on the steps to take to trade digital options. But we won’t just list the steps to take: we’ll go a little further to put in your hands some timely information that will allow you to make the whole process error-free so that everything works to your advantage when you go to trade options.
So, How Can You Trade Digital Options? Everything is described in these Few Simple Steps:
There are many brokers in the digital options market, unlike the situation a few years ago. Brokers used platforms developed by their design and software teams, configured with features unique and peculiar to their brokers, or they could decide to use the cheaper route by using a turnkey solution that allowed providers to configure the platform features to the broker’s specifications.
Therefore, the selection of a broker is indirectly an exercise in selecting a trading platform. The choice of platform will influence those available for trading and this will determine how the trader will pursue a career in binary options.
An investor, for example, may be qualified in the Boundary instruments, but may not be as successful with the 60-second instrument. Therefore, the professional will be best served with a platform that meets the need to trade Boundary digital options in addition to the 60-second options. In addition to the obvious issue of selecting a broker that is not going to disappear with the trader’s money.
There are several trading contracts, however, it is not mandatory that the trader be a master of everything because invariably, if the trader wants to be master of everything, he may end up being master of nobody.
It is best to choose one or at most two instruments and perfect them in the trading platform. Choosing a trading contract will present the assets that can be traded with the type of trading chosen at that particular time.
When the list of assets appears with the trading type selection, the investor can then choose an asset from the list. Four asset classes are traded: stocks, commodities, currencies and stock indices. These asset classes have their individual characteristics and investors should choose the one they are familiar with.
For example, a forex trader may decide to trade assets such as currencies only, since he would be familiar with this type of trading. Others may decide to trade purely stocks. It all depends on the investor’s preference.
Investment values should not be entered carelessly and arbitrarily. It is important to keep the risk for trading in acceptable limits. A trader should not trade more than 10% of his account as investment value. Such limits will keep the account safe in the event of a loss.
The investment value should therefore be 10% of the maximum account capital or a smaller percentage to avoid a financial risk. If the investor has $2,000 as capital, the total exposure of all open positions should not be more than $200, which is 10% of $2,000.
Before you execute the trade, always check that all the trade parameters have been entered in the way you would like. It is not uncommon at this stage to discover some mistakes, such as the type of instrument chosen to be wrong, incorrect investment amount, etc. You should make corrections before executing.
You should also predict the payoff before entering a trade. This will tell you whether the trade is worth it or not, especially when you use platforms such as Deriv or IQ Option, where there are several types of trades with a variable payout structure. It is important to remember to use demo accounts to learn how to trade binary options correctly
There are several, categories of instruments in digital options trading. Although there are several types of trading, the price movement of assets will continue to be the determining factor, if the investor has made the correct prediction they will make money, however if they get it wrong they will lose. The different types of instruments is provided different points that can be used to reduce risk while simultaneously increasing profit potential.
Binary options of different types, the most common option trade is the Up/Down, (Buy/Sell) option this type of option is offered by all brokers. Other important types of binary options are the “Touch options and the “Boundary Options”.
This is the fundamental form of digital options. With Up / Down, Put/Call options, you have to predict whether the price of an asset will move up or down. This type of option is very easy to use and can generate significant gains if you have good market reading skills. Payouts for Up/Down Put/Call options range from 65% to 95%, and sometimes you will get a refund of up to 5-25% if the option expires out of the money (but this will depend on the broker you choose).
“Call Options generate profit when an asset moves up. If you think the asset value will go up you should buy a call option. This type of option is ideal for making profits in bullish markets.
Options sell when the price of an asset moves down. They are good for bearish markets, when the investor wants to profit from decreasing asset values.
Touch options are a special type of binary options that are used to predict whether the asset price will “touch” a certain value. If the specified value is touched before the expiration time, the option will either finish in the money or out of the money depending on the option type.
If the value is not touched by the expiration time, the option will end in its term as a regular option. Touch options usually have high payouts. They can be as high as 250% or even 500%. However, you should be aware that a higher payout means lower chances of ending up “in the money”.
Touch Up options will generate profit if the asset price will hit a certain value above the starting price. In order to generate profit with this option, the chosen asset must move with a minimum number of points in order to reach the touch value.
Assuming that the direction of the asset is moving is mandatory, but not sufficient. Touch Down options are similar to Touch Up options, however the touch value is below the starting price. This means that Touch Down options are used in falling markets (down markets) when you want to profit from a sharp drop.
Touch Up and Touch Down options are ideal in volatile markets when you anticipate sharp price movements in periods.
No Touch options are used when you predict a very calm market. They generate profit when the asset price has not reached the touch values. Only a few brokers offer No Touch options as they are less popular than other types of binary options.
Boundary options are a special type of binary options where you predict whether the market will end up inside or outside some pre-defined “bounds” at expiration time.
If you estimate that the market will be very calm and there will be no major price movements, if the price ends up “in the range”. Traders will end up in profit.
In the opposite situation, when you believe that the market will move sharply in one direction and will end up out of bounds at expiration time, you should buy “out” options. Boundary options are a bit more exotic and will not be offered by all brokers.
Pair options are an exotic type of binary options where two assets compete against each other. You can bet on which will be the better asset until the end, Pair options are traded on popular stocks, and options are chosen from the same category. You will find pair options such as Google/Java, Apple/Microsoft, or Coke/Pepsi. To trade pair options you need a specialized broker for this type of options.
This is similar to One Touch, but in this case, the predetermined levels are multiple and traders can choose the levels they believe are most realistic for different payouts, which can reach an impressive 1500% if trades are successful.
The forex market is most dynamic, which is probably why it is the most popular of all markets. Currency movements can often be predicted, and foreign exchange markets are also known to be very volatile.
No wonder this is why all binary brokers have their forex binary options at the top of their asset index list. All brokers offer binary forex options, and many traditional forex traders are now using binary options as their trading method.
Just as in classical forex trading, the most commonly traded currency pair is EUR/USD. This pair is the most popular asset among traders. Binary options are usually offered for the most important currency pairs, which include combinations of Dollars, Euros, Japanese Yen, British Pound, Canadian Dollars and Australian Dollars. Some brokers offer binary options on more exotic pairs, but you should expect lower payouts in these situations.
Trading gold and oil are becoming increasingly popular in recent years, and you will find binary options on these assets at any broker. Other commodities that can be traded with binary options is silver, sugar, coffee, wheat, corn or copper. If you want to make more exotic trades, you should check the asset list of more brokers in order to find what you are looking for.
The major stock indices can now be traded on binary options platforms. This is probably the easiest way to profit from the financial markets. Stock indices are very sensitive to economic and political news, and forecasting them can be relatively easy, especially for short-term movements.
They are ideal assets to be traded with binary options. Some indices that will be found in any broker’s asset index are: Nasdaq, FTSE, DOW JONES, DAX or NIKKEI. Other indexes of major European markets are also featured by most brokers.
Trading stocks has always been more difficult to access than other markets because it generally requires more capital. Buying a significant amount of stock can be very expensive, and even if you want to trade on margin with a CFD broker you will find that the leverage offered for stocks is always lower than the leverage offered for commodities, forex or indices. The stock market is also less liquid than forex or commodities markets.
This is why binary options are ideal for trading stocks. You no longer have to worry about margin calls, low leverage or high commissions charged by stockbrokers. Now you can make 80% profits in less than 20 minutes of stock trading.
Although not all stocks can be traded with binary options because of their lower liquidity, you will certainly find binary options for famous stocks such as Apple, Microsoft, Yahoo, Google, Bank of America, Société Générale, Exxon Mobile and many other multinational corporations.
The Roll Over feature allows traders to extend the expiration date of an option so that they can have a greater chance of expiring in-the-money. For example, if a trader buys a Put option and five minutes before the expiration time the price of the underlying asset has not yet declined as expected, the trader could extend the expiration time to give the option the opportunity to be in profit.
Each of these binary options instrument types are available to all traders. Additional features like Take Profit and Roll Over will only be available to those who partner with a broker that offers them.
Instrument types may be labeled differently by each broker. However, even novice traders should be able to quickly identify a basic trade type and appeal to what specific benefits it offers when combined with current market conditions.
60 second options are essentially the same as call/put options, the difference is the shorter expiration time used in the contract. While these contracts have the potential for quick payouts, it can be very difficult for the trader to make a correct prediction due to the short time frame. However, in a strongly trending market they can be used to book repeatable profits from a trend.
Binary options are the biggest trend in ‘online’ trading and this is because they have a number of advantages over traditional trading. Below are some of the advantages that make binary options trading so popular:
High profitability – Trading binary options can generate very high returns in very short periods of time. Most binary options have payouts between 65% and 95%, which is very high considering that they can have expirations as short as 15 minutes. Touch options can have payouts of up to 500%. High returns in a short period of time is what speculators want, and binary options are ideal for this.
Ease of Access – Binary options are extremely affordable. There are many reputable binary options brokers on the ‘internet’, and opening an account takes less than 5 minutes. Brokers have good funding options, so you can start trading in a matter of minutes.
Small initial investment – You can start binary options with minimal investments. Some brokers accept deposits as low as $1. Under these circumstances, many people can afford to invest.
Easy to use and understand – Traditional trading can be quite complicated for those with less experience in the field, but binary options are simple and straightforward. You don’t need any kind of financial knowledge.
Excellent money management potential – Money management is easy to program with binary options trading. You always know exactly how much you can earn and how much you can lose. You can never lose more than you invested in binary options, and the fixed payouts allow you to create money management strategies that can turn out to be very profitable.