How To Start Trading Binary Options

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How to Start Investing in Binary Options

Damyan Diamandiev
Contributor, Benzinga

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If you’re looking for a simple way to trade and invest in financial assets, why not consider binary options? They’re easy to understand and preferred among newbies, so you’ve pretty much already got a head start in the right direction. Benzinga will help launch you the rest of the way.

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What is Binary Options Trading?

Binary traders profit from price fluctuation just like other traders, but binary options have a preliminary stated risk and profit potential. That’s why this type of contract is called a “binary” option. You get one of the two possible outcomes: suffer the risk or profit from the reward.

In binary trading, you bet if the price will be higher or lower after a certain time passes: the expiration. If you’re right, you win. If you’re wrong, you lose. When you lose, you lose the amount you’ve bet in the trade. When you win, you win around 80% of the amount you’ve bet (this depends on the broker as well).

Let’s say you believe the price of the EUR/USD will be higher in one minute and you bet $10. If you’re correct, you’ll profit around $8, depending on the broker. If you’re wrong, you lose your $10.

There’s some specific terminology wrapped with binary options. Can you sell an option? No, but you can buy a “put” option.

This is how it works:

Call Option

You buy a call option when you expect the price to increase. This means you enter a deal where you bet that the market will increase in price.

Put Option

You buy a put option when you expect the price to drop. This means you enter a deal where you bet that the price will go down.

Calls and Puts

It’s easy to understand the difference between “buy” and “sell,” and which corresponds to bullish and bearish markets. However, it might be tricky to remember the difference between calls and puts. Here’s an easy way to remember:

Imagine a phone is on a table. When you want to “call” you need to lift the phone “up,” an increase. When you want to “put” it down, it needs to go downward, or “drop.”

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  • Binomo
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How To Start Trading Binary Options

Step 1: Build your strategy

Test different approaches and check which one is profitable for you. You can also combine different indicators to build your strategy. Some indicators could be:

  • Price levels
  • Trend
  • Candle patterns
  • Chart patterns
  • Moving average indicators
  • Fibonacci levels
  • On-chart indicators
  • Area indicators

These are not the only indicators available; there are many more and each of them works in a different way. Match signals from different indicators to reduce the chance of getting a bad signal and incline the scales in your favor.

Step 2: Calculate the returns

Say that your broker will give you 80% return if you guess the right price direction. You risk 100% of the invested amount, a return of 8:10. How successful should your strategy be and where is your break-even point?

Say that you do 100 trades by investing $10 in each. This means that you’ve invested a total amount of $1,000. Your strategy has a 55% success rate, meaning that you will get an approximation of 55 successful trades out of 100.

If you guess correctly, you’ll win $8. If you guess incorrectly, you’ll lose $10. Since you’ll get around 55 winners, this means you will make 55 x $8 = $440. Since you’ll get around 45 losers, then you will lose 45 x $10 = $450.

A profit of $440 – $450 (loss) = -$10 per 100 trades with this strategy, which isn’t ideal.

Here’s another test with the same brokerage conditions: 80% return on a successful guess. Let’s say our strategy has a proven record of 70% success rate. This means we’ll have 70 winners and 30 losers after 100 trades:

70 x $8 = $560 (profit)

30 x $10 = $300 (loss)

Net profit = $260

Step 3: Money management strategy

Don’t forget to factor in luck. If you deposit $100 in your account and you invest $20 in each trade, you’ll likely fail. The reason for this is that you will be able to handle only five losing trades in a row, which is very likely to happen.

It’s safe to have money for at least 100 trades. What is the chance to get 100 losing trades in a row? It’s just like flipping a coin and getting 100 heads in a row: pretty unlikely.

Step 4: Choose your binary options trading broker

Pay attention to some important rules when you choose a broker. There are scam brokers who will not let you withdraw your money, so research in advance. Good brokers:

  • Are regulated and conform to the laws of a country.
  • Have existed for a while. Scam brokers get caught and typically close after a year or two.
  • Have good reviews online. What are people saying about the broker? Can you withdraw your winnings?
  • Offer a variety of trading assets. You don’t want to have only five currency pairs available for trading.
  • Have a friendly interface.
  • Include a rich set of trading indicators. These indicators will assist in your analysis and help you build a successful strategy.

Step 5: Create and fund your trading account

This is the easiest step as long as you have the money! Follow your broker rules for creating an account. You’ll need to identify yourself and to confirm your account, then deposit the amount you are willing to start with.

Make sure you conform to the money management rules we already discussed. If you’re willing to invest $10 in a single trade, this means you’ll need to deposit at least $1,000. This way, you’ll have enough money to conduct 100 trades and you’ll be able to handle an eventual downswing.

Step 6: Execute your first trade

Now you’re ready to go! If you’ve deposited $1,000 in your account, then it is safer to invest only 1% per trade, or $10.

  • Change the investment per trade to $10.
  • Choose the expiration time of the binary option.
  • Do your analysis and apply your strategy.
  • Click “call” if your analysis shows that the price will go up or “put” if you believe that the price will go down.
  • Wait until the binary option expires.
  • Track results.
  • Repeat.

Final Thoughts

Binary options are an innovative and easy way to invest in the financial markets. Rules are simple (that’s why many traders prefer this type of trading) and there is a limited risk per trade, based on the amount you invest.

You’ll still need to conform to the well-known trading rules if you want to be successful. Build a strong strategy, calculate the amounts, manage your bank well and be smart, and you’ll increase your chances of success. A demo account is always a helpful test before jumping in with real money.

How to Start Trading Binary Options

Here is an easy guide to getting started with Binary Options for those of you who are brand new. This will get you set up and put you on the path to trading successfully. For those of you unfamiliar with Binary options, we recommend you read our overview of what they are and how they are traded.

To start trading, follow these steps.

1. Sign up for a Binary Options account with a reputable broker. If you are from the US/Canada or Australia then start trading binary options here.

Rank Broker Min. Deposit Max Returns Features Review
$50 200% + $50 CASHBACK TRADE NOWREAD REVIEW
$100 85% + CYSEC REGULATED TRADE NOWREAD REVIEW

2.Deposit your funds so you are ready to take advantage of opportunities when they arise, but do not begin trading live yet. We recommend starting with a small deposit, not more than between $200-$500 is needed but this is up to you.

3.Set up a demo account, this should be extremely easy with the broker to trade in a sandbox mode.

4.Read our binary option trading tips. This guide is a basic overview of strategy for new traders.

5.Place at least 20 trades in demo mode before making one live trade. At this stage your focus is on getting a feel for the trading platform and entering trades correctly, as well as beginning to develop your read on how the market moves and factors that influence movement.

6.Begin placing live trades, not more than $5-$10 dollars per trade. Remember the goal is not to make a million dollars with one trade, it is to systematically make money over time. You need to start small in order to trade with a clear head, and to work on your strategy without taking a huge risk at this point.

7.Contact us if you would like help with your trading or developing your strategy from this point, remember we are here for a resource to help you learn and grow as a trader. Things to keep in mind: what time of the day are you trading? What are you using to indicate a trade setup? Did you write your rules down and are you following them every time? Are you using larger size when you have more conviction on a trade? Let us know what you are doing and we will help.

This is a guide to getting started. For more advanced strategy read our posts and strategy guides, and feel free to contact us. The more you learn the higher the probability of you making a lot of money, so we recommend it.

Daniel Major

B.S. Degree in Economics and Finance. Professional day trader. Live and work in Manhattan, NY, NY.

10 thoughts on “ How to Start Trading Binary Options ”

There are two ways of learning in Life: learning by doing or learning from others. Learning by doing is certainly possible, but you will spend more money. Why? Because you have to “finance” your losses. You will have – no doubt – a string of losses, until you master the art of trading with Binary Options. Many Beginners take this route. It seems so easy.
Just open an account, fund it and start hitting the buttons. The awakening comes once the account is empty! In order to avoid this and make the journey more pleasant and easy you can use several tools and support systems: Binary Options Managed Accounts, Binary Options Trading Signals and/or a good Binary Options Education.Binary options trading is very easy means getting money online and get rich in no time it all depends on an investment,With a good strategy, a regulated broker that won’t rip and strategy,research and some knowledge on price action, support and resistance you can make very good profits it will bring hug return of profit from this you can be financial free and you wont care about your bills any more with a minimum investment of $300 you will be able to get not less than $4200 or even more if you start with a minimum investment of $500 you will be able to get not less than $7500 if you start with a minimum investment of $1000 you will be able to get not less/Than $18,000 weekly or even more if the market is very profitable. Before getting into binary options you need to have a good amount of knowledge and regulated broker feel free to contact for assistance if you want to start trading binary or info on strategy,softwares, trading or how to trade profitably via email

I’m from Nigeria and I want to start trading binary . How do I get a broker

How to Start Trading Binary Options

Binary options are quickly becoming the newest trend in consumer investing. If you’re not already familiar with binary options, the way they work is relatively simple. You can look at binary options as another way of trading on any given commodity, be it a stock, a currency, or a futures product. When you call or put (buy or sell) with a binary option, you’re entering a situation with a fixed level of risk. You will either receive a fixed amount of cash (or the value of the underlying financial instrument) or nothing; the price you pay for a win or a loss comes in the form of a spread. Since spreads on binary options are high, you do need to be consistently profitable in order to make money instead of lose money. How do you get into trading binary options?

Just as you can sign up with a broker to trade Forex or another financial instrument, you can also sign up with a broker to do options trading. A good broker will allow you to open a demo account with virtual funds to practice trading before you go live with real money. You should be able to practice indefinitely until you know what you’re doing before you risk real assets.

Before you can get started, you’re going to need a couple of things. The first thing you’ll need is a bankroll. Investing is a risky business, and with binary options you literally are betting that a certain value of a certain commodity is going to be above or below a certain level at a particular time. Since this is a bet, you need to have money you can afford to lose which you can invest. You will also need money to cover the spreads, which are more expensive than they would be with some other investing products.

The other thing you’ll need before you can trade binary options successfully is some kind of a method. Just as you wouldn’t dive into stocks, currencies, or another market without a method in place that you can use to produce consistent, reliable returns, you don’t want to trade binary options without a method either. Figure out which types of financial instruments you’re interested in trading, and then start back testing a system over historical data. Once you achieve some consistent profitability there, you can begin demo trading. Make sure you demo trade successfully for a few months before you start trading binary options live.

You also need the right mindset to trade binary options. You need to be willing to acknowledge that what you’re doing is risky and that there is no way to guarantee good results. At the same time, you cannot rely on luck to pay you consistently and profitably; if you want to trade binary options for a living, you’re going to have to turn to skill and discipline. Binary options are relatively easy to learn, but there are countless ways of trading them. So dive in and start learning all you can!

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    1st Place! Best Binary Broker 2020!
    Best Choice for Beginners — Free Education + Free Demo Acc!
    Sign-up and Get Big Bonus:

  • Binomo
    Binomo

    2nd place! Good choice!

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