How to Trade Binary Options Successfully
Binary options are a new way of trading that offer huge upside, while being very simple to understand and hence ideal for beginners. In this article, we give an overview of how you too can be a successful trader thanks to these instruments and which binary options brokers you should be trading with and which ones to avoid!
Binary options are the new kid on the block when it comes to trading financial markets. The only decision that is required when you trade one is choosing whether you believe an asset will finish ‘up’ or ‘down’ at a certain time. The often confusing process of setting stop losses or take profits to prevent yourself losing a crippling amount is therefore not needed for trading binary options.
Because of this ease of use, they are the ideal gateway for those looking to get started in trading for the first time. However, many professional traders also make their livelihood in this domain as well, since they can offer returns as well as profit profiles that are impossible to get with standard instruments.
Thanks to their structure, the risk management portion is taken care of in itself. Unlike a standard trade, in a binary option you know beforehand the maximum that you can lose; you can tailor this to fit your risk appetite. You also know exactly how much you stand to win on each trade, and typically, you can expect 70-85% returns per trade.
Tip 1: For maximum profitability – it is crucial to get the best terms possible on your returns; this in turn means that you have to carefully select the binary options broker who is offering you the best deal for your money.
Despite their simplicity, being really successful at binary options still needs many of the same skills as being successful at trading in general. You need to be the right mix of fearless, conservative, emotionally controlled and well-prepared. You will also need to have a very good understanding of the underlying asset that you wish to trade.
It is therefore very important that you choose your asset according to what you are most comfortable with. If you are a forex man, stick with forex. If stocks are your thing, play binaries on indices. If gold, oil, or silver inflame your passion, then stay with commodities.
Tip 2: For maximum profitability – it is crucial that your broker provides the assets that suit you: whether it’s forex, single stocks, indices, or commodities, ensure that your underlying of choice is available to trade on. Being an big winner in one asset is better than being a loser in many!
If you want to make consistent profits, it is necessary to have a good understanding of both fundamental analysis and technical analysis. Ideally, your trading platform will cater for both – it will have an economic calendar of events, perhaps even analysis of the outcomes; as well as great charting facilities. It is worth noting though that to some extent you can specialise in a timeframe where one of these is more important than the other. For example, some brokers offer very short term options (from 1 to 5 minute expiries), and some others offer very long ones, up to 3 months in length. With the former, technical analysis is much more important since fundamental analysis is not going to predict with any accuracy where the price of the asset will be in a minute’s time; with the latter, it’s all about the fundamentals.
Tip 3: For maximum profitability – choose the timeframe that suits you. Are you a technical analyst at heart? Go short term. Believe in fundamental rigour? Pick week or longer options. And if you’re a bit of both, the playing field is wide open. Make sure your broker can cater for your timeframe – not every broker offers short term options, for example!
An often overlooked factor that is important for being a successful trader is to have a good trading platform to work with. We’ve touched on this already in terms of charting and calendar facilities; if your broker provides them, that’s fantastic! If not, make sure that you use appropriate third party software that gives you the best tools to work with. Some features that your charting platform must have are:
• Can switch instantly between timeframes, whether 1 minute bars or daily bars
• Easily viewable OHLC (Open, High, Low, Close) data for each bar
• Ability to zoom in and out and look back in history easily
• Built in suite of technical indicators, including at least moving averages (preferably also Fibonacci retracement, RSI, oscillators – and more indicators is even better)
As well as charting, the trading platform itself must be responsive and latency-free. Imagine that you are trading a 1 minute binary and your broker’s platform takes 10 seconds to process your order. This is not even a hypothetical – some brokers are actually that bad!
Tip 4: For maximum profitability – you should look for fast execution, with no slippage and no bouncebacks on your trades. Again, getting the right broker here is paramount.
It is inevitable that there will be instances where a trade is not confirmed, or an error in the system prevents your trade from getting filled. In these cases, you are at the mercy of your broker and their support. It is of utmost importance therefore to choose a broker with a great support system; you will want 24 hour phone lines, an email address, and perhaps a chat system too.
There’s also a little secret in how some of the best traders are profitable. The secret is that they get cashbacks from their brokers.
Cashbacks are deals where the broker, after you have traded a certain volume, will give you a percentage of your deposit back – for free. This percentage can vary from 0% with the stingiest brokers to 100% and above. Now imagine the difference in your bottom line at the end of the month if you deposited $1000 with a broker who was offering 0% vs one who was offering 100%. That’s right: with the same trading performance on both, one broker is going to leave you $1000 richer.
Tip 5: For maximum profitability – make sure you sign up to a broker offering a great cashback deal. A good range to aim for is 50-100%. Read the details on how to unlock the cashback carefully, so that you know how much volume is required to get the money.
Finally, the most important ingredient in being a successful binary options trader is – as with everything else in life – experience. So what are you waiting for? Get trading and gaining experience right now!
Below is a list of the top 10 best binary options brokers in the industry, as compiled by BinaryOptionsExplained.com. These are trusted brokers, and are rated based on payouts, bonuses, trading platform features and customer service. Majority of the brokers have a global reach covering markets in USA, Canada, UK, Australia, Middle East and Europe.
We have personally used each of these brokers and have ensured that their deposit options, signup processes and security features are safe, easy-to-use and lucrative for traders of all kinds, and from all around the globe.