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How To Trade Binary Options – A Simple Guide To Binary Trading

If you are ready to explore the lucrative and profitable aspects of binary options trading, our experts at BinaryOptionsExplained.com are happy to help. Binary options are still a new but highly profitable way to trade and make a significant return on your investment in a short time. However, it is important to understand how binary options trading works in order to make the most of your investment.

Binary options – an option contract with fixed rewards

For the novice trader, we’d first like to highlight what Binary Options trading is about. It is a relatively new, risk free way of trading in stocks, currencies, gold, silver, and many other commodities, which are commonly referred to as options. This type of trading is ideal for beginners although experienced traders also use it to maximize their profits and offset any losses through traditional stock trading.

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Binary options is about predicting price movements of assets such as stocks, indices, commodities and currency pairs. When an underlying asset invested in reaches a certain value on the expiry of a trading contract which is made for a specific period, it is known as ‘in the money.’ When an asset falls below the specified value it is known as ‘out of the money.’

A minimum risk trading alternative

Binary options are purely speculation based. However, there is minimum risk involved as compared to traditional trading. You do not have to be a stock market guru to trade binary options. In addition, there are several tools that assist in making the right speculation.

One of the biggest benefits is that you can begin with a small investment of as little as $100 and still fetch significant returns. To maximize your chances of making money there are several binary options strategies you can adopt. A thorough research of an asset is essential prior to making a purchase. There are plenty of online tools to monitor the value of an asset over a period. This helps to predict the value of an asset by the time your binary options trading agreement matures.

Trading Binary Options FAQ

1. How binary options trading works

It is important to understand how binary options trading works. A trader speculates that an underlying asset such as stock, currency pair or commodities, will reach a specific value within a stipulated period of an hour, end of day, or weekly, which is known as the expiry period.

For example, you may speculate that the stock price of Coca Cola will reach $41 within one hour. You can invest in a Call Option, which is that you predict the stock will reach $41 value. Alternatively, you invest in a Put Option, which is where you speculate the Coca Cola stock price will not reach $41. If you use the Call Option and the stock price of Coca Cola reaches $41, you can generate as much as 80 to 185 percent from your investment. In addition, some brokers offer a refund of as much as 15% of your investment if you happen to speculate incorrectly.

2. What Are The Main Elements Of A Binary Option Trade

There are three main ingredients in a binary option trade. These are;

  • The Strike/Target Price
  • Expiry Time
  • Payout offer

Strike/Target Price: This is the price determined by your binary options broker and which you enter a trade. For example, if the strike price of gold per ounce is $1257 then at expiry of the contract the price of gold must be at that value in order to win this trade.

Expiry Time: This is the duration from the moment you place a trade and buy the option contract until it closes. Most brokers offer a variety of terms from as little as 60 seconds to a day, week, and even a month. Some of the most popular short term binary options are 60-second, 30-minute and 1 hour contracts.

Payout offer: This is what the binary option broker offers upfront as returns on the trade. This could be as much as 80% for a winning trade and 0% if you lose. Some brokers offer 10% to 15% on losses.

3. What are the Types Of Binary Options Trades

There are types of trading in binary options, each with its distinct characteristics.

High/Low or Call/Put

This is the simplest form of binary options trading where traders bet on whether the price of an asset will either rise or fall. If you believe the price of an underlying asset will rise over a period of time you can purchase a High or Call option. If the asset rises above the strike price at the end of the contract then you are ‘in the money’ and will get back the amount you invested plus the return percentage which is usually between 75% to 125% or more.

A Low or Put option is the opposite of a High or Call option. If you predict that the price of the underlying asset will fall below the strike price at the end of the contract then you will receive the full payout as stipulated in the option contract.

Touch/No Touch Binary Options

In a Touch option you predict whether the underlying asset’s price will reach or touch a predetermined price point. If the asset reaches the trigger price point at any time during the contract period the trade closes and you get your expected returns. If you choose the No Touch option and the price of the underlying asset reaches the trigger price point, you lose the trade.

Double Touch/Double No Touch Options

These types of trades work similar to Touch/No Touch. However, there are two price points, a high and a low between which the underlying asset’s price fluctuates. If you choose a ‘Double Touch’ trade you win if the asset touches or breaches either of the price points. In case of a ‘No Double Touch’ trade you win if the price does not reach either the high or low price points.

Boundary Options

Boundary binary option trade involves price ranges. You need to predict whether an underlying asset’s price will fall within a particular range or drift outside of the range. If you guess correctly you win or else you lose your investment. They are also known as tunnel bets or In and Out options. As compared to the other types of trades, boundary options present a higher risk of losses. However, the returns could be much higher as well, often as high as 300%.

4. How Can I Start Trading Binary Options?

Getting started with binary options trading is easy. After you choose a broker you need to set up your trading account and make a deposit in order to start trading. Most brokers have a registration process that doesn’t take more than a few minutes. Once done, you can make a deposit via one of the supported banking methods. Most brokers offer an array of options including credit/debit cards, eWallets, and wire transfers.

If you have any queries regarding the opening of an account you can always contact the broker’s support staff via live chat or email.

5. Where Can I Trade Binary Options?

Every binary options broker has an online platform through which you can trade anywhere, anytime, as long as you have access to the internet. BinaryOptionsExplained.com features a list of the best binary option brokers and platforms so you don’t have to look further than or site.

6. What Do I Do To Set Up a Binary Options Trading Account?

Our experts always recommend that every budding binary options trader start by doing a bit of research on brokers. It is important to compare the type of returns, percentage of commission on each trade, payout range – which should ideally be around 75% to 125% or more for winning trades and a rebate of around 10% to 15% on losing trades. Make sure to open a demo account to get a feel of the trading platform and its security features.

However, BinaryOptionsExplained.com has done all the hard work and research, so you can confidently pick from among our list of top binary options brokers.

The next step is to register and set up an account with your preferred broker. You will be asked for basic details including your name, birth date, country of residence, and other relevant details.

7. What Does A Typical Binary Options Trade Look Like?

Here are a few basic steps to get started with trading in a few minutes.

Choose one or more brokers from our exclusive list.

Register with the chosen trading platforms and use a preferred payment method to fund your trading account. Most brokers allow members to open account with a minimum of $100 only. Choose an asset to trade. Most brokers offer a variety of assets such as stocks, indices, commodities and currency pairs. Let’s say you pick a currency pair USD/EUR.

Decide the amount you wish to invest in the asset, which we will take as $100 as an example. The payout for a winning trade will be set by the broker, which can be as high as 90%.

The next step is to predict the price movement of the asset. Select Call/High if you feel the price of the underlying asset will rise above the strike price (which is set by the broker) or Put/Low if you predict that the price will drop below the strike price. If your prediction is correct by the time the trade closes you will get back your investment of $100 and the respective payout percentage, which is 90% in our example. That means you get back $190. The duration of the trade can be anywhere from 60-seconds to an hour or more.

8. Can I Really Make Money With Binary Trading?

There is absolutely nothing to stop you from making money with binary trading. It is all about predicting correctly from two possible outcomes. However, it isn’t just about winning one trade. You need to be consistent over the long term, which means you ought to develop a technique or strategy that works best for you.

It takes a great deal of patience and analysis to find out a strategy that works based on your trading activity. Reading price action, forex signals, pivot points, and other data can help. You may want to invest in a binary signal service that can help predict potentially profitable trades. Yes, the potential to make money is always there. But that can only happen when you learn to trade smartly.

9. Where Can I Find Help On Binary Options Trading?

You will find all the help you need right here at BinaryOptionsExplained.com. All the broker listed here on our site also allow its members to practice with demo binary trading accounts. Most brokers also offer plenty of tutorials, videos, and lessons to help you become a better trader.

10. What Is A Binary Option Strategy?

If you are new to the market you may be looking for a binary options strategy to help you make the most of your investment. The truth is there are many strategies so you need to be aware of as many as possible and then make an educated decision on when to play in the market.

The biggest advantage is you don’t need to worry about any complex calculations, in-depth statistics and analysis, and high risk stocks. Incidentally, placing options with hourly expiry periods is a good strategy.

As a beginner it may be wise not to choose an asset that is extremely volatile in the beginning. In less than half an hour you could determine the current trends and place more trades with a ‘Call’ or ‘Put’ option so that you maximize the profit potential and reduce the risk of losses.

Another strategy is the tunnel binary option where you receive a payout if the asset remains within a specified amount for a length of time during the duration of the trading agreement. This is a viable strategy to employ if you are not sure about the asset. The advantage of a tunnel is that you get paid if even you speculate incorrectly but the asset value remains steady within the tunnel.