Binary option trading sounds to most like a scam. Just hearing the word binary options immediately makes you think of the many scams where you purchase or use a binary option trading robot to read the signals, trade for you and make thousands of dollars for you on auto pilot. Yes, you should run for the hills on that score BUT trading binary options in itself is nothing more than trading on the stock market.
What Is Binary Option trading?
Binary options have an expiration time, a premium and a strike price like you would get with traditional options.
Binary options is actually a much simpler method to trade online where the trader chooses the ‘premium’ amount for the option. The profit you gain when making a correct call at the expiration time, is usually fixed and not determined by how far the market moves beyond the strike price.
Since this profit amount is fixed, binary options are also known as “all-or-nothing’ options. In other words: You either gain the fixed profit amount on a correct prediction or you gain nothing.
Binary Option Trading – How Does It Work In Practice
In the binary notation there are only two values: Zero and One. Binary option trading similarly only have two options: High and Low. You will mostly trade on forex. So you choose the market you want to trade on and then you can set the time frame in which you want to trade. I prefer 2 or 5 minute periods although you can opt for even shorter expiry times.
It is really fast trading and thus very risky. The aim is to predict if the price of the stock will be higher or lower after the time period you chose. You start by setting the amount you would like to trade. Each market will have a different percentage of profit it will pay out.
So if your prediction was correct, you are awarded the assigned percentage of the amount you chose to trade with. If not, you lose that amount. In other words: The profit percentage for the market is set on 87% and I placed $10 on the option. If my prediction is correct, I gain $8.7 and if my prediction is incorrect, I lose the $10 I have decided to trade with.
You have many tools to your disposal to assist in your prediction. It is therefore helpful to know a bit about trading signals before you try your hand at it.
Can You Make Money With Binary Options?
Yes, would be my short answer.
I wanted to make some money online and came across binary options. So I researched some good binary option brokers to use, learned only one strategy and played for a day or two on a practice account. (not real money) When I was happy that I got the strategy nailed down, I started trading with real money but I only deposited $20. Some brokers require a much higher minimum though.
Long story short: I made over $200 the first day! So I thought: Wow! I can do with $200 a day. Well, I pretty much lost it all again and more only a few weeks later.
For you to be able to make consistent money from binary options trading, you will need to invest a bit of money and take some time to learn how to read the signals, practice a lot before you start trading, get familiar with the different markets and their trends, find your strategy and stick to what is working for you. It is also “easier” to read the trends on longer expiry times.
What are Bulls And Bears?
I am sure you will hear a lot about the bulls and the bears when trading online or reading up about it.
When the market trend is up, it is referred to as a bull market and when prices fall and the market trend is down, it is referred to as a bear market.
There is this constant battle between the bears and the bulls so to speak. Sometimes it feels as exciting to me as watching a football match. When the bulls are winning you see the spiky patterns like a bull’s horns and for the bears the downward valleys are seen as the bear’s claws.
The Problem With Binary Option Trading
To make a decent amount of money through Binary Options Trading, you will either need to do a lot of trades which means watching the markets the whole day or you need to put a good amount of money into a sure trade. Emotions play a big role and doubt makes method for a lot of bad decisions as well.
Many a beginner opt not to learn all they can about the markets; since it can be overwhelming. Sitting in front of the computer the whole day trying to make a buck is sometimes also not an option. That is why trading robots is so lucrative. Imagine a robot that automatically trades for you and accurately reading the signals with a high probability of making you money while you sleep.
You start thinking: ‘Well. I have a 50/50 chance of getting this right and those odds sounds good. So people start trading playing a guessing game or apply gambling rules to it. This does not work. You will forfeit your hard-earned cash.
You also need to consider the times the market opens and closes because it is very difficult to trade when the market is quiet. Depending on where you find yourself in the world; good trading hours could be awkward times of the day. This is yet another reason why Binary Option Trading robots are so lucrative. But do they work?
Do Binary Option Trading Robots Work?
Usually when something sounds too good to be true, it is. If robots worked then making money would be as simple as signing up with a broker sporting one of these robots, then setup the robot and you have money in the bank 24/7. I know many wants to believe it is true and so do I. That is why I tried a couple of these robots.
In my experience, I will stay clear of binary option trading robots.
Somehow people have the mentality of making money fast online. I do not know if it is a mindset others instill in us but there simply is no quick method of making a consistent income online overnight.
What Are The Best Binary Option Trading Brokers?
Some popular brokers are IQ Options, 24Options and eToro.
I have mainly traded with IQ Options and 24Options. Nowadays I am not trading online anymore; since I found it a bit stressful, me not being so good at analyzing the markets and not making money consistently. Those are not the only reasons. The main reason I quit was because I found a better and method more sustainable method of making money online.
Who Is Binary Option Trading For?
I can tell you it is not for someone just starting out with online trading. It looks very simple with only two option: Low or High, but if you think that gives you a decent chance of making money online quickly, I would urge you to think again.
Yes, it is much simpler to trade and quite fun as well, but you will need some knowledge.
Binary Options Strategy
There are many indicators and strategies that can increase your chances drastically in reading the markets correctly. But keep in mind: Each market has its own ‘personality’ and behavior. They are not the same.
For that reason: What works for one person does not necessarily work for someone else. For applying a strategy, it is important to understand why it may work, which market that strategy was applied to and what the time was.
There are of course basic principles and rules that apply to all markets.
If there is enough interest, I will let you in on some strategies I had the most success with. Keeping things simple and not trying to apply all the strategies at once, is the best method to go.
The fact that you can make money with Binary Option Trading is not to say that it is easy. Relying on luck will only get you so far.
It is risky to do binary option trading if you do not have the knowledge. Making money consistently is not that easy either. If you are willing to learn and you get comfortable with some markets and their ‘personality’, I am sure you can make some money.
There are lots of scams related to Binary Options Trading that you will need to watch out for.
If you are not in the stock market business, you may end up spending a lot of time watching markets, investing small amounts at a time and end up simply trying to break even for the day.
Exchanging time for money will probably force you to keep on working for life OR you can earn passive income.
It is easy to do but requires hard work, patience and time. The positive is: You can work from anywhere, anyone can do it and you can earn limitless income – the only ingredient needed is YOU.