Binary options are quite different from regular trade options. While regular options give you the right to sell or buy underlying assets at a certain price, binary options only give you a fixed return if the asset sells at a lower or higher price. The core of binary options trading is making predictions on the future price of an underlying asset. The prediction can only be for an upward or downward movement in price, even if it is by a few cents. When you pay for a binary options contract, you are agreeing to receive a percentage (usually between 65% and 81%) or lose the same percentage if your prediction is wrong.
Given that the entire outcome of the trade depends on you, the trader, you must know how to influence a win, in this case an in-the-money deal. An in the money result happens when your prediction is right, earning you a payout. Some knowledge on market trends and a few tips will help you trade better and increase your gains in binary options. The first thing you should do before making a go at binary options is learning as much as possible about the method of trading. There are many online tools that one can use to increase their knowledge of binary options. Choose a simple course or tool whose teaching guide uses plenty of visual aids.
Second, begin by opening a demo account. Most binary options brokers give access to demo accounts, which hasten the learning process for the new trader. A demo will enable you keep track of changes in the binary in real time, without risking losing money. It is a great way to learn strategies, know how the trade works and learn the best approaches to take. When you are finally confident of your demo skills, you can make a go at trading with real currency.
The demo account is largely tied to the kind of broker you use. A good broker should be able to provide a good platform in which to trade. In addition to user friendly navigation tools, they should provide customer support, helping you where you are stuck. Choose a broker who has been in the business for a while and has a proven track record. Brokers dealing in binary options tend to specialize in this method alone and so are able to provide the best instruments and terms of trade.
It will pay to understand how the market works. Do not attempt to try your hand in binary options trading just because everybody else is doing it. Take the time to study what is required, know all the rules and regulations, find out what factors are likely to affect the value of the asset and any other important detail that would have an effect on the outcome of your prediction.
Know when to enter or exit the market. This is very crucial for the person who wants to make money. Just like the stock market has seasons, this too has its good and bad timings. To get to the stage where you can correctly predict the movement of asset prices, you will need to dedicate a lot of time to learning about the market. If you are using a good broker, this will be easy as they will provide all the advice and technology needed to give you in depth information. Charts and graphs that you can interpret and a history of market performance are just some of the tools that can help you know what the best times to buy into the market are.
Take advantage of stop loss strategies. The stop loss is used widely across all financial platforms as a way of minimizing loss for investors. Each market tool has its own unique stop loss terms. Understand what the terms are for the tool you choose to trade in so you can use it to your advantage at the right time. The market you are trading in will also determine the type of trade loss used. Average markets tend to have tougher stop loss strategies than volatile ones so if you are buying a contract for one such market, you must understand perfectly well how the market operates and how to make the right timing to invoke a stop loss.
If you are new to binary options trading, you may find that you have a very low level of risk tolerance. In this case, you will need to invoke the stop loss to protect yourself from high losses. As you gain experience, you will gradually adopt strategies to minimize your risk of loss. At this stage you will find that you no longer require stop loss strategies as much as you previously did.
If possible, buy options in a market that you are somewhat familiar with. This will reduce the likelihood of making the wrong predictions as you already know the market pattern and what to expect. If you have invested in the commodities market before, you might want to consider starting your binary options trade with a contract in the commodities as opposed to one in the forex market. You are likely to have more confidence in your prediction/decision when you choose a market that you are familiar with.
Again, stick to the less volatile markets, those whose performance is rather predictable. With these markets, you will in most cases know how certain happenings in the market affect the value of the asset.
Becoming a Binary Options Broker
We have all been there, taking up something new and having a head full of questions. This can be especially frustrating when everybody around you seems to use terms you do not understand and walk about as if they know everything from A to Z. In some instances, this is harmless, even entertaining to a degree.
But, if one is a hopeful financial investor who does not understand the difference between becoming a binary options broker and a binary options trader then that could spell trouble.
For an interested individual who is hoping to earn some extra money in trading, trading to make sense from all the different terms used in the industry can be a nightmare.
Hence, in this article, we will try to introduce all the major aspects of binary options trading and especially highlight the difference between becoming a binary options broker and binary options trader.
Becoming a Binary Options Broker … or Not?
If one has just heard something about binary options trading and how profitable it can be, in all likelihood that individual has also heard terms like “becoming a binary options broker” and becoming a binary options trader”. Let us make clear that these aspects of binary options trading are vastly different and these terms are not interchangeable.
For most people looking to trade binaries becoming a binary options broker is not what they want. Instead, they wish to become binary options traders. Binary brokers are actually companies which posses a trading platform where traders then trade binary options.
The entire trading process happens online, which means that traders get to access the trading platform via a browser. They do not even have to download anything in order to start trading.
Naturally, there are plenty of business companies who have decided on becoming a binary options brokers. But considering the fact that there are some 500 binary brokers vs millions of existing and potential binary options traders, the numbers tell a poignant tale.
Nonetheless, binary brokers provide online trading platforms which offer a number of assets, usually divided into four groups – commodities, stocks, indices, and currencies – as well as various trade options and other useful trading features like the demo account.
The basic principle of trading binaries is fairly simple and is centered on a single fact – the price of the selected underlying asset can either go up or down. Traders, based on their own market observation make an educated guess what is most likely to happen. And, based on that prediction, they will either make a profit or lose the invested sum.
Naturally, not all binary brokers provide the same level of quality but opting to enter the world of binary trading with some of the well-known binary broker names like IQ Option, 24option, PlusOption, StockPair or BD Swiss is a more secure path.
Another benefit of trading binaries is the fact that location does not represent any issues as most (if not all) brokers offer a mobile trading app so traders can use the trading platform at all times.
Becoming a Binary Options Trader
Becoming a binary options traders instead of becoming a binary options broker is what most are actually aiming for. And, as procedures go, this is a fairly simple one.
A person interested in trading binaries will have to find a suitable broker and then create a username and password.
The next step is making the deposit with the selected broker. In most cases, the minimum deposit is set at $250 though, one of the most prominent brokers in the industry, IQ Option, has a $10 minimum deposit rule which makes binary options not only attractive prospect but an affordable one as well.
With those perk, another aspect which is appealing to hopeful traders around the world is the straightforward principle of binary trading, which makes it fairly easy to understand and later apply in the trading process. Still, those hoping of becoming a binary options trader need to understand that knowledge and skill are required. Which is where binary brokers come in again.
Most of the professional and respected brokers will have invested into a comprehensive Educational Materials section.
In recent years there are plenty of webinars and video tutorials as well as articles on how to become a successful binary options trader and earn hefty sums included in the educational materials.
We urge all traders, be they beginners or professionals, to constantly check this section for news and updates as that can only be a positive contributing factor to their success in the trading process.
Understanding the Difference: Becoming a Binary Options Broker vs. Trader
In making sure that interested individuals understand the difference between becoming a binary options broker and a binary options trader, it does become easier to understand the basic terms.
This, also, means that people are less likely to end up confused and deterred from getting involved with this online trading enterprise which can have a significant positive outcome in terms of additional profits and new skills learned along the way.