How to make money with binary options?

What is a binary option

This product comes with quite a risk, but like other products with higher risk can result in high earnings. In order to trade binary options successfully, it is important to understand how they work. If you trade in binary options, you don’t specifically trade products. Instead, you estimate whether the price of a product will be higher or lower at the end of a specific time frame. This time frame is called “binary option expiration time”. At the beginning of the trade, a specific amount is determined that the trader will receive if they are right. When the contract ends and you were right, you win the predetermined amount of money.

Advantages of trading binary options for profit

Trading binary options is very easy to understand. There are only two outcomes: the price is higher or the price is lower than at the beginning of the time frame. This makes binary options a very suitable product for beginner traders. Another big advantage is that you can make money quickly. The time frame can be set according to the traders wishes, and can last several minutes, hours, or even months. Binary options that only last a minute can be traded hundreds of times a day, making daily gain possible. Furthermore, the risk and gain of the binary option is always clear. The investment that you need to make and the gain this will yield are always clear before you enter into a contract, and cannot change during the trade. This makes risk management easy.

Who is binary options trading suitable for?

Binary options are suitable for everyone who understands how they work. Since binary options are so easy to understand, it is a good product for beginners to start trading in. Binary options are also a very interesting product for experienced traders. This is because the gain of the options are very high, and day trading is possible. Because of the different time frames that can be chosen, it is a very volatile way of trading.

Is binary options trading risky?

On one hand, trading binary options is quite risky. When trading binary options, either you can win it all or lose it all. There is no midway, where you sell a product and still win back a bit of money. Trading binary options is a game of all or nothing. However, binary options are fairly easy to understand and risk management is possible. Because it is always clear what amount you will win or lose, the risk of trading in binary options can be easily managed.

How to trade binary options?

Before you start trading, you need to pick a reliable broker. To know which brokers are reliable and what characteristics they have, you should do a Binary Options Comparison among brokers. You should look for a broker that has a reliable reputation, offers bonuses and extra’s and only requires little money as a down payment. After you have picked a broker, it’s time to open an account with this broker. Determine your budget and send money to your trading account, before you can start trading binary options. Next, it is time to pick a strategy that suits your wishes.

Know the market trends

Markets are constantly changing. Big events such as recessions, war and business development have a great influence on whether the price of a share will go up or down. A weak revenue forecast can drop prices whereas innovation can stimulate a rise. To estimate whether the price of a financial product will go up or down, you should follow the daily news. Follow the world affairs and inform yourself about what these affairs can do to the stock prices.

Pick the market you want to trade

Once you have determined the markets, you can choose one to trade in. It is important to pick a market that appeals to your interests, as you might already have knowledge about this market and don’t mind following its developments. It is also important to choose a contract with the time frame of your liking. If you are planning on taking a bit more risk and trading quickly, you can choose a short term contract. On the other hand, by choosing a longer contract you can contain the risk more easily. Binary options with a long time frame are easier to predict, since you have more information to base your guess on.

Select a strike price and expiration

The next thing that you need to do is determine a strike price and an expiration time that you feel comfortable with. Do research about the course that the share took before and determine your strategy before you set a price. Find a midway between the contract’s bid and offer price. If that price is within your budget and you’re comfortable with the level of risk, it’s time to place your trade.

Place your trade

Placing your trade is an easy process. You can click on the strike price of the product that you are following and you will see a screen with the option buy or sell. Determine whether you will be placing a limit order or a market order and type in the number of contracts that you want. Confirm and place your order.

Wait for expiration, or close out your trade early

Go to the positions or order window on your brokers website to see if your order has been fulfilled. A market order is usually fulfilled right away, whereas a limit order may take a while. You can track the movement of the market until your expiration time is reached. With binary options it is also possible to close out early. If you feel like you are going to lose or the markets are in your favour, you can close out early. In this way, you can limit your losses or raise your profit.