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Binary Options Trading in South Africa
As the world becomes increasingly more plugged in to the internet, and the cost of living continues to rise globally, it’s important to diversify your funds to ensure future financial success.Many individuals, citing this need, have begun to seek out different investments throughout South Africa to invest their rand, discovering Binary Options Trading and involvement with these type of investments.
Options trading refers to the engagement of stock exchanges through forex funds, or a compilation of various stocks into one bundle. In South Africa, online option trading is the most economically viable way to trade the forex, often done through binary options trading.Utilizing websites such as share trading, traders in South Africa can access their various binary options and conduct their bets with relative ease.
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What is Binary Options Trading?
Binary option trading refers to the process of estimating the calculated price of a stock, and then obtaining that estimate after it has reached that. Often, those trading are done through a binary trading platform. While most stock options trading involves the purchasing of an asset and then waiting on its value to increase, Binary Options trading is different. It is a form of Forex trading, and is often done on the open market. Investors can normally work through specific brokerages, who trade their Binary Options for them. This allows for many investors to sit back and collect their returns. However you can see this isn’t always the case.
How Binary Options It Works
If Investor A predicts that the price of a good will rise a significant amount, while another predicts that it will fall, the gain/loss is determined by what the investor chooses as the correct price. By betting R2000 that it will go down by a set amount, Investor B bets that it will go up by the same amount. In terms of that 2000 rand, Investor A made a bid, while Investor B made a call.
Once that price is achieved, or unachieved, by that set amount of time, the amount bet by each investor is given in regards to what is lost/gained in a turnover. If Investor B was correct, then Investor A will lost their bet/investment and it will be given to Investor B. 15% of the turnover from each Binary Options trade will be deducted towards the firm that helped facilitate the trade.
Trading in South Africa
By using the online platform, share trading in south africa, users are able to stay up to date with their trades. Being provided with a live graphic of market trends, traders can monitor their prices and stay up-to-date with current pressing details. This is indeed a huge advantage for the traders who trade using binary options. While in the past couple decades it was required to.
Trusted binary options brokers
This opportunity enables South Africans to trade online, plugging them into the network of global traders all growing their own investments from the comfort of their own home. As our country is thrust into the digital age, many South Africans are capitalizing on this event with relative ease.
With the turbulence of binary options trading, immediate knowledge of your situation is required, and in the importance of smart-phones in our daily-life, current up-to-date monitoring is now easier than ever.
Unfortunately, often enough, traders who do not have access to the right information or resources find themselves having trouble finding success within the market. Not only this, their opportunities are limited geographically, making trading online the best choice for many residents in South Africa.
What is Binary Options Trading?
Binary Options trading refers to a monetary trading option in which you either get a fixed pay-off, or nothing at all, after placing a bid on what you believe the price of an investment will be at a specific time.
You could purchase into the price of sliver for an investment of 100, hoping that it will rise above a price of 500 by a certain period. If it is reached by this time, you have your investment returned. Often online trading offers additional benefits to your success as well.
Best Binary Options Brokers 2021:
First approved in 2008 by the United States, it has long found a home online in which specific brokerages work with investors to increase their revenue potential.
It works through a rapidly fluctuating price system, in which a single option may open at forty-two rand one day and increase exponentially to fifty depending on the market.
However similar, trading online in binary options is different. Done through brokerages, many listed at the bottom of this page,
Why Should I choose Binary Options Trading?
Here, we hope to enable your route to financial success with comprehensible financial resources and tools. With access to what we provide, we will guide you through the best route that fits not only your schedule, but your personal goals.
How do I get started?
In the expansive world of binary options trading, we recognize help might be needed and our support staff is here to help you with any questions you may have through our email.
Each represent their own excellent starting point in your journey. Whether that’s through the trading of Oil binary options, or gold, it’s possible for any trader to have a fully diversified portfolio with binary options trading.
For the smart investor, research is key, and the availability of our own research works tremendously well with the links listed below.
More Binary Options Terms.
Fixed Return Option – A FRO is another term for asset-or-nothing, in which when the trade you place is successful that a specific amount of money is returned to the trader. Sometimes traders can promise up to 80% returns, however a return rate of at least 50% is more likely.
Controlled-Risk Trading – Controlled-Risk trading is the process of brokerages or other managers helping an investor manage their funds with a lack of risk for overall loss. In Binary Options trading, this is a typical method of management.
Theoretical Asset Pricing – Theoretical Asset Pricing, also known as Capital Asset Pricing, is the process of using binary options to determine the future price of an asset or security. Utilizing its past price history, it is a model to determine the risk or expected returns of various assets.
Over-The Counter (OTC) – OTC trading, or off-exchange trading, is the process of two parties directly trading with-in each other without the use of an exchange. An exchange, such as the traditional stock exchange, is normally regulated by a government body while the OTC one is not. Binary Options is one of the most common forms of OTC trading.
With the rapidly increasing and decreasing prices of binary options trading, it’s important to consider a few select strategies in order to maximize your profit.
These strategies have been developed over time by both brokerages, and individual traders, specifically to help out the average investor.
5 Step Binary Options Trading Guide
The most crucial aspect of learning how to trade binary options is the knowledge behind it, for many investors lack the overall information needed to make successful trades.
By knowing more about the subject you want to invest in, the history of its prices and whether or not it is at a current peak price, or the volume of the asset you wish to trade in online, you can increase your chance of success.
Vital to the success of your portfolio, research will also decrease the risk of your exposure to scam-brokerages.
2. Choosing the right trade
Specific assets trading do not move as quickly as others, while others drastically change in prices throughout the day and focus more on the overall cash-value. These types of trades are known as asset-or-nothing or cash-or-nothing.
Another helpful tip is to note when each global market opens, and conduct your trades when this happens.
3. Conducting your trading
With real-time monitoring through the online platform investors are able to track the asset in which you are investing, often letting you set bids or quotes on the asset you are trading.
If you have purchased oil and believe it will rise $5 in price by the end of the day, the website or brokerage you use will facilitate your trade and take its fee from the trade. Generally this is under twenty-percent.
By doing multiple trades per day, which increases the chance you could make money, you could quickly earn a profit.
4. Managing your funds and Diversifying
As you grow your online binary options portfolio, the need to branch out your funds will arise. This means, instead of just trading in one asset, that you begin to trade in multiple.
Keeping on track of your research will allow you to be sure that you are conducting careful trading. The only way to make a large profit in binary options is through a large amount of trading, which can only be built through growing your existing assets.
As well, it takes a good understanding of money management to succeed in binary options trading.
5. Keep Your Emotions In Check
The key form of binary options trading is to keep track of your emotions, as the price of your asset may decrease significantly below the goal you have set, but this may soon quickly come back to its initial standing.
This often rapid decrease or increase can cause many unweary traders to let go of their investments at a lower price than what they had purchased them for initially, when in reality that price fluctuation could’ve stabilized sooner than they thought.
Binary Options Trading- How to Know when to “Put” or “Call”
After you have bought your first binary options and are ready to begin trading, you will have to make one choice in each trade.In the formula of binary options, you will have to either place a ‘Put’ on your binary option, or a ‘call’ on your trade for your desired outcome.
This choice is pivotal to your success, for if you are correct, then you will see a return from your trading platform or brokerage. If you are unsuccessful however, this unfortunately may not be the case.
For this reason, investors and traders across South Africa study statistics and other data to gain a better understanding of the market. With their extensive research, they have released strategies and other methods of trading that our partners share, and we would like to discuss in more detail.
Due to the rapid fluctuations of the global financial markets, each binary option that is trading on the market is changing in price every second through changes in pips.
When you are deciding to place a put on your Binary Options trade, you are making the assumption that the asset you are trading will go up in price.
The highest form of return through Binary Options, is through specific options pricing. This means you will choose the exact price it will rise to, or a price that is close to it. Typically this form of trading goes against another investor, and whoever is closest to the correct number wins the trade.
While with putting you do not always have to set the specific price you predict your asset to grow to, often times placing a ‘put’ on your binary options simply means you just predict it will go up. Trading platforms that offer this form of trade typically offer a lowered return rate, but with a steadier rate of success.
In order to increase your success, binary options should be placed on ‘Put’ if they are increasingly volatile. If Asset X has a pip graph that rises more often than lowering, notice at what times it is the highest.
Once you have a good understanding of the trading behavior of your asset, you will be able to use this along with other observations to boost your percentage.
To place your binary options trade on ‘call’, you are predicting that the price of it will lower.
It is similar to putting, with only the opposite intention.
Binary Options trading on the market will go through ‘dips’ in which their value is drastically lowered from a steadier price in the past. These dips often repeat themselves during certain times, and can be watched out for. For this reason, if a dip is noticed, it is important to place your option on ‘Call’.
This choice is influenced dramatically by real-world events that may correlate with the value of the asset your Binary Option is trading, and a close eye on the financial markets can reduce the risk of turmoil to your portfolio.
Making your choice
With your research, you will notice trends within your binary option of interest and will have to take note of each. A trader who understands the mathematics behind trading, along with his asset’s trading history, will notice that his risk percentage will be lowered tremendously.
With either call or put options, you will see the same rate of return. For this reason it is up to you to use the strategies we list along with our counterparts, and research your decisions to call or put before you make your first trades.
Breaking down Binary Options
Every year, binary options trading liberate South Africans financially. Although at first glance binary options trading may seem complicated, in application the process of Forex investing is relatively easy and a growing trend that ties South Africa into the global financial market.
How Do Binary Options Trading Work in South Africa
A trader buys into the forex with a base currency, and then sells it at the price they wish as a quote currency – this differentiates the market and influences the price of the forex.
The price is ticked off in measured intervals known as pips, otherwise traded as units. By quoting the select pip you wish to sell or buy your forex, you predict the potential gain. Pushing it down into such tiny intervals allows for a maximized control over the often turbulent pricing of the Forex market.
The investor who predicted that the pip would rise to a specific amount, would place a ‘bid’ on the price, while the investor who wished to sell the forex at another pip would place a ‘call’.
Ultimately, as stated above, the most accurate bid or call takes the bet on the trade with generally 15% to 20% of the trade’s profit going to the firm that helped facilitate the transaction in the first place.
Effectively when you trade a Forex binary options you are buying into the price of one currency against another, as each trade is paired up with another identical trade for the opposite notion.
With the investment of a certain currency, for example your own funds, it is matched against another volatile raising or lowering of price. This enables the Rand to be bought against the USD, Euro, or any global currency.
In short, you are bidding your price against something while another trader is doing the opposite, and whoever is closer to achieving this goal is able to receive the profit while the other receives the loss.
Binary Options Trading Advantages
Placing trades, once limited to the JSE, can be done through the online website that is functioning as your brokerage, or the brokerage yourself, on their own platforms that they provide.
These websites digitally give the tools of the average investor on the JSE, and provide a steady stream of up-to-date information that wouldn’t be found outside of the digitally world.
By bidding on theoretical trading, you are effectively working ahead of the market to achieve profit you desire. You are also competing on a global market against currencies of potential higher or lower value than yours, exposing your overall value to a different level of fluctuation.
With the price of the Forex often depending on multiple currencies, this pushes the pip up and down depending on that options position in the market. By trading the Rand against the USD for instance, which has a higher monetary value, an investor would be able to double their money.
Other investments, such as trading traditional stocks on the JSE, are conducted on a much slower basis. They are limited to specific areas of interest and do not offer the robust diversity that binary options trading does.
Binary options and Forex trading FAQs
It is important for any trader wishing to begin investment in binary options to conduct extensive research before beginning. This is why we’re here to help you.
How do I get started?
After registering your account with one of the websites we’ve provided, along with giving the information required to be entered, any trader is able to begin investing. Accounts are generally free on most websites, making it easy for anyone to sign up.
By linking your account with your bank account, you can place a small amount of funds in your investment account to be redistributed into investments. With some websites your account can begin investing with as little as a 12 rand deposit, but generally deposits range from six hundred to over one thousand rand.
What can I trade in?
With binary option investing, you can bid on the price of nearly anything. Many investors see the most success in the industrial field.
Others bid on the price of specific companies to even the potential real estate value of buildings.
Open twelve hours a day, the market operates and places its trades from 22 GMT to 22 GMT.
How do I place a trade?
By using the websites we provide, we make it easy for you to navigate the trading process and conduct your business.
What are the dangers of binary options trading?
With any investment comes risk, however dangers can be significantly minimized by using the right tools and choosing the right investments. Due to the gambling nature of the independent market, it’s possible to lose a large part of your investment if you are not careful enough.
How can I protect after these dangers?
By choosing the correct brokerage, or the one that fits the most to you, you can feel assured that a general rule of ethics comes into place. They protect for future financial disasters, as well as direct your binary options investments on a day-to-day basis.
Generally it is hard for your investment to lose a significant amount of money, as the brokerage you’ve chosen will normally not let you lose more money than what was initially placed into the account. This means you can feel confident to trade on the market, without the risk of losing it all if you operate independently. This functions for many websites available for binary options trading as well.
What if I want to go independent?
Many South African binary options traders, working through online websites such ourselves, work as their own brokerages and use the websites support staff as their guide for any potential problem. By sending a question, or concern you may have, your problem could potentially be addressed.
What is a pip?
A pip is how traders track and measure the price movement of an asset, broken down into a micro interval. Typically, a pip is worth one unit of the currency it is trading in.
How can my small investment grow?
After investing, you are able to place trades in intervals. If you bid that the price of gold will rise $10 from $40, and you find that you are correct, you will gain the $10 that you bid. Over time your success in doing so will grow your funds to whatever amount you wish, and can be diversify to include multiple trades at one time.
How can I find the support team?
By using our own email listed, as well as the email and live-chats in the websites we have available, access to the support that you need is possible.
Binary Options Strategy – How to make money
Binary options trading is new and attractive way of making money on the Internet. It is defined as fast and simple trades with market assets such as gold, silver or Google stocks.
Simple binary options platform
In order to be profitable with binary trading you just need to predict if the price of selected asset will rise or decline in the next few minutes or even seconds. The accuracy of prediction can be increased using our strategies.
Our trading strategies
Traders can make thousands of dollars crowns with very low risk in just a few hours. You will find the latest and best binary options strategies trade on our website.
Are you ready to make your computer your only employer and make a living by trading from the comfort of your home?
Our binary options trading systems are categorized by the expiration date.
To pull off our strategies, you will need the services of a forex rates program, and we suggest that you use the well known MT4 platform. You should try out a number of indicators so you can find the one that can offer you the best strength parameters. Once you have tested MT4 and found a broker, you need to follow some basic rules and strategies. Watch out for the strength and performance of your chosen currencies during middle of the US and UK market sessions. Once you have identified the currency pair, cryptocurrency or an asset you wish to trade, you need to can now start a trade. If your pair is GBP and Euro with GBP as the strongest, then you can call for a ‘PUT’ trade for EUR/GBP, and choose long expiry time. One of the most accurate binary options strategy is this one: Binary Options Strategy that Works.
Recent binary options strategy published
Trading ZAR currency, is it worth it?
„Three Ducks“ Trading Strategy
EUR/USD Price Action Strategy for Binary Options
The 1-2-3 Strategy
Pinocchio Binary Options Trading Strategy
Binary Option Trading using the ADX and EMA Cross System
Urban Towers Strategy – Awesome %
Binary Options Strategy – The Zig-Zag Indicator
There’s this common thinking that binary options trading is only best for the experienced traders around. Keep in mind that it’s one activity that’s open for everyone, at any skill level. In fact, you can even find specific trading strategies that can work for beginners. The idea here is to predict the movement of the prices, and take advantage of the movements. To take advantage of the best binary options strategy for beginners, we recommend to have a look at this one: A trading strategy for beginners.
Strategy for trading binary options
Binary option trade strategies are usually based on use of indicators. People often do not know how these work, therefore you can find the indicators description on our website.
Trading based on indicators may not be always a good idea. It is recommended to employ also technical analysis. This Binary options website contains lots of useful resources for technical analysis.
Easy binary options strategy
Thank you for visiting our website about binary options strategies that can work for beginners. For a start, you should know that binary options is never a ‘get rich quick scheme’. On the contrary, investing and participating in binary options trading requires patience and time, and can be a test of one’s commitment and skills. But the good news is that it can be a source of decent income on a regular basis and if done right, you can even quit your day job and concentrate on trading. But without the right set of strategies, any investing decisions will end up badly. If you want to be successful in this field, we suggest that you read our guide below and with every single strategy itself. There are surely some easy binary options strategy. One of the easiest ones is the Moving Average Strategy.
Binary options brokers
Not all strategies work with every broker on the market. There’s many, many types of binary options, such as high/low options, touch/no touch trading, boundary and so on. Every broker offers different types of trading, just as it is with expiration times.
Some brokers offer expiration times as short as 30 seconds. Other start with 5 minutes. That’s a reason why not every strategy can be traded with certain brokers. Underneath every strategy on this website, you will find a recommended broker the strategy works with. Good luck!
Binary option trade risk
Binary option trade is not a simple matter! Even if you have the best available strategy some things may go wrong. Therefore do not risk more money than you can afford to lose! However we will always recommend only the best and proven strategies.
Every strategy needs to be tested on a demo account first. It is very wise to use a binary demo account to try, whether the strategy works or not. If it doesn’t work for you, try a different one. There’s many options of getting a demo account, but not all demo accounts are the same. Check our option brokers comparsion table to find a broker who offers free demo practice account.
How to Succeed with Binary Options Trading 2020
Welcome to the largest expert guide to binary options and binary trading online. BinaryOptions.net has educated traders globally since 2020 and all our articles are written by professionals who make a living in the finance industry and online trading. We have close to a thousand articles and reviews to guide you to be a more profitable trader in 2020 no matter what your current experience level is. If you wish to discuss trading or brokers with other traders, we also have the world’s largest forum with over 20 000 members and lots of daily activity. Read on to get started trading today!
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What is a Binary Option and How Do You Make Money?
A binary option is a fast and extremely simple financial instrument which allows investors to speculate on whether the price of an asset will go up or down in the future, for example the stock price of Google, the price of Bitcoin, the USD/GBP exchange rate, or the price of gold. The time span can be as little as 60 seconds, making it possible to trade hundreds of times per day across any global market.
Before you place a trade you know exactly how much you stand to gain if your prediction is correct, usually 70-95% – if you invest $100 you will receive a credit of $170 – $195 on a successful trade. This makes risk management and trading decisions much more simple. The outcome is always a Yes or No answer – you either win it all or you lose it all – hence it being a “binary” option. The risk and reward is known in advance and this structured payoff is one of the attractions.
Exchange traded binaries are also now available, meaning traders are not trading against the broker.
To get started trading you first need a regulated broker account (or licensed). Pick one from the recommended brokers list, where only brokers that have shown themselves to be trustworthy are included. The top broker has been selected as the best choice for most traders.
If you are completely new to binary options you can open a demo account with most brokers, to try out their platform and see what it’s like to trade before you deposit real money.
Introduction Video – How to Trade Binary Options
These videos will introduce you to the concept of binary options and how trading works. If you want to know even more details, please read this whole page and follow the links to all the more in-depth articles. Binary trading does not have to be complicated, but as with any topic you can educate yourself to be an expert and perfect your skills.
The most common type of binary option is the simple “Up/Down” trade. There are however, different types of option. The one common factor, is that the outcome will have a “binary” result (Yes or No). Here are some of the types available:
- Up/Down or High/Low – The basic and most common binary option. Will a price finish higher or lower than the current price a the time of expiry.
- In/Out, Range or Boundary – This option sets a “high” figure and “low” figure. Traders predict whether the price will finish within, or outside, of these levels (or ‘boundaries’).
- Touch/No Touch – These have set levels, higher or lower than the current price. The trader has to predict whether the actual price will ‘touch’ those levels at any point between the time of the trade an expiry.
Note with a touch option, that the trade can close before the expiry time – if the price level is touched before the option expires, then the “Touch” option will payout immediately, regardless of whether the price moves away from the touch level afterwards.
- Ladder – These options behave like a normal Up/Down trade, but rather than using the current strike price, the ladder will have preset price levels (‘laddered’ progressively up or down).These can often be some way from the current strike price.As these options generally need a significant price move, payouts will often go beyond 100% – but both sides of the trade may not be available.
How to Trade – Step by Step Guide
Below is a step by step guide to placing a binary trade:
- Choose a broker – Use our broker reviews and comparison tools to find the best binary trading site for you.
- Select the asset or market to trade – Assets lists are huge, and cover Commodities, Stocks, Cryptocurrency, Forex or Indices. The price of oil, or the Apple stock price, for example.
- Select the expiry time – Options can expire anywhere between 30 seconds up to a year.
- Set the size of the trade – Remember 100% of the investment is at risk so consider the trade amount carefully.
- Click Call / Put or Buy / Sell – Will the asset value rise or fall? Some broker label buttons differently.
- Check and confirm the trade – Many brokers give traders a chance to ensure the details are correct before confirming the trade.
Choose a Broker
Options fraud has been a significant problem in the past. Fraudulent and unlicensed operators exploited binary options as a new exotic derivative. These firms are thankfully disappearing as regulators have finally begun to act, but traders still need to look for regulated brokers.
Note! Don’t EVER trade with a broker or use a service that’s on our blacklist and scams page, stick with the ones we recommend here on the site. Here are some shortcuts to pages that can help you determine which broker is right for you:
- Compare all brokers – if you want to compare the features and offers of all recommended brokers.
- Bonuses and Offers – if you want to make sure you get extra money to trade with, or other promotions and offers.
- Low minimum deposit brokers – if you want to trade for real without having to deposit large sums of money.
- Demo Accounts – if you want to try a trading platform “for real” without depositing money at all.
- Halal Brokers – if you are one of the growing number of Muslim traders.
The number and diversity of assets you can trade varies from broker to broker. Most brokers provide options on popular assets such as major forex pairs including the EUR/USD, USD/JPY and GBP/USD, as well as major stock indices such as the FTSE, S&P 500 or Dow Jones Industrial. Commodities including gold, silver, oil are also generally offered.
Individual stocks and equities are also tradable through many binary brokers. Not every stock will be available though, but generally you can choose from about 25 to 100 popular stocks, such as Google and Apple. These lists are growing all the time as demand dictates.
The asset lists are always listed clearly on every trading platform, and most brokers make their full asset lists available on their website. This information is also available within our reviews, including currency pairs.
The expiry time is the point at which a trade is closed and settled. The only exception is where a ‘Touch’ option has hit a preset level prior to expiry. The expiry for any given trade can range from 30 seconds, up to a year. While binaries initially started with very short expiries, demand has ensured there is now a broad range of expiry times available. Some brokers even give traders the flexibility to set their own specific expiry time.
Expiries are generally grouped into three categories:
- Short Term / Turbo – These are normally classed as any expiry under 5 minutes
- Normal – These would range from 5 minutes, up to ‘end of day’ expiries which expire when the local market for that asset closes.
- Long term – Any expiry beyond the end of the day would be considered long term. The longest expiry might be 12 months.
While slow to react to binary options initially, regulators around the world are now starting to regulate the industry and make their presence felt. The major regulators currently include:
- Financial Conduct Authority (FCA) – UK regulator
- Cyprus Securities and Exchange Commission (CySec) – Cyprus Regulator, often ‘passported’ throughout the EU, under MiFID
- Commodity Futures Trading Commission (CFTC) – US regulator
- Australian Securities and Investments Commission (ASIC)
There are also regulators operating in Malta and the Isle of Man. Many other authorities are now taking a keen a interest in binaries specifically, notably in Europe where domestic regulators are keen to bolster the CySec regulation.
Unregulated brokers still operate, and while some are trustworthy, a lack of regulation is a clear warning sign for potential new customers.
Recently, ESMA (European Securities and Markets Authority) moved to ban the sale and marketing of binary options in the EU. The ban however, only applies to brokers regulated in the EU. This leaves traders two choices to keep trading: Firstly, they can trade with an unregulated firm – this is extremely high risk and not advisable. Some unregulated firms are responsible and honest, but many are not.
The second choice is to use a firm regulated by bodies outside of the EU. ASIC in Australia are a strong regulator – but they will not be implementing a ban. This means ASIC regulated firms can still accept EU traders. See our broker lists for regulated or trusted brokers in your region.
There is also a third option. Traders who register as ‘professional’ are exempt from the new ban. The ban is only designed to protect ‘retail’ investors. A professional trader can continue trading at EU regulated brokers such as IQ Option. To be classed as professional, an account holder must meet two of these three criteria:
- Open 10 or more trades per quarter, of €150 or more.
- Have assets of €500,000 or more
- Have worked for two years in a financial firm and have experience of financial products.
Strategies and Guides
We have a lot of detailed guides and strategy articles for both general education and specialized trading techniques. Below are a few to get you started if you want to learn the basic before you start trading. From Martingale to Rainbow, you can find plenty more on the strategy page.
Signals and Other Services
For further reading on signals and reviews of different services go to the signals page.
If you are totally new to the trading scene then watch this great video by Professor Shiller of Yale University who introduces the main ideas of options:
Education for beginners:
Types of Trades
How to Set Up a Trade
The ability to trade the different types of binary options can be achieved by understanding certain concepts such as strike price or price barrier, settlement, and expiration date. All trades have dates at which they expire.
When the trade expires, the behaviour of the price action according to the type selected will determine if it’s in profit (in the money) or in a loss position (out-of-the-money). In addition, the price targets are key levels that the trader sets as benchmarks to determine outcomes. We will see the application of price targets when we explain the different types.
There are three types of trades. Each of these has different variations. These are:
Let us take them one after the other.
Also called the Up/Down binary trade, the essence is to predict if the market price of the asset will end up higher or lower than the strike price (the selected target price) before the expiration. If the trader expects the price to go up (the “Up” or “High” trade), he purchases a call option. If he expects the price to head downwards (“Low” or “Down”), he purchases a put option. Expiry times can be as low as 5 minutes.
Please note: some brokers classify Up/Down as a different types, where a trader purchases a call option if he expects the price to rise beyond the current price, or purchases a put option if he expects the price to fall below current prices. You may see this as a Rise/Fall type on some trading platforms.
The In/Out type, also called the “tunnel trade” or the “boundary trade”, is used to trade price consolidations (“in”) and breakouts (“out”). How does it work? First, the trader sets two price targets to form a price range. He then purchases an option to predict if the price will stay within the price range/tunnel until expiration (In) or if the price will breakout of the price range in either direction (Out).
The best way to use the tunnel binaries is to use the pivot points of the asset. If you are familiar with pivot points in forex, then you should be able to trade this type.
This type is predicated on the price action touching a price barrier or not. A “Touch” option is a type where the trader purchases a contract that will deliver profit if the market price of the asset purchased touches the set target price at least once before expiry. If the price action does not touch the price target (the strike price) before expiry, the trade will end up as a loss.
A “No Touch” is the exact opposite of the Touch. Here you are betting on the price action of the underlying asset not touching the strike price before the expiration.
There are variations of this type where we have the Double Touch and Double No Touch. Here the trader can set two price targets and purchase a contract that bets on the price touching both targets before expiration (Double Touch) or not touching both targets before expiration (Double No Touch). Normally you would only employ the Double Touch trade when there is intense market volatility and prices are expected to take out several price levels.
Some brokers offer all three types, while others offer two, and there are those that offer only one variety. In addition, some brokers also put restrictions on how expiration dates are set. In order to get the best of the different types, traders are advised to shop around for brokers who will give them maximum flexibility in terms of types and expiration times that can be set.
Trading via your mobile has been made very easy as all major brokers provide fully developed mobile trading apps. Most trading platforms have been designed with mobile device users in mind. So the mobile version will be very similar, if not the same, as the full web version on the traditional websites.
Brokers will cater for both iOS and Android devices, and produce versions for each. Downloads are quick, and traders can sign up via the mobile site as well. Our reviews contain more detail about each brokers mobile app, but most are fully aware that this is a growing area of trading. Traders want to react immediately to news events and market updates, so brokers provide the tools for clients to trade wherever they are.
What Does Binary Options Mean?
“Binary options” means, put very simply, a trade where the outcome is a ‘binary’ Yes/No answer. These options pay a fixed amount if they win (known as “in the money”), but the entire investment is lost, if the binary trade loses. So, in short, they are a form of fixed return financial options.
How Does a Stock Trade Work?
Steps to trade a stock via a binary option;
- Select the stock or equity.
- Identify the desired expiry time (The time the option will end).
- Enter the size of the trade or investment
- Decide if the value will rise or fall and place a put or call
The steps above will be the same at every single broker. More layers of complexity can be added, but when trading equities the simple Up/Down trade type remains the most popular.
Put and Call Options
Call and Put are simply the terms given to buying or selling an option. If a trader thinks the underlying price will go up in value, they can open a call. But where they expect the price to go down, they can place a put trade.
Different trading platforms label their trading buttons different, some even switch between Buy/Sell and Call/Put. Others drop the phrases put and call altogether. Almost every trading platform will make it absolutely clear which direction a trader is opening an option in.
Are Binary Options a Scam?
As a financial investment tool they in themselves not a scam, but there are brokers, trading robots and signal providers that are untrustworthy and dishonest.
The point is not to write off the concept of binary options, based solely on a handful of dishonest brokers. The image of these financial instruments has suffered as a result of these operators, but regulators are slowly starting to prosecute and fine the offenders and the industry is being cleaned up. Our forum is a great place to raise awareness of any wrongdoing.
These simple checks can help anyone avoid the scams:
- Marketing promising huge returns. This is clear warning sign. Binaries are a high risk / high reward tool – they are not a “make money online” scheme and should not be sold as such. Operators making such claims are very likely to be untrustworthy.
- Know the broker. Some operators will ‘funnel’ new customer to a broker they partner with, so the person has no idea who their account is with. A trader should know the broker they are going to trade with! These funnels often fall into the “get rich quick” marketing discussed earlier.
- Cold Calls. Professional brokers will not make cold calls – they do not market themselves in that way. Cold calls will often be from unregulated brokers interested only in getting an initial deposit. Proceed extremely carefully if joining a company that got in contact this way. This would include email contact as well – any form of contact out of the blue.
- Terms and Conditions. When taking a bonus or offer, read the full terms and conditions. Some will include locking in an initial deposit (in addition to the bonus funds) until a high volume of trades have been made. The first deposit is the trader’s cash – legitimate brokers would not claim it as theirs before any trading. Some brokers also offer the option of cancelling a bonus if it does not fit the needs of the trader.
- Do not let anyone trade for you. Avoid allowing any “account manager” to trade for you. There is a clear conflict of interest, but these employees of the broker will encourage traders to make large deposits, and take greater risks . Traders should not let anyone trade on their behalf.
Which Are The Best Trading Strategies?
Binary trading strategies are unique to each trade. We have a strategy section, and there are ideas that traders can experiment with. Technical analysis is of use to some traders, combined with charts, indicators and price action research. Money management is essential to ensure risk management is applied to all trading. Different styles will suit different traders and strategies will also evolve and change.
There is no single “best” strategy. Traders need to ask questions of their investing aims and risk appetite and then learn what works for them.
Are Binary Options Gambling?
This will depend entirely on the habits of the trader. With no strategy or research, then any short term investment is going to win or lose based only on luck. Conversely, a trader making a well researched trade will ensure they have done all they can to avoid relying on good fortune.
Binary options can be used to gamble, but they can also be used to make trades based on value and expected profits. So the answer to the question will come down to the trader.
Advantages of Binary Trading
The main benefit of binaries is the clarity of risk and reward and the structure of the trade.
Minimal Financial Risk
If you have traded forex or its more volatile cousins, crude oil or spot metals such as gold or silver, you will have probably learnt one thing: these markets carry a lot of risk and it is very easy to be blown off the market. Things like leverage and margin, news events, slippages and price re-quotes, etc can all affect a trade negatively. The situation is different in binary options trading. There is no leverage to contend with, and phenomena such as slippage and price re-quotes have no effect on binary option trade outcomes. This reduces the risk in binary option trading to the barest minimum.
The binary options market allows traders to trade financial instruments spread across the currency and commodity markets as well as indices and bonds. This flexibility is unparalleled, and gives traders with the knowledge of how to trade these markets, a one-stop shop to trade all these instruments.
A binary trade outcome is based on just one parameter: direction. The trader is essentially betting on whether a financial asset will end up in a particular direction. In addition, the trader is at liberty to determine when the trade ends, by setting an expiry date. This gives a trade that initially started badly the opportunity to end well. This is not the case with other markets. For example, control of losses can only be achieved using a stop loss. Otherwise, a trader has to endure a drawdown if a trade takes an adverse turn in order to give it room to turn profitable. The simple point being made here is that in binary options, the trader has less to worry about than if he were to trade other markets.
Greater Control of Trades
Traders have better control of trades in binaries. For example, if a trader wants to buy a contract, he knows in advance, what he stands to gain and what he will lose if the trade is out-of-the-money. This is not the case with other markets. For example, when a trader sets a pending order in the forex market to trade a high-impact news event, there is no assurance that his trade will be filled at the entry price or that a losing trade will be closed out at the exit stop loss.
The payouts per trade are usually higher in binaries than with other forms of trading. Some brokers offer payouts of up to 80% on a trade. This is achievable without jeopardising the account. In other markets, such payouts can only occur if a trader disregards all rules of money management and exposes a large amount of trading capital to the market, hoping for one big payout (which never occurs in most cases).
In order to trade the highly volatile forex or commodities markets, a trader has to have a reasonable amount of money as trading capital. For instance, trading gold, a commodity with an intra-day volatility of up to 10,000 pips in times of high volatility, requires trading capital in tens of thousands of dollars. However, binary options has much lower entry requirements, as some brokers allow people to start trading with as low as $10.
Disadvantages of Binary Trading
Reduced Trading Odds for Sure-Banker Trades
The payouts for binary options trades are drastically reduced when the odds for that trade succeeding are very high. While it is true that some trades offer as much as 85% payouts per trade, such high payouts are possible only when a trade is made with the expiry date set at some distance away from the date of the trade. Of course in such situations, the trades are more unpredictable.
Lack of Good Trading Tools
Some brokers do not offer truly helpful trading tools such as charts and features for technical analysis to their clients. Experienced traders can get around this by sourcing for these tools elsewhere; inexperienced traders who are new to the market are not as fortunate. This is changing for the better though, as operators mature and become aware of the need for these tools to attract traders.
Limitations on Risk Management
Unlike in forex where traders can get accounts that allow them to trade mini- and micro-lots on small account sizes, many binary option brokers set a trading floor; minimum amounts which a trader can trade in the market. This makes it easier to lose too much capital when trading binaries. As an illustration, a forex broker may allow you to open an account with $200 and trade micro-lots, which allows a trader to expose only acceptable amounts of his capital to the market. However, you will be hard put finding many binary brokers that will allow you to trade below $50, even with a $200 account. In this situation, four losing trades will blow the account.
Cost of Losing Trades
Unlike in other markets where the risk/reward ratio can be controlled and set to give an edge to winning trades, the odds of binary options tilt the risk-reward ratio in favour of losing trades.
When trading a market like the forex or commodities market, it is possible to close a trade with minimal losses and open another profitable one, if a repeat analysis of the trade reveals the first trade to have been a mistake. Where binaries are traded on an exchange, this is mitigated however.
Spot Forex vs Binary Trading
These are two different alternatives, traded with two different psychologies, but both can make sense as investment tools. One is more TIME centric and the other is more PRICE centric. They both work in time/price but the focus you will find from one to the other is an interesting split. Spot forex traders might overlook time as a factor in their trading which is a very very big mistake. The successful binary trader has a more balanced view of time/price, which simply makes him a more well rounded trader. Binaries by their nature force one to exit a position within a given time frame win or lose which instills a greater focus on discipline and risk management. In forex trading this lack of discipline is the #1 cause for failure to most traders as they will simply hold losing positions for longer periods of time and cut winning positions in shorter periods of time. In binary options that is not possible as time expires your trade ends win or lose. Below are some examples of how this works.
Above is a trade made on the EUR/USD buying in an under 10 minute window of price and time. As a binary trader this focus will naturally make you better than the below example, where a spot forex trader who focuses on price while ignoring the time element ends up in trouble. This psychology of being able to focus on limits and the dual axis will aid you in becoming a better trader overall.
The very advantage of spot trading is its very same failure – the expansion of profits exponentially from 1 point in price. This is to say that if you enter a position that you believe will increase in value and the price does not increase yet accelerates to the downside, the normal tendency for most spot traders is to wait it out or worse add to the losing positions as they figure it will come back. The acceleration in time to the opposite desired direction causes most spot traders to be trapped in unfavourable positions, all because they do not plan time into their reasoning, and this leads to a complete lack of trading discipline.
The nature of binary options force one to have a more complete mindset of trading off both Y = Price Range and X = Time Range as limits are applied. They will simply make you a better overall trader from the start. Conversely on the flip side, they by their nature require a greater win rate as each bet means a 70-90% gain vs a 100% loss. So your win rate needs to be on average 54%-58% to break even. This imbalance causes many traders to overtrade or revenge trade which is just as bad as holding/adding to losing positions as a spot forex trader. To successfully trade you need to practice money management and emotional control.
In conclusion, when starting out as a trader, binaries might offer a better foundation to learn trading. The simple reasoning is that the focus on TIME/PRICE combined is like looking both ways when crossing the street. The average spot forex trader only looks at price, which means he is only looking in one direction before crossing the street. Learning to trade taking both time and price into consideration should aid in making one a much overall trader.
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