Binary Options trading has a straightforward question: will the value of assets underneath this trading be below or above a specific cost at a predetermined time?
If that is true, a considerable profit can be made with one of the most transparent and straightforward instruments to trade. But what are binary options, and what are the drawbacks and benefits of binary options?
The answers to these questions are covered on this page, and it also provides details on how to start trading binary options that include tips, strategies, and the regional differences you need to be aware of.
Top Binary Options Brokers
| Rank | FX Broker | Rating | Visit | Min. Deposit | Regulation | Review |
|---|---|---|---|---|---|---|
| 1 |  IQ Option | VISIT BROKER | $10 | CySEC | READ REVIEW |
Above, Binary Brokers’ top list can be used to find the best binary brokers to start trading.
What are Binary Options?
First things first, we need to view the function of binary options. In simple words, binary options are a subsidiary that can be traded on any market or instrument.
They are straightforward and attractive. You know the exact return you will have, whether it is a profit or a loss before the trade is made. They are usually known as ‘all or nothing’ because you don’t need a calculator or complicated math to trade.
An accurate estimate of the turning profit can be easily made by analyzing quarterly reviews, news announcements, and global trends. It will help you determine the increase or decrease in the price at a predetermined time. Thus, turning in your profits and avoiding a loss can be easy.
There is a wide range of subordinates to pick between. Binary options such as crude oil and aluminum can be traded on commodity values.
You settle for a stock cost such as Facebook and Amazon. The options for foreign exchange are also available, including all the minor and major pairs. You can also choose between the cryptocurrencies like Ethereum, Bitcoin, and Litecoin.
A Brief History of Digital Options
To start trading binary options regularly, you must have a detailed comprehension of their genesis. It’s been decades since the digital or binary option has been around.
Initially, it could only be approached by large institutions and extremely wealthy people. But later on, the US Securities and Exchange Commission allowed binary options to be traded through an exchange in 2008.
Thanks to technology and the internet, the world can now access these digital options. The demand for these digital trades will increase rapidly because it is easy to access by a knowledgeable trader, and it is pretty simple to understand their functions.
Option Types
There are several different options to select from. Some of the popular types are:
- Up/Down – the most comprehensive and straightforward binary option. Will the price rise or fall compared to the current price when the time of expiry comes?
- In/Out – the set figure will be high and low. You can then predict the change in the price, whether it will be in the range or outside the range that has been selected.
- Touch/No Touch – current price will be higher or lower than the set levels. At that point, you enter a situation where you will determine if the price will reach the level between trade and expiry. You will get the payout as soon as the price reaches the level.
- Ladder – they have similar nature as up/down trades. But the difference is that the ladder will rely upon predetermined levels instead of the current price, and these levels can be moved up or down. Typically, a significant price move is demanded by them. Even though it is substantial, both sides of the trade are generally not accessible.
Expiry Times
The expiry time is an essential component of binary options. So basically, the time for the ending of trade is known as expiry time, and it is also the time when you can determine whether you have profit or loss. These expiry times vary from 30 seconds to the whole year.
If trading during regular business hours, you might want to trade a five and 30-minute strategy for binary options. You will be able to make a high number of trades in one day if you select the binaries with an expiry time of 1 minute.
Is Trading Binary Options Legal?
People are scared of the scammers that are present in the market. Due to these scammers, binary options have a negative reputation among people. It is also legal to trade binary options, and most companies operate pretty.
In some regions like the EU, regulatory bodies have withdrawn binary options from the retail market. But it is still usable by professional traders. Some of the areas like Australia and India’s binary options are legal. Still, it is vital for the trader to select a reputable broker and to avoid scams and fraud; read the following section:
Scams and Frauds
The reputation of binary options has suffered from cybercrime and deceptive marketing. The brokers not regulated by any regulatory body trap investors by giving them the avidity of quick cash. Regulators are taking it seriously, and these frauds and scams will be eliminated soon.
Binaries are legal and honest but avoid offering instant money, using celebrities for promotion, and claiming that binary options are accessible for trading.
So the main thing about it is that you should be aware of the scams and have the required knowledge about every perspective before trading. You can also confirm whether the broker is regulated correctly by asking it in a live trading room.
Binary Options Trading Vs. CFDs Trading
Binary options and CFDs have some decisive differences between them. There is unlimited risk associated with CFDs. Moving assets have a significant price; the trade value can increase and become large for better or worse.
While the working of binary options is a little bit different, the rate of gain or loss is fixed no matter how much you invest. It doesn’t matter if the price reaches sky-high; you will be rewarded the same percentage you are entitled to, with a call option.
Similarly, if the price comes down to zero, you will lose only what you have invested. So the difference between both is that the binary option gives you fixed risk.
And if we compare forex trading with binary options, you are controlled in your profit potential.
Why Trade Binary Options?
Both pros and cons of binary options should be well-understood if you wish to have a profit. It would be best if you were assured that your risk tolerance, trading style, and capital requirement would suit binary options.
Advantages:
Binary options provide you with the right amount of attractive benefits. Some of the best advantages are as follows:
- Simplicity – the bet you put will be straightforward because you will focus on one factor and direction. There may be uptrends and downtrends in the price. The expiry time will address your concern about the end of the trade. Compared to the other markets, you require a system such as stop-loss to limit your losses.
- Fixed risk – trade gold, stock, and crude oil; you have a variety of variables to deal with, from margin and slippage to price re-quotes and news events—fewer boundaries minimize the risk.
- Trade control – you can have reasonable control from starting your trade. You will know the gain or loss at the beginning of the deal. For instance, when you trade in stock, you will not be sure the trade will achieve the entry price.
- Profit potential – the profits in binaries are much more attractive than other trading. You may get the offer of payouts of up to 90% from some brokerages. Binaries are made for you if you intend to make enormous profit potential with a single trade.
- Choice – binary will not restrict you to specific markets like stocks or cryptocurrency. Instead, it will allow you to trade instruments in all virtual markets and start trading indices, currencies, and bonds as you wish.
- Accessibility – There are always the best trading hours in binary options worldwide. Anytime at night or on the weekends, you can join the groups of enthusiast traders who want to make profits daily by a simple login. You can also look at the real-time charts for every market if you start trading 24 hours a day.
Risks:
When there are benefits to trading on binary options, some risks are also associated with it.
- Reduced trading odds – when the payouts exceed 80%, the expiry time is near the trade date. You may have to trade with the reduced payouts if you have incredibly high odds of succeeding in your trade.
- Limited trading tools – while most brokerages offer analysis capabilities and advanced charting, there is a lack of trading tools in binary options. Luckily, you can get these tools and graphs from other online sources, and the brokers are working efficiently to fill this gap.
- Price of losing – your chances are inclined towards the loss. Around every 70% profit, the loss related to similar trade would be 85%. It means you need to gain 55% to achieve break-even.
- Risk management – in contrast to the different markets, brokers make it easy for traders to enter the market by providing a trading floor with minimum accounts. It means that capital can be lost effortlessly. While the brokers of stock may allow you to open an account with just $250, trading smaller-scale parts, most binary will not permit trades of $50. Even though you have $250 in your account, only five deals not in your direction may see you sink into the red.
How Does Binary Options Trade Mechanism Work?
It is straightforward to trade for beginners by following the steps below:
Step 1 – Find a broker.
The most crucial decision for beginners is to find a perfect broker that would meet your requirements and will help to improve your trading performance. But many options are available; how do you find an ideal fit?
Cost – If you are trading daily on a high-frequency basis, the commission fee will pile on rapidly. To increase your profit, look for a broker with a straightforward fee structure. And as a reminder, different classes of assets have additional costs.
Deposit – It is vital to know the rules for the minimum deposit because some brokers may offer you trading without any deposit, and some may ask for a minimum of $50 or $100 deposit. The broker offering a minimum deposit may be ideal if you are already broke. And if you are looking for low deposits, GCI and JC are good options to trade binary.
Asset-specific – Brokers have specialization in different assets. For instance, if you are looking to trade in crude oil, a broker who is specialized in this particular asset might be helpful for you. They will offer you the knowledge you need for trading, and having a relevant newsfeed and availability of the best options will be beneficial. For example, 212 is the best possible option for trading binary stocks.
Regulation – It is essential and highly recommended to check your broker’s legitimacy before you start trading because of the scams happening in the market. All the safest are trading with IQ Options, 247 Binary Options, and Binary.com.
Platform – The platforms of binary options are where you will spend time and are the entrance to the market. Many online trading platforms are available now that will provide you with all the tools, charts, and patterns you need to decide in your best interest.
These platforms are pretty easy to use. For example, will your binary trades be based on more uncertain charts or candlesticks?
Nadex, MT4, and Keystone offer secure binary options trading. You must check reviews and compare the trading platforms thoroughly before buying them.
Reliability – Any problem occurring while trading can cost you time, and if you are regularly trading during business hours, time can cause you loss of cash. To tackle this problem, check the reliable support of the broker’s offer.
Some brokers might offer you customer support that is available 24/7 through live chats, calls, and in multiple languages. If you want customer support of top quality, 24 Option and Etrade are excellent options for binary options trading.
Trading apps – Many people like to use tablets and mobile devices for trading. However, there are many variants of the software for binary options trading.
So it will be beneficial to check on the cross-platform capabilities of the software offered by the broker. You must also check whether the required charting tools will work on Android or iOS devices. For example, IQ Option offers fantastic trading apps for binary trading.
Extras – Numerous brokers will improve the deal with some valuable additional items. Some of them may offer free courses, trading plans, and lessons. So you have to search if the courses they are offering are for free and will improve your trading experience. Some may also provide trial binary trading for free so that you can have experience before you start trading.
You can use tips, bonuses, trading signal reviews, and the best strategy. Also, the free demo accounts for the practice. Some brokers may allow you to use Paypal for binary options trading. However, be aware of the scams that offer no minimum deposit for binary options trading.
Demo accounts – It is wise to start with a demo account to get a grip on trading. With duplicate money, you can experiment with many options and assets. The demo account is the perfect place to make mistakes and learn from them before you involve your actual money, as it does not require any deposit, so you can try out different things while saving up your initial deposit.
No universal broker is perfect; it depends on your needs. Some brokers can trap you by offering you minimum trades with a few pounds, while some may require you to invest in hundreds or even thousands. Just stay away from these scammers.
Step 2 – Choose an Instrument/Market
Binaries, including indices, stocks, Forex, and commodities, can be traded in almost everything. You can bet anything, whether it is the price of natural gas or the stock price of Google. You can only get a good profit if you opt for an asset according to your understanding of that asset.
Step 3 – Decide on the Expiry Time
Being a short-term trader, you would likely be interested in 30-second, 1-minute, and 24-hour expiry times. The price movement and binary options trading volume must be balanced.
Making more trades means enormous profit potential, but making fewer yet accurate trades is better. Furthermore, having a specific time that suits your trading style would be best.
Step 4 – Decide on the Size
Size does matter in the game of binary options. The higher you invest, the greater will be the possible profit. On the other hand, remember you will put your entire investment on the line. If you have a productive system to manage your money, there is less chance of having a total loss.
Step 5 – Choose an Option
There are many alternatives for your preference, and you must be confident about your prediction. Cover all the factors that could put your investment in danger, then select the best option that will help you gain the maximum return.
Don’t select an option just because you want high rewards. It is wise to choose the options that are safe bets.
After choosing the option, check and confirm the trade. Then stay aside, relax, and wait for the payout of your trade.
Strategies
The strategies for binary options differ from trade to trade. What may be helpful in a ladder option in Forex may be futile in a range option on gold. So it would be best if you had a strategy for two reasons.
Firstly, your emotions will not interfere with your decisions for the trade. Greed, fear, and ambition lead to mistakes. A strategy will help you to focus on data and maths.
Secondly, you can only repeat your decisions for a profitable trade with the help of a strategy. Once you discover the trick of binary options, you can easily make consistent profits by repeating the process.
Steps of Building a Trade Strategy
Binary trading options have two essential elements, creating a signal, and the second relates to money management and deciding how much to trade. How would you determine these two steps?
Step 1 – Creating a Signal
The direction of the price can be observed through the signal, and you can make predictions price. News and technical analysis are two ways to make signals.
Charts, Patterns, and Indicators – You can predict the price movement by identifying the patterns in your graph. You can use line chats, other candlesticks, and Heiken-Ashi. Successful traders will consistently build a strategy upon their findings.
You can then add indicators in your strategy, which would help you make the trade decisions and choose the best option. These technical tools don’t have any specific value, but they are proven to help analyze the market, and you need to make sure that your broker provides you with these tools.
The great thing about binary is that you use numerous patterns, typical indicators, and tools to predict the movement of binary options in the future. You can start using:
- Resistance and support levels
- Price action
- MACD indicators
- Stochastic oscillators
- Trends
- Mirrors
- Babypips
- Options close expiry
You can see the patterns and charts pages for further details.
News – You can rely on the news while trading binary options without technical indicators. News is beneficial because it is easy to use and understand. Company announcements, such as the release of financial reports, need to be considered.
It is recommended to look for news covering all the global markets. Small announcements can either raise the price or lower it.
You need to gather news sources and be in the range of your references to trade your binary options before the market joins you. You can also enjoy a TV or radio in the background and browse online. The most valuable sources of news for trading are:
- CNBC
- Bloomberg
- Yahoo Finance
- Financial Times
- Business Insider
Step 2 – How Much You Should Your Budget Be?
Keeping it simple at the start of your trading experience is in your best interest. Trade the same amount repeatedly until you experience trying new experiments. Following are three strategies for both experienced and beginners:
Martingale Strategy – This strategy aims to recover the losses as soon as possible. To do so, you need to trade in more significant amounts right after the deals that went into decline. You will specify the amount to be traded each time; let’s say it is $250.
And if you lose the bet on $250, you would bet $500 in the next bet, and if you win that bet, you will recover more than what you lost in the previous bet, rather than trying to achieve break-even.
The drawback of this strategy is that if you keep losing the bets, you will lose a lot of money quickly. So try using this strategy only if you are experienced enough to predict the trade accurately.
Percentage Strategy – Binary options traders and other traders mostly use the percentage-based system. The main idea of this approach is to specify a percentage you are willing to risk.
For instance, if you have $10,000 in your account and wish your risk percentage is 2%, then a trade of $200 can be traded on a single deal. Commonly, the risk margin is between 1-2%.
But if your risk profile is high and you get consistent results, you might increase this margin to 5%. The most helpful fact about this approach is that you cannot lose more than you can afford. Due to this reason, it is an ideal approach for beginners.
Straddle Approach – This approach is best suited for frequent changes in the market and before a vital news announcement breaks. Traders having any experience can utilize this approach. You can avoid the call and put option using this strategy, and both can be put on a specified instrument.
The aim should be to utilize put when there is a rise in the instrument’s value, keeping in mind that it will fall soon. And once it starts falling, put a call option on it, and expect it to return to normal. You can also put on the rising value of assets and place a call on the low-price assets.
This way, it is possible that any of these assets will be profitable. And if the market is volatile, this approach could help you make significant profits. It is best suited for the 60 seconds binary options trading strategy and covers the expiry time of one day.
Bots & Algorithmic Trading
You may want an automated system to control your trading when you have discovered a consistent profit strategy. These robots need pre-programmed signals and algorithms to function.
The bots will do all the work on your behalf, which includes trading options. The benefit of these bots is that they can perform more trades than you can do manually, which will, in return, increase the profit potential. They are also able to trade in different markets and assets.
It is highly recommended to check the reviews of auto-trading by a robot your broker offers. Many brokers will allow you to build the program for the robot quickly. The usage of your entry points that depend on RSI/MFI patterns, Bollinger bands, and moving averages is also available.
However, it is essential to stay tuned even if you set up a system and run, and you cannot run autopilot for binary trading options. You have to be present on the platform in case of any problem. You need to be careful because unpredictable changes in the market and technical crashes can cause an issue.
Timing
Many of the strategies of binary options fail to examine time variables. These strategies need specific time options to perform better. Five minutes of the plan for binary options is considered to be a reasonable option.
Similarly, you might consider the 15-minute strategy for binary options according to your needs. So, make sure you take time into account for whichever approach you wish to use.
“Summing-Up” Strategy
You can only succeed in binary options if you choose the strategy that suits your trading style. So, examine the instruments you will be trading and then use the productive systems of money management, use patterns and charts to make telling indicators. Additionally, the use of news announcements can also be beneficial.
If you first apply a gap, new fence, hedging, or another binary strategy, why not use the practice account to try them for the first time? Demo accounts will enable you to find out any issue before you decide to invest your own money.
You can see our strategies page for further guidance.
Tips
Education – Binary options trading 101; create your interest in educational resources. Benjamin Franklin states,’ You can get the best interest by investing in knowledge.‘ Another fact about the success of top traders is that they never stop learning. It would be best if you changed your strategies along with the change in the market.
Some of the resources mentioned below may be useful for that purpose:
- Books & eBooks – you can get all the information about day trading binary options from the sets of books and eBooks available. You can also use the experience and knowledge of experts to enhance your performance. The best thing about a book is that you can learn at your desired pace. ‘Trading Binary For Dummies’ by Joe Duarte is a book that has made trading binary options relatively easy.
- Video tutorials & seminars – they are pretty comfortable and engaging. You can find a lot of video tutorials that will help you start trading. Workshops allow you to get the answers to your questions, and the basics of trading binary options are explained in them. Furthermore, some brokers offer weekly seminars to inform you about market developments.
- PDFs & instruction guides – a breakdown of steps is available for you to follow and apply. The best thing about PDFs and instruction guides is that they can be downloaded for free and are available for iOS, Android, and Windows. The most popular PDF for binary options trading is ‘Abe Cofnas PDF.’
- Forums & chat rooms – you can talk to multiple experts in a chat room to generate ideas about binary options trading. The recommendation from these experts will be helpful while investing your money. An option to swap live screen charts is also available to experience other tactics and methods of binary trading.
- Newsletters & blogs – you can use these to be updated for the developments and changes in the market. You can also hear about the competition of binary options.
- Copy-trading – when binary trading tools are combined with social trading platforms/networks, it is known as copy trading. You can analyze the strategies of experienced traders by following them and using their way of trading. Check the copy trading reviews carefully before signing up.
The above tools carry a critical role in the training of binary options trading. Utilize the free examples and trading videos as much as possible because they will help you have the upper hand over the market.
Trading Journals – At present, no university teaches binary options. So, clarification on why the choice didn’t work can be challenging to find. Keeping a log report of your trades, including price and date, can help resolve this problem.
You can use either an Excel document or any other software. This record can also help file tax returns at the end of the year. And in binary options, this journal is considered the best-kept secret.
Psychology – It isn’t just about the right strategy for binary options trading. You can make huge mistakes if you cannot control your emotions. Robert Arnott said, ‘It is rarely profitable if you find something comfortably.‘ You can be distracted by greed and fear when the pressure kicks in.
Always stick to your strategy and accept that losses are part of trading. You must have faith if your plans are based on careful technical analysis and accurate math. You will lose your profits when you show inconsistency in your emotions.
Regional Differences
Regulation – Regulatory bodies are gradually working on the orders as binary options are gaining popularity worldwide. That means different limitations and rules can govern the markets and the area where you trade.
UK (United Kingdom):
If you are trading binary options regularly during business hours in the UK, a license is required from the UK gambling commission. You will have extra protection if FCA regulates the broker you choose. But beware, some brokerages only have registration with FCA but are controlled by them.
Trading regulations have become complicated since Brexit. Rules around binaries were enforced in Europe through MiFID II guidelines, but the UK may not seem to implement the instructions now. The EU does not pressure the UK to reclassify binaries as financial instruments.
US (United States):
The choice of broker for the citizens of the US is limited to just two. CBOE and Nadex are the only two options with a license. Luckily, both these firms are massive that offer competitive prices and a variety of assets to trade.
Rest of the World:
ASIC, Israel regulates Australia, and CySec regulates Cyprus, while DIFC governs Dubai and the rest of UAE for the trading of binary options.
Day trading of binary options can also be started in Pakistan, India, Canada, Malaysia, South Africa, New Zealand, Kenya, Indonesia, Nigeria, Vietnam, and the Philippines. Each country has its requirements and regulatory bodies.
So, research the broker you want to sign up with if you’re going to be safe.
Taxes
We consider taxes as a form of regional distinction. Binary options are often viewed as gambling, like in the UK. It has some benefits to it, and one of these benefits is that HMRC will not charge any tax on the money you make through binary options.
You are liable to pay tax if you consider yourself a full-time trader, and binaries are your only source of income. You need to have a clarification even if you are still exempt.
The tax regulations are different outside the UK. For instance, the tax obligations in Germany and Japan are very other. So, before you start trading, cover every detail about the tax obligations.
Can Trading Binary Options Make You Rich?
You must refer to this page and other sources to guide yourself if you trade binary options for a professional job. Can you become rich by trading binary options? Yes, there is no doubt about it. And it is evidenced by a lot of millionaires. But to reach that level, you need to cover everything mentioned above.
FAQ:
Are binary options legal?
Yes, but there are variations in regional regulations.
In Australia and India, they are legal.
The US has Nadex for binaries, which is legal.
Though the EU withdraws binaries for a retail investor, its trade is possible, which is again legal by professional traders, and there are specific criteria for being a ‘professional.’
Can we trade on weekends?
Yes, trades at weekends can be made in two ways. Firstly, in some parts of the world, forex markets remain open on weekends, and you can trade on Forex during these times.
Secondly, synthetic markets are also present with a broker like (binary.com), but traders should keep that these options don’t possess any underlying market. They are made only for those who are down to trade anything.
Are binary options banned in Europe?
ESMA, the European regulator, withdraws binaries for retail traders. There is no regulation for brokers, but binaries are still offered to EU clients.
EU traders can nominate themselves as professional traders, and they can also trade some synthetic markets. The product functions the same as the binary options, but they are said to be slightly different.
Do binary options work on MT4 or MT5?
There are no brokers that offer MetaTrader integration for binaries. But technical analysis can be performed in MT4, and separate trading platforms can be used to place trades.
Can you use binary options on cryptocurrency?
Yes, all the leading brokers offer binaries on cryptocurrencies like Ethereum, Bitcoin, and Litecoin. Traders will not have ownership of the cryptocurrency; they will be estimating the price. There isn’t any need for a crypto account or crypto wallet.
