In this guide:
What are binary options?
Some people would say that binary options are financial instruments that allow you to make large profits from small market movements. Other people would say that they are a way to bet money on the stock market and other financial markets. The truth is a little bit of both, binary options are a financial instrument and are regulated as such. There are a few jurisdictions such as Isle of Man that governs binary options as gambling.
Binary options allow you to speculate on the future market movements of an underlying asset. I would not call it gambling, but it is not investing either. I think the best way to describe it is by using the word speculating. A way to quickly earn or lose a lot of money.
Scam brokers have plagued the binary option industry. This has given binary options a bad reputation. This is undeserved. Binary options trading is honest provided you choose to trade with a reputable broker.
How to trade with binary options?
Trading with binary options is easy. Doing so skillfully is a lot harder. You can learn more about how to become a successful trader further down in the article. To trade with binary options, you must first open an account with a binary options broker such as IQ option, HighLow or Binary.com. Once you have an account, you will need to deposit money to that account. You can do this in a number of different ways. The easiest way to do so is by depositing money using your VISA or Mastercard. Other methods include the use of different e-wallets and through direct deposit.
Once the money is in your account you can start to trade. Start by navigating to the options that are based on the asset you want to trade with. On that page, you will usually find a number of different options with different maturities. Maturities can range in length from a few seconds to over a month.
Once you have decided what type of option you want to buy you have to decide whether you think the underlying asset will increase or decrease in value. If you think the asset will go up in value then you should by a call (up) option. If you think the value will go down then you should buy a put (down) option. Decide how much money you want to “invest” in the option and click the buy button.
Once you have bought the option, there is nothing more for you to do. All you can do is to wait and see if the option matures in the money or not. You can not sell a binary option once you have bought it. Some brokers will allow you to close the position early. How much money you get when doing this depends on how likely the option is to mature in the money. The more likely the option is to mature in the money the more money you will offered if you close your position early.
Binary option brokers
Binary options can only be traded through binary options brokers. You can not buy or sell binary options through your regular stockbroker. Binary options brokers act as the underwriters of the options they sell. You buy the option from them. They are not traded on any exchange. Different brokers will offer different options. Options in different brokers will have slightly different terms and how much money you can earn from a binary option will differ between different brokers.
The fact that the broker act as an underwriter means that there is no third party involved in the transaction.The transaction is strictly between you and the broker. The broker receives all the money that you pay when you buy an option. They make a profit if the option matures outside the money. If the option matures in the money then the broker will have to pay you and they will lose money. All binary options are designed to give the broker an edge to make money. All option underwriter underwrites the option to make money. You will need to choose which options to buy skillfully to make money. You will lose money if you buy random options.
There are a number of good binary options brokers on the market. There are also a number of bad ones that you should avoid. Examples of good options include IQ option, HighLow and binary.com. Examples of brokers you should avoid include Banc de binary, Option Rally, And trader XP
I recommend that you use a review site (preferably several) to find out if a broker is good before you register with the broker.
Learning to trade
It is very important that you learn how to trade before you start buying and selling binary options. Allow it to take some time. Do not rush. If you start trading before you are ready you are almost guaranteed to lose money. 70-90% of all traders who start trading with binary options lose money. The main reason they do this is that they start trading before they know how to do so successfully. If you learn how to trade successfully before you start trading you will have a good chance to earn money.
How do you learn how to trade without trading? There are several ways to do this. The first thing you should do is to read everything you can find about binary options.
The second thing you should do is to use a trade simulator to try different trading strategies and see how well they work. A trade simulator is a software that allows you to make simulated trades using virtual money. The software will enable you to keep track of your trades and will allow you to see if you are earning or losing virtual money. A very common type of trade simulator is the demo accounts that many binary options brokers provide you with. Using the demo account provided by the broker you want to trade with can be a great way to learn how to trade and how that particular trading platform works.
You should try different trading strategies until you have developed a system that works well for you. Do not start trading using real money until you are able to consistently earn money when you trade using your demo account.