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HomeFinance and AccountingMarket TradingHow do trade binary options successfully?

How do trade binary options successfully?

Photo by Anna Nekrashevich from Pexels

Binary options are financial products and are like no other kind of financial product. Trading in binary options is not without risk, but when handled right it can result in high gains (or high losses). Binary options have been approved by the Securities and Exchange Commission (USA) in 2008 and are therefore perfectly legal. Looking to expand your investments? Trading in binary options can pay off instantly and is certainly worth doing research about. To make it easier, you will find an explanation of how binary options work and how you can trade them, in this article.

What is a binary option?

Binary options are a fairly easy-to-understand product. To trade in binary options, you simply estimate whether the price of the option will rise or fall. If you’re correct within a certain time frame, you gain a predetermined amount. The time frame is called “binary option expiration time” and is determined by the trader. It does not matter how long this time frame is: if the price is higher or lower than at the beginning and you estimated right, you win.

How do binary options work?

Trading in binary options is very simple because there are only two options: the price is higher or lower. Because of this simple nature and the risk, trading in binary options is more similar to gambling than investing, but can certainly be very profitable. It’s very accessible and easy to understand, and therefore it is a great way to start investing as a beginner.

Trading binary options are done through a broker. On websites such as https://www.binaryoptions.com/ you can find more information about binary options brokers. This website specializes in binary options and offers a lot of beginner guides and strategies to help you get started. You can find a list of brokers, whether they are reliable or not, and the characteristics of the brokers on this website.

How do trade binary options successfully?

Firstly, it is important to choose a good strategy that fits your wishes. Trading binary options seem simple, but randomly guessing is never a good idea. Try to do some research about the current binary option trading strategies and choose one that you understand well. As a beginner, it is advisable to start with an easy and lower-risk strategy before you move on to the more difficult and profitable strategies.

The best strategy to start with is the watching strategy. With this strategy, you study the information of binary options and observe their movements before you start to invest. Study hourly, daily, weekly and monthly changes and learn how to spot the point where the options are changing course, which are the best times to invest. This is also a great strategy to learn about the best expiration dates for specific binary options and gives you a better chance at winning.

Know the market trends

Trading in binary options is a simple process, however, it is smart to pick the right strategy. The best way to estimate what the binary option will do is to know the market trends. An estimation will always be an estimation, as nobody will know for sure what will happen in the future, however, there are things you can do to make a well-estimated guess. Read the financial news, news about politics and other things that affect daily life. Developments in international relations, business and technology have a great influence on the course of a binary option.

Pick the market you want to trade

There are many different brokers who each different offer markets to trade in. With the broker NADEX for example, you can choose between the Forex, commodities, events and stock indices. Pick a market that fits with your trading plan. It also helps to pick a market that fits your personal interest. Are you interested in international relations or politics? Pick options that are affected by changes in these areas, such as currencies. Lastly, pick a market that features your desired contract time. If you’re looking for quick payouts, it’s better to pick a market that features short-term contracts rather than contracts that are weeks or months in length.

Select a strike price and expiration

If you have already researched and picked a trading option, you have probably already thought about the risk of your desired options. Pick an option that has a risk level that fits your strategy. For a beginner, it is advisable to pick a lower-risk option to get a good feel of the market, before you start trading high-risk options. Pick your strike time when the risk is the lowest.

In addition, pick an expiration time that fits your strategy. If you pick a short-term option, the payout might be quick but with a longer contract, the risk might be lower. This all depends on your preferences, the market, and important economic events.

Photo by Alesia Kozik from Pexels

Place your trade

Now it is time to start trading. Pick a striking point in the chart of the binary option and select buy or sell. It is important to indicate whether you want to place a limit order or a market order. Type in the number of contracts that you want to buy and place your order. Now you simply wait for the contract to expire or close out the trade early if you don’t want to wait anymore.

Wait for expiration, or close out your trade early

With a market order, you will see immediately if your order has been fulfilled. With limited orders, this might take a while. After your order is fulfilled, you’ll be able to track the movement of your order until it expires. The markets are unpredictable. If you feel that it is working against you and you might suffer a significant loss, you can close out early.

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