Binary options are one of the modern investment techniques in which traders bet on the price movement of various underlying assets like Commodities like gold and silver, Forex Currency pairs, stocks of various companies and market indices, etc. It was introduced to the retail investors in the year 2008 after its approval by the United States Securities and Exchange Commission. Beginners prefer to start their trading career with binary options due to easier accessibility, very low minimum investment, limited risk and high profitability. Trading binary options could be very simple if you chose a reliable and licensed broker. But you should be cautious about the scam brokers prevailing in the binary options industry who allure newbies by promising unrealistic payouts and various get-rich-quick schemes.
If you understand the market trends of the underlying assets, making money in binary options can be fairly simple. What are binary options? Binary options are also called digital options which require the traders to speculate the price movement of an underlying asset and if the prediction is correct, they can gain up to 80% returns on their investment. If the underlying asset reaches the strike price before expiry time, then your prediction is correct and the option is said to expire “In the money”. But if the asset does not reach the strike price before expiry time, then your prediction goes wrong and the option expires “Out of the money”. There are various techniques which can help you to make accurate predictions and to make money with binary options trading as explained below in this article.
Social trading or Copy trading is a simple way for beginners without any market knowledge to get started with binary options market. Many brokers maintain their social trading community in which novice investors can copy and execute the successful trades of other experienced investors. Once you register in a social trading network, you can monitor, follow and interact with other experienced traders in the community. Traders will be ranked based on their performance using various factors like success ratio, trading frequency, investment amount, highest profits etc. You can choose which traders to follow based on your trading style and after you gain some confidence in the strategy of any particular trader, you can automatically copy and execute his/her trades according to your own terms and conditions. You can also allocate a particular amount of funds from your binary options trading account for this purpose. This technique is really helpful for beginners who are new to the market and not aware of technical indicators or various trading strategies.
Using Technical Indicators to make accurate market predictions:
Technical indicators can be really helpful to analyse the past market trends based on which you will be able to predict future price movements accurately. There are plenty of technical indicators used by experienced traders but most common ones are Relative Strength Index (RSI), MACD, Bollinger bands, Moving Averages, Stochastic oscillator, Commodity Channel Index (CCI), candlestick charts, etc. You can make use of price action charts to determine how your underlying asset is likely to move in the future and place your bets based on that. Using technical indicators can help improve the success ratio of binary options traders and boost their profits.
Making Use of a Signalling Service:
As a beginner, you may have very little or no knowledge about various trading strategies or technical indicators used to accurately predict the price movement of an asset within certain time frame. Hence, you can seek the assistance of trusted signal providers to increase your chances of success. A Binary Options Signal refers to the trading instructions sent by a signalling service to the subscriber which can be used to execute a binary options trade. These instructions will generally include the direction of the trade (whether to choose a “Puts” or “Call” option), Strike price, Expiry time and the underlying asset to choose. There are several paid signalling services where you can subscribe and receive trading alerts on your mobile or email. Some services offer an intuitive signal interface with warnings, sound alerts and countdowns to indicate when to execute your trade. Finding a reliable signal provider can help you become a successful binary options trader. You can find out some recommended binary options signal providers by searching online and figure out which one will match your requirements.
This is one of the techniques to make money with binary options especially if you are trading commodities and stocks as underlying assets. You should do a thorough research and market analysis about the particular asset on which you are going to bet. For instance, if you are going to place the bet on a particular stock, you should analyse important information about the company including their earnings reports, market news, financial statements, product releases, press reports etc. This can provide you with a better idea of how the price movement of that particular stock is likely to be in future based on which you choose either a “Put” or “Call” option. Similarly, if you wish to bet on the price movement of a currency pair like EUR/USD or GBP/USD, you should read all the market news relating to those assets. By doing through fundamental analysis and clearly evaluating the history of a particular asset, you can make accurate predictions of its price movement.
Support and Resistance Analysis Trading Strategy:
Another simple technique to gain success with binary options as a novice investor is based on reversal patterns formed at support and resistance levels. It is a very simple price action strategy which can be used by both beginners and experienced traders due to its simplicity and compatibility with other strategies. Usually, the support lines indicate the price level below which an underlying asset has not plunged for certain time period. Based on the market experts, all the assets follow a certain market trend and whenever an asset reaches the support line, it is expected to surge back in reverse direction. For example, consider the stock of a company XYZ which has been moving between $30 and $80 in the last 1 year then $30 indicates your support line. In the same manner, the price level above which the asset has not soared for a specific time period is the resistance level of that asset. In our previous example, $80 indicates the resistance line of the particular stock. If you learn how to plot the support and resistance levels on a price-action chart, you can calculate the price movement of the assets more accurately and gain more profits with binary options.
One of the important benefits of trading binary options is that you know both the risks and rewards in advance. Due to its limited risk and easier accessibility, many traders wish to invest in binary options. By choosing a reliable broker and following aforementioned techniques, you can definitely become a successful binary options trader.