What is binary trading? Does it really work?

11 min read

All you need to know about binary trading: focus on binary options, types and operation; binary trading techniques, related risks and gains. Examples and tips to make real money with binary options and not waste profit opportunities.

Nowadays, online trading has become available to everyone, as everyone has understood its profit potential. However, trading is not a trivial matter, as much effort is needed, a lot of study and trying to treasure the experience of others every day, of those who can boast the title of professional traders.

However, somewhere we must begin, but it is not necessary to plunge headlong into a new and unknown world, risking wrong positions and investments that could lead the trader apprentice to inexorable losses. Without a doubt, a good starting point is represented by binary trading: very simple of its kind, easy to understand, with average winning guarantees.

Here, we want to deepen the discussion on binary options, defining them, identifying the risks and the merits and at the same time, indicating the strategies to be able to make money with this technique.

What is binary trading?

The binary trading allows strong gains through the online buying and selling shares.

Binary trading is a method used by many traders, apprentices, and professionals, as it allows a simplified use and a very high gain, but also the skills and the risks are proportional. Binary options are very successful among trader apprentices, as this trading method can also be used by those who do not know the whole spectrum of the trading universe, but who wish to approach this practice; it goes without saying that currency markets and commodities are much more challenging for a fast-trading trader, so binary options seem to be the best alternative. But are they all roses? Read on.

The simplicity of binary trading is often preferred even by professional traders.

Binary trading consists of buying binary options, also known as digital options. Binary options are contracts that can be purchased in alternative markets, managed by brokers (properly called binary options brokers).

In reality, it is not a question of actual purchases, but of financial operations, linked to the assets; therefore what is bought is not an asset, but a contract that entitles the trader to receive a gain or a loss, already established, based on the outcome (positive or negative) of the choice, or, of the option. This choice consists in predicting the price trend of a given asset.

How does binary trading work? The guide to operate in 7 step

As mentioned above, binary trading consists of a very simple way to understand and easy to put into practice. In order to equip the interested reader with a guide that directs him to the in-depth knowledge of binary trading, the practical and very useful instructions are provided below for those who begin this journey; furthermore, the discussion is completed with an in-depth description of the general functioning of binary options.

1) To start trading binary, it is essential to know the sector, at least in general terms; so the advice is to read or, if you have the opportunity, talk to industry experts and then practice a lot with a demo platform.

2) As a second thing you need to register on one of the brokers, the one that according to your experience and that of most people is deemed more reliable. It is advisable to register on several brokers and try the demo version, in order to understand if the platform is right for you.

3) The third step is to pay a minimum deposit, equal to $100 or so, by credit card, paypal, bank transfer or other payment methods, eligible by the platform. Usually, brokers allow new members to benefit from a welcome bonus.

4) From this moment on, the registered trader is operational on the chosen platform: the time has come to choose the desired asset, on which to go to invest, such as for example the currency exchange, a stock market index, a commodity or corporate action.

5) The next step consists in choosing the type of binary option with which to invest. In binary trading, there are three types of investments, namely the following:

  • Touch does not touch;
  • Tall or short;

With the first type, the trader has to guess if, before the expiry of the position, the price of the asset will be able to touch or not the price previously set; with the second type, the trader must predict whether, at the time of expiry of the position, the price of the asset will close above or below the current price; with the last type, the trader must guess if at the time of closing the position, the price of the asset will close inside or outside a set price range.

6) At this point, the trader must choose the expiration of the option, which can be set over a long period of time, comprising several days, average of a few hours, or short, specifying ten minutes, five minutes, two minutes or even sixty seconds.

7) The last move, perhaps the most important for a trader, is to purchase the option; subsequently it will be enough to wait for the deadline, in order to verify if the forecast has occurred or not: in the first case it is possible to earn on average 80% of the invested capital, in the second case, or if the forecast was wrong, the sum will be lost bet.

What are the types of binary options? The examples

Although previously the topic of binary trading has focused on the various types of options, below we want to deepen these investments, also providing useful and practical examples to better understand their operation.

High / Low Options

The trader must predict whether, at the end of an established and previously chosen period, the price trend of a given asset will be up or down compared to the original.

A trader expects the euro dollar exchange rate, quoted at 1.40, to rise in the next sixty seconds; he proceeds with the purchase of a HIGH option with expiry, for example, one minute. In the event that the asset price is higher than 1.40, the trader will earn up to 85%, otherwise the loss will be equal to the amount invested.

Options Touched / Not Touched

The trader has to guess if, within the expiration, the price of the selected asset will touch or not a price level proposed by the broker.

The euro dollar exchange rate is 1.40; the binary option touches / does not touch has a target of 1.42 after five minutes. In the event that the forecast is correct, the trader will obtain a profit, otherwise he will witness the loss of the invested capital.

Interval Options

The Range option is used in flat market moments; it allows the trader to predict whether a price, at the established expiry, will be within a range of prices, set by the broker or not.

If a range of 1.40 – 1.42 is proposed and the trader chooses a deadline of ten minutes, he must guess if at the end of time, the price of the exchange will be between 1.40 and 1.42 or otherwise.

How much can you earn with binary options and how long?

How do the brokers earn?

Trading platforms earn on incoming business volume, regardless of whether transactions are growing or losing. The interest of the brokers is to attract the largest number of traders, so the primary objective is to retain investors in their platform: the only way to do this is to make them earn and then invest for as long as possible in order to increase their profits.

Many choose to work with binary options not only for their simplicity, but also because they guarantee yields ranging from 60% to over 300%: by averaging, it is possible to say that the gain is within a percentage equal to 85 %.

The expiry time of the positions is established by the same trader, starting from a minimum of one minute, up to a maximum of thirty minutes, hours or even days.

Although the extreme simplicity of binary options can make this seem like a game for everyone, in reality, from an economic point of view, this trading strategy is particularly suitable only for those who have a certain risk appetite. In addition to high returns, it must be said that in binary trading the possibility of losing the invested capital must also be taken into account, so it is necessary to pay close attention.

Therefore, before starting to make binary trading, it is not only essential to know the sector thoroughly, but also to make an examination of conscience and check if you have the right predisposition to risk.

If you recognize yourself as an investor who does not want to take any risks, look for a safe return in binary options, then binary trading is not for you!

What are the risks of binary trading?

As mentioned many times, the trading activity can lead to the achievement of a high yield, however the connected risks must not be underestimated.

It is possible to summarize the risks of binary trading in three categories, namely the following …

  • The risks of the broker;
  • Financial risks;
  • Psychological risks.

The first risk is connected with the possibility of falling into the wrong hands of a broker that is little or not at all correct or unauthorized; in this case, the only purpose of this trip would be the loss of all the capital invested. To avoid this, it is advisable to rely only on the authorized platforms.

The second risk is related to the binary trading activity itself, for example, in the event that a trader misses his investment forecast. This type of risk cannot be eliminated, but it is wise for an investor to know how to deal with it in the best way, aiming at money management and risking only a small part of the capital when the forecasts are uncertain.

Perhaps, psychological risks are the worst, as they can lead to unreasonable actions and therefore absolutely inappropriate. Earning a lot of money quickly, as well as losing it with the same rhythm, can cause the loss of mental lucidity, one of the pillars of the trading activity.

Does binary trading work or is it only a scam?

Of course, binary trading works and is by no means a scam, unless the suicide trader decides to rely on a fraudulent broker.

If done correctly, binary trading allows you to earn a profit after the other, even in a short time. It goes without saying that we must never underestimate the possibility of losing all the capital invested.

Binary options allow you to know in advance, or before investing what the potential gains are and what the potential losses are: peculiar characteristic of this type of investment. Everything can be kept under control, but to avoid making a mistake in the forecast, it is necessary to make good money management, so that a single wrong operation does not have a devastating effect on the total operations.

What are the winning strategies to be used to make binary trading?

The binary trading statement works, does not mean that it is sufficient to open an account on a platform to start earning. It is necessary to choose and apply the right trading strategy to the specific case and then not forget the study of trends and graphs.

Probability calculations can help traders, as many of the binary options are executed following this strategy. In any case, to become an excellent trader and start making money online, it is essential to develop a winning strategy, or copy it from existing methods: what matters, in the end, is to find the right binary trading technique, suited to your needs, financial goals and your own investment style.

The binary trading strategies are also based on particular technical elements, essential to be able to earn. For example, there are traders and analysts who provide trading signals, or accurate forecasts that can be used immediately, sometimes automatically, with the sole purpose of significantly increasing the probability of earning.

To conclude: The five advice for making a good binary trading

Below you will find all the necessary advice, to keep in mind before starting to do binary trading.

  1. Choose the right binary trading broker and focus only on one platform.
  2. Always remember that trading with binary options, even if very easy to do, is still a serious activity and not a game.
  3. It is necessary to be firm and to have clear and fixed daily earnings objectives.
  4. Properly manage your starting capital.
  5. Maintain lucidity throughout investment time.

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