Trend Strategy

Sometimes referred to the Bullish/Bearish Strategy, the Trend Strategy involves reviewing charts for the asset you want to trade and determining if it has an upward, downward or changeable trend. This is a basic strategy and suitable for novice traders and often used by expert traders.

 

If the asset has an upward trend place a CALL, if the asset has a downward trend place a PUT and if it has a changeable trend it is best avoided as there is no indication as to which way the asset is likely to move. The Trend Strategy is that simple.

If the trend is flat, that is no significant upward or downward movement, the trader may decide to use the more advanced NO TOUCH option method to take advantage of the fact that prices of the asset are trading within a narrow range.

If the asset has an upward trend place a CALL, if the asset has a downward trend place a PUT and if it has a changeable trend it is best avoided as there is no indication as to which way the asset is likely to move. The Trend Strategy is that simple.
If the trend is flat, that is no significant upward or downward movement, the trader may decide to use the more advanced NO TOUCH option method to take advantage of the fact that prices of the asset are trading within a narrow range.

Reversal Strategy

The Reversal Strategy is a more advanced strategy based on the concept that if an asset moves in one direction it is unlikely to stay at a peak but return to its original position or close to it. In this case a trader would place a CALL or PUT, depending on which way the asset moves, on a suddenly changing asset price knowing that it will return close to the original price once the peak is reached.

Notice how the overall trend is changeable but it peaked high, dropped to a low peak and returned to a stabilised price again.
The secret to success is identifying when the asset has reached its peak. Knowing why it changed and using fundamental and technical analysis are key to identifying when the asset will peak and return to a stabilised price.

Pinocchio Strategy

The Pinocchio Strategy is another common and popular strategy for trading Binary Options. A candle bar that has a very small body and a very long wick is known as a Pinocchio bar, or a Pin bar. Just as Pinocchio lied to us as his nose got longer, the candle bar lies to us as the wick gets longer.

A long wick means that the asset price is going in one direction and increases the likelihood that it will go in the other direction very soon. The market is lying to us so we trade against it. When the wick is down we place a CALL and when it is up we place a PUT.

9 Step to Success in Binary Options.

Trading Binary Options boils down to simply choosing if an asset will finish higher or lower than when the trade started. You must decide whether to choose PUT or Call. How do you decide? We have included some helpful binary options tips that will help you make that all important decision. While these tips are not a guarantee of instant success they will help you fine tune your trading skills and highlight some of the common pit falls.
There are many ways to succeed as a Binary Options Trader and these 10 Binary Options Trading Tips will help you make a good start to your trading career or point out some bad habits if you already have some trading experience.

1. Understand the Binary Options Market and Trading Tools

Don’t just jump in and randomly choose PUT or Call. This is simply gambling and at best you will win some trades by pure chance. Instead learn all you can about how this market works and the products that are available from brokers.

2. Choose a Reputable Binary Options Broker

Look for a broker with a wide choice of assets and a high rate of payout. If you have a preference for a particular market check that your chosen broker offers trades on this.  Choose a broker with a demo system so that you can fully check out their platform and get comfortable with their interface before making any live trades. There are many new brokers appearing on the market every day, while they may be great brokers they will be largely unproven and will not yet have gained a reputation (good or bad). It is advised to go with the established and proven brokers who have had time to prove themselves.

3. Learn How to Trade

This may seem obvious but many new traders get so caught up in the exciting prospect of earning large amounts of money that they skip this step. They jump in without fully understanding how to trade and lose their funds. It is important to take advantage of the broker’s demo system and practice trading and check out any strategies that you may consider using when live trading. In fact many experienced traders use demo systems to check new strategies and techniques.

4. Research the Markets and Implement a Strategy

Successful traders research their assets well, keeping up to date with any news that is likely to affect their asset price and keep an eye on an Economic Calendar, checking what events are coming up that may cause the asset price to rise or fall. In addition, they use proven strategies that work for them. Trading without research or reliable binary options trading strategy is a sure way to lose more trades than you win and your broker will love you!

5. Choose Assets Wisely

Pick one of the more common assets available to trade. There will be much analysis and news available for the more common assets and they tend to be discussed in-depth in forums and other online sources. Avoid the less common assets unless it is one that you already are familiar with and comfortable making predictions on its movements.

6. Practice on a Demo System

As already stated ask for access to the brokers demo system and check that it is a fully interactive system and not just a series of slides and graphics. Most brokers will insist that you make a deposit before allowing access to their demo systems but if you are serious about trading you will be making a deposit when you get started so this should not be an issue for you.  Give yourself time to get to know the system fully and to practice trading and using your strategy.

7. Manage Your Money and Your Risks

There is a saying “Don’t put all your eggs in one basket” and this is true for traders too. You should never risk too much of your capital on one trade, many traders never risk more than 5% of their capital on a single trade. If it goes wrong they will still have a sizable portion of their capital available to continue and can recover quickly.

8. Consider trading One-Hour Binary Options

Avoid very long-term Binary Options until you are more experienced.  It is difficult to accurately predict where an asset price will be in one month. Instead trade One-Hour Options where you can more accurately predict the closing asset price from analysis, research, upcoming economic events and news stories. In addition, this can be a quick way to profit. If the market is trending in a particular direction you may consider using 60-Second Options to take advantage of the trend and maximize your profits.

9. Don’t Expect to get Rich Quick

Some traders just want to earn some extra cash from a couple of hours work per week while others make a great living by putting in a lot of hard work and extra effort. Be realistic and understand that you get out what you put in and if you put in nothing…. Well you know what the result will be.

3 Different Techniques used in the Binary Options Trade

The binary options trade is like a bird’s eye view of the economy. It’s a form of trade where people predict the direction of a particular asset or the overall market. What makes binary options very appealing is that aside from their straightforward reward-risk variables, investors get to choose when the trading begins and ends. Binary Options can go as short as 60 seconds.
Despite having straightforward reward-risk variables, the binary options trade requires people to have good strategies in order to trade efficiently. There are several types of trading strategies and this article will tap on the most common three.

Using technical analysis

Technical analysis involves the use of charts in order to predict the price movements of assets. It is, in theory, the basis of all price predictions. Without charts, it’s impossible to keep track of price movements. Technical analysis basically means that whatever happened in the past will repeat itself again in the future since “the market remembers.” Because of this, it’s extremely important to look back and analyze candlestick chart patterns or any other technical indicator that happened in the past. There’s no shortcut to being good in technical analysis; only experience and mastery of application matters when looking at charts.

Using fundamental analysis

If technical analysis involves the use of charts, fundamental analysis involves reading business news. Fundamental analysis is about studying the overall economic situation to predict whether prices will shift or not. Let’s take a look at gold for example. Gold’s prices are declining now for a number of reasons. The U.S. Fed has just stopped its quantitative easing and is predicted to increase interest rates in the U.S. by next year – two major factors that drive the precious yellow metal’s prices down today. In addition, the tensions in Ukraine are easing now and gold’s purpose as hedge against political turmoil isn’t currently needed. Last year, when Germany decided to return home some of its gold reserves from the U.S., investors scrambled to have gold investments. They’ve deducted Germany’s repatriation program as the country’s way of preparing for an economic crisis. Physical gold is used as hedge against economic uncertainty and Germany is well aware of that. Things like these that you hear in the news are important to know whether or not gold prices will go up or down within a given time frame. Real-time monitoring of news can help investors make sound decision in binary options.

The Martingale type of betting

The Martingale technique used in binary options demand investors to double the amount of their initial investment at each loss until a gain is achieved. It’s as simple as that. This form of strategy has higher risks than gains, since it requires investors to double their bets until their winning position of closing. The principle of the Martingale strategy is to offset losses of previous bets until an investor gains his or her target. If an investor predicts the price movements incorrectly for several times in a row, his or her losses will be extremely huge. Beginners should definitely stay away from this binary options technique.

Advantages of Binary Options

Binary Options have many advantages over tradition Options and indeed over traditional currency, commodity and stock trading. Ideally suited to new investors and those unfamiliar with trading environments we are seeing many experienced investors move away from FOREX and other types of trading due to the many advantages of Binary Options trading.

Binary Options facilitate the trading of a wide variety of assets across multiple markets with high rewards and lower risk in a fast time-frame when compared to other types of trading.

What Are The Advantages Of Binary Options

Easy to Get Started

Getting started trading Binary Options is simple. You choose a broker or brokers, sign up, make a deposit and you can start trading. However it is strongly advised to practice on the broker’s demo system first so that you can test out your trading strategy.

Many brokers now have low initial deposit requirements ($200) making this form of trading accessible to almost everyone. Other forms of trading require large initial deposits of perhaps $10,000 or even more than $100,000 thereby excluding people that don’t have large amounts of money readily available.

Simple and Easy to Trade

Binary Options are simple to trade as you only need to predict the direction that the asset will move whereas with traditional options you also need to predict by how much the asset will move. In addition the expiry times can be very short which can make the outcome easier to predict.

Once logged into your account with your broker you simply select the asset, select the direction (CALL = Increase in price, PUT = decrease in price) and decide how much you wish to invest in the trade. Finally select start/submit and your trade is recorded. Now all you have to do is wait for the trade to expire to see if you are “in the money”.

Experienced traders use a proven trading strategy and follow the information wires looking for news and events that could have an effect on their chosen asset price. It is important also to check an Economic Calendar regularly to see if there are any announcements or events scheduled that could influence the asset price.

Controlled Risk

Unlike other forms of trading the potential profits and losses are known upfront. You cannot lose more than your original investment in the trade. Some brokers now return up to 15% of any losses which is unique to Binary Options trading.

Many traders use the 5% rule of thumb when trading. They never invest more than 5% of their total capital in any one trade which protects them from one bad trade wiping them out completely.

High Fixed Payouts and Fast Returns

Payouts are usually higher from Binary Options trading than from other types of trading and typically range from 75%-85% for standard options. In addition, the expiry times are short with most brokers offering 60 second, 5 minute, 15 minute, 1 hour and end of day so you know quickly how you are performing and fast returns are possible.

Multiple Assets/Markets

One single broker account gives you access to Currencies, Commodities, Stocks and Indices across multiple worldwide exchanges. Brokers do offer different sets of assets so it is worth checking their asset lists first, that way you are sure to find your preferred assets or areas that you want to focus on.

Short Term Contracts

As mentioned earlier contracts can be as short as 60 seconds while others may last for 3 months. This gives you several investment opportunities and flexibility when trading to cope with changing market conditions.

Multiple Types of Binary Options

Binary Options trading provides you with multiple types of Options to trade so that you can adapt your strategy depending on the current market conditions. For example you can trade boundary or touch options when the market is volatile. This allows you to trade in any market condition.

Trade Small Amounts

Many brokers have low minimum trade amounts so that you can build you confidence while learning to trade. These minimums can be as low as $10 but $25 is more typical. There are no other trading environments where you can make such high returns for so little so quickly.

Trade Anywhere Anytime

Trading platforms are available via PC and laptop and more recently via tablet and mobile phone. This latest development means you can now trade and check on your assets when out and about accessing your broker’s system via a smartphone or tablet. This will allow you to trade 24 hours a day as Binary Options cover international markets and there are always assets being traded.



As we have seen there are many advantages of Binary Options trading from being easy to get started, simple to use, high payouts and quick returns. This makes them an ideal investment choice for new traders and an attractive alternative for experienced traders.

Trend-Friend. Any timeframe

For the ones that are still interested in the Trend-Friend. Any timeframe, here's an updated version I've been using for a while now and have about the same succes rate with (70 to 80%), but since I use it on  Any timeframe, there are more trading opportunities.

Here it is Forex/binary Guru.  

Peace Patrick

 Okay folks its been ages since I posted a new strategy and the reason was I could not find anything better than what I already posted. But last that have changed. I actually been using this kinda style since months but I was always going back to No Cloud Ichi for 5m or above expiry because smaller expiry wasn't a big attraction to me.Last week as I dug deep into it I felt its worth sharing.

Note : I have not traded it much just back tested and took some live trades , results are great so far but please do test it and then see if you like it.

Things not to do : Do not add an indicator unless you can prove that it really helps to prevent the losing trades.Test it before you put it out there , dont just be like " IF we add this indicator I think it might save us some losers" But do it this way , add the indicator to your chart and then mark the losing trades you saved and then post the screenshot and the indicator . You are most welcome to change the settings of the indicator used too maybe we can find better settings.

Also as the name suggests it is a trend based strategy so do not trade in choppy market however it is not a major trend based strategy so once you read it you will see that you can trade it almost anytime , I know confusing but just read and you will get what I mean.

Strategy : Lets call it Trend-Friend as it based on trend even if it the smallest temporary trend. There are two ways to trade it , Aggressive- 60 sec trades , Non Aggressive- 2min trades. Both ways are equally good so try them both.

Indicators Used : Moving Averages and Stoch.

60 sec strategy - Agressive - When the main chart MA channel and stoch channel are trending to same direction we take trade on every candle to that direction untill we lose , Once we lose we martingale on next candle after the losing trade if both channels are still in the same direction. I know people don't like to martingale but this type of martingale wont hurt you much , the most consecutive loss I have seen is 2 so yeah but then if you still don't like to martingale then just stop at losing trade and wait for next setup to become valid.

Here is the picture

2 min trades - Non Aggressive - We only take trades when there is candle which goes against the both channel , we take 2min call or put towards the channel direction once that opposite candle finishes. If we lose we can martingale to recover on this one too.

In above picture you will see the trades in first uptrend which I did not mark after the 4th vertical line there were 2 more down candles which met out requirements as per main channel but sub window channel didn't agree so we just let it go , there are 100's of trades in a day with this strategy even if you just trade 4 major pair so you don't need to rush and hey I don't want to trade more than 10 trades a day and that is me stretching myself.

Now have I traded a lot with this strategy ? NO ....... Then why am I posting this ? Because I think its pretty good and I think its better than my no cloud ( yes I did say that ) and because I will be using this going forward and most importantly I want some fame time on forum been ages so if not anything it might be hot topic for few days and I will have my fame.

I think I have covered important parts and made all the rules clear , still if you have questions shoot it .

Regards

Peace Patrick

PS : it is not 60 sec or 2min expiry strategy only , it's rather one candle or two candle expiry which can be done to any time frame if you know what I mean.

Credits to Singh

Bollinger Band Strategy

Hello Friends,

This is a Bollinger Band strategy that I have been using lately and it works well, it's very simple to use too, none of the indicators in this strategy are made by me, Neither am i the creator of this strategy...  Its Just what i am using with great success rate.  kudos to the developers of the indicators and strategy..

My aim is to teach you what works.

Time Frame: 1 Minute
Expiry: 3 minutes

Watch the market on a 1 minute time frame.
take the trade on 3 minutes expiry time.

Trade any Forex Currency Pair.
Trade volatility Indices.

Trade ONLY with Trend for best results!

BUY SIGNAL
Candle Above Blue Moving Average
BIG Green Arrow Pointing UP
Stochastic Sloping UP

Confirmations.

Price action must have touches the lower bollinger band.
Do not take trade if price action has not touch the lower bollinger band.
Stochastic must have turn upward before taking the trade.
Ensure it is not a 1 minute break out from 15mins, 30mins time frame  before taking trade.
This strategy will never fail you on a sideways trend if you do multiple confirmations.

SELL SIGNAL
Candle Below Red Moving Average
BIG Red Arrow Pointing DOWN
Stochastic Sloping DOWN

Confirmations.

Price action must have touches the upper bollinger band.
Do not take trade if price action has not touch the upper bollinger band.
Stochastic must have turn upward before taking the trade.
Ensure it is not a 1 minute break out from 15mins, 30mins time frame  before taking trade.
This strategy will never fail you on a sideways trend if you do multiple confirmations. Here are some examples for you to see:

Valid buy signal with green horizontal line, take note of buy rules.

The Use of Binary Option Robots

BINARY OPTIONS ROBOTS

Trading robots and automated trading programs come in a huge array of varieties. Whether you trade in the Forex market, binary options, CFDs, or some combination of any of these. A lot of traders are drawn to these because of the fact that they seem to offer effortless profits. However, this is far from the truth, so don’t get drawn into this trap. Any type of trading, whether you come up with the signals or someone else does, has risk involved with it. Trading can lead to a loss of money, which is one of the reasons why it’s so important that you take some time and choose the right service for your own trading. Binary robots and signal services  are not guarantees that you will make money from forex or binary and there’s always a chance to you can lose money.

Our goal here is to try and steer you in the right direction by giving you all of the information that you need to make an educated decision when looking at a trading service. Some services are very good and have strong track records while others are not quite as reliable. Most of the time, this will need to be something that you figure out on your own though. By giving you the information that you need to make a good decision, we can get you started down the right path.

Trading Robots

A trading robot is any type of service that actually makes trades for you. These have existed for many years in the world of  forex. But they are fairly new when it comes to binary options trading.

Trading robots, have certain things that you need to look out for. Some of these include:

• How profitable the robot has been.
• Whether the robot is legitimate.
• How can the robot be customized.
• Can the bot blow up your entire account

This last point is an important one. Some automated trading services let you have a large degree of control over what trades are made and some services give you no control. While a trading robot or another automated trading service is designed to save you time, that doesn’t mean that you should not invest any effort into it. Robots are not for those without experience, but rather for those traders that know exactly what they are looking for and are using the robot as a tool to save time or to supplement profits.

For example, if you look at your robot and it allows you to control how much risk you take on per day, which assets you want to focus on, and other aspects of your trading, you have found one that allows for a high degree of customization.

Customization is important because automated traders tend to operate on algorithms. When an asset shows a certain pattern, then a trade is made. This is usually fine, but as any experienced trader will tell you, when conditions exist where this is a bad idea, you can lose a lot of money. Being able to customize your trades will help you to smooth these bumps out.

Final Thought

Whether you’re trading binary options or Forex, a trading service can be really helpful. But remember that they are not an automatic path to earnings. You need to be vigilant and monitor the quality of whatever product you are using, spending at least a few hours per week evaluating whether the service is doing what it should. And that’s after you spend several hours ensuring that all of the settings are correct before you begin.

Can you Really Make Money with Binary Options?

Binary options trading is very popular in many countries around the globe. However, most people still ask the question "can you really make money in binary options". In this article I will try to answer this question and give you a few tips on how you can make money trading binary options.

The short answer is that yes, you can make money online with binary options trading if you only trade at legitimate binary options brokers and learn the fundamentals of binary trading and employ proper trading strategy.

Binary options trading is a form of investing through predicting the movement of various assets such as gold, silver, the USD etc. It is very similar to other forms of investing such as forex and stock trading. It’s however simpler, has relatively fewer risks (in the sense that you will always know in advance what you might lose) and can offer larger payouts.

The idea is that you can make money in binary options only if you treat it as a real form of investing. This means learning how it works, learning how to read charts and learning how you can make accurate predictions. All these are not that difficult but it takes some time. If you treat it as gambling and just make random predictions then you will obviously not win.

Trading binary options online is not as complicated as many people think it is. You don’t have to be an economics expert in order to make money by trading binary options. Below these lines I'll reveal why making money with binary options is actually pretty simple.

Difference between Forex and Binary

Before we even dive in to the differences, pros, and cons between binary options and Forex, you must first understand that you will find it hard to be consistently profitable on either if you don’t understand trading itself. You may be able to get lucky for a while but the same can be said for the casino. What your goal should be is teach yourself a job for life. Your introduction to reading price action and order flow has been presented in the Forex Basics and Trading Strategies sections of this website. You will need to master that before attempting to trade in either way but for now this lesson may help you understand which type of trader you will become, you may even like both and do a bit of each!

One big difference between the two is that with binary options you will take trades with a fixed return, 70% would be a common example, but the returns do vary from broker to broker and from trade type to trade type (you will learn more about that later). With Forex your returns are not limited in the same way and a healthy risk:reward strategy can be implemented, returns of 200% and higher are a common example with Forex. The next big difference between the two is the fact that with binary options you are required to assign a time duration to your trades. With Forex you need to predict a target area for your trades and it doesn’t really matter if it gets there fast or slow. There are definitely pros and cons to each which we will now address so that you are clear.

Trade Duration

Forex:
Once a trade is open you can exit the trade whenever you see fit. Usually this will be at your take profit or at your stop loss but could also be due to what you are seeing on the charts or major news events. The real point is you have full control and the only real exceptions is on weekends where you can not exit any open trades.

Binary Options:
Before you enter any trade you will have selected the expiry time, this could be 1 minute to 1 hour from entry and is your choice. Once you have committed to an expiry time you are tied in to that trade until the time passes. Some binary options brokers will allow you to exit your trade early but at the price of a lower return than originally agreed. Other will allow you to delay the expiry time at the price of a higher investment. Not all brokers offer each of those options and the binary options broker world is very diverse.

Risk:Reward

Forex:
If you have taken the time to learn and develop a complete trading plan then risk:reward on Forex is completely in your hands. By using a stop loss you can limit your risk on every trade to a percentage of your account and always know your risk. The exception to that would be due to slippage which may drag your stop loss point further away and increase risk, this is just the price you pay for full control. If you were to always target a minimum of 100% return, so that you never risk more than you are trying to gain, and sometimes enjoy returns of 200% or 300% then you can be profitable winning even just 50% of your trades. The real point is that you have control over your risk:reward and can use that to your advantage.

Binary Options:
With binary options you will always know your exact risk before you enter any trade and nothing can change it. Returns however are out of your control and are lower than a sound trading plan on Forex. Your average high/low binary options trade has a return of 65-80% which means you will always risk more than you are trying to gain.

Trade size

Forex:
Forex brokers vary in their minimum trade size but the lowest you will find are called micro lots. This is 1,000 units of the base currency and is also known to as a 0.01 lot. On the other end of the scale you will also find a different maximum trade size between Forex brokers. It can go as high as 100 standard lots of the base currency which is 10,000,000 units.

Binary Options:
Binary options brokers also vary in their minimum and maximum trade sizes but the lowest you will find is $1. A more common minimum would be in the $20-25 range though. The highest maximum we have found to date is $100,000 and the next level down we have seen is $50,000.

Leverage and Margin

Forex:
Leverage is something that will vary from broker to broker but a very common example would be 1:200, this means that you could trade a $200,000 trade size using just $1,000 of your account. Without correct management you could find yourself getting a margin call because the value of each point the market moves against you is based on the $200,000. This is easy to avoid and easy to understand with the correct training but it is one part of trading Forex.

Binary Options:
There is no leverage or margin to concern yourself with when it comes to binary options.

Trading costs

Forex:
The costs involved with any Forex trade will always be the spread, and if you hold overnight, the swap/rollover. Depending on your account type and broker you may also be charged you a round trip commission also.

Binary Options:
With binary options there are no spreads, swap/rollover or commissions to think about.

Volatility Risk

Forex:
The market is know to have surprise volatility that occurs both out of nowhere or due to news events. These sharp swings in price can trigger your stop loss and cause a loss from what then goes on to be a winning trade.

Binary Options:
When surprise volatility hits your binary options trade it will not hurt your trade as long as your view was correct when expiry time hits. Only the expiry time can exit your trade.

Human Error

Forex:
There are several potential points of error when trading Forex which makes it the more technical trading style of the two. With the correct training and tools  you can minimize the chance of error significantly but you can never eliminate it. Without the right training and tools you may find yourself entering the wrong trade size, forgetting to place a stop loss, or forgetting to place a take profit. Even with the correct tools you may find yourself interfering with a trade or exiting early.

Binary Options:
The chance of you making an error with binary options is very low which is most likely why they have become so popular these past years. You could perhaps enter the wrong amount such as 255 instead of 25, or select the wrong direction but that is about it. If you did make either of those mistakes then the lessons would be learned fast and there are no other real foreseeable errors to make. This is definitely the most user-friendly trading style of the two.

• Expiry Time – Binary has a set expiry time; No set expiry in Forex
• Spread – No Spread in Binary: There is spread in forex
• Payout – Binary is Fixed, Forex depends on the pips you earn
• Risk – Binary Carries a smaller reward; Forex carries bigger risk but also can be bigger rewards.

What are Binary Options?

 

What are binary options?

Binary options, as the name implies, has two possible outcomes:

1. The price of the underlying asset finishes either above or below the specified price at the specified time. It can be categorized as one of the simplest financial assets.
2. Based on a “yes” or “no” proposition, it allows an individual to trade, although the risk, as well as profit potential, are capped.

Evolution of binary trading options

Binary options became available for retail traders following SEC approval in 2008.

Previously, binary options trading existed but was available only to banks, institutional investors or high net-worth individuals through the over-the-counter market.

In 2007, when the subprime mortgage crisis began to rear its ugly head, the Options Clearing Corporation, or OCC, embarked upon the job of developing regulatory framework for the options market, while also proposing changes to upgrade binary options to the status of a financial asset that could trade as a standalone instrument in major exchanges.

Following SEC approval, the Chicago Board Options Exchange (CBOE) and the American Stock Exchange offered binary options to retail traders. In its early days, binary options came with a lot of restrictions such as the availability of merely call options and options on the S&P 500 Index.

Slowly and steadily, the popularity of binary options increased amid the broadening of the variety of binary options available for trading and the improvement in the trading software that now allows online and mobile app trading.

Types of binary options

• High/low option (above/below option): This is the most popular type of binary option. An investor bets on the underlying asset going above or below the predetermined price at the time of expiration.
• Touch option: An asset will touch the strike price at the time of expiration.
• Range option: The asset is in a predetermined range by the time of expiration.
• 60 seconds option: As the name suggests, the 60 seconds option expires in 60 seconds from the time of purchase. A trader in the 60 seconds option should be quick and adequately backed up by a trading software with a best-in-class charting program.

Cash-or-nothing vs. asset-or-nothing

There are two forms of options: cash-or-nothing and asset-or-nothing.

A cash-or-nothing option pays a trader a fixed amount of money or nothing at all, while an asset-or-nothing options also has a fixed payoff but the payoff is equal to the price of the asset.

Other terms

• Underlying asset: The asset on which the binary option is based upon, or a security used in the binary options contract.
• Call: An option contract drawn up by a trader who believes the price of the underlying asset will increase by the time the option expires.
• Put: An option purchased by a trader who believes the price of the underlying security will drop by the time the option expires.
• Strike price: The price of an underlying asset at the time of the purchase of the binary option, compared against the price of the asset at the time of the expiry of the option.
• In-the-money, or ITM: An option is in-the-money if a call option’s strike price is below the market price of the underlying asset, or if the strike price of a put option is above the market price of the underlying asset.
• Out-of-the-money, or OTM: When the strike price of a call option is above the market price of the underlying asset or when the strike price of a put option below the market price of the underlying asset, then the option is out-of-the-money.

Breadth of underlying assets

Binary options provide for trading a host of underlying assets, some of which are:

• Stocks
• Indexes
• Commodities
• Currency pairs

Binary options example

Assume the bid and ask price of a binary options contract for the EUR-USD currency pair at greater than $1.415 are $30 and $34, respectively. A trader who believes the pair will close above the $1.415 level at 4 p.m. ET, will buy the call option at $34.

Since the option can increase in value to $100 or drop to $0 depending on how the EUR-USD pair moves, a traders makes a profit of $66 (if the pair trades above $1.415 at the specified time) or incurs a loss of $30 (if the pair trades below) $1.415 at the specified time.

The price of the binary option is determined by the market, based on the likelihood of the proposition implied by the contract coming true. If the odds are less, the option price will be low (say $10 or $15).

If you invest $100 in a call option in the S&P 500 Index, which is currently trading at 2,875 (strike price), with an expiration time of 30 minutes, you stand to gain $100, plus a payout (if specified in the contract) if the index is above 2,875 at the expiration time.

The expiration time can be the last traded price or the average of the bid and ask price, depending on the terms set by the broker.

However, if your binary option expires out of the money, or the index is trading below the strike price, you stand to lose your $100.

If the market price is exactly at the strike price at the time of expiration, then you preserve your investment, without any profit.

Advantages to binary options trading

• You’ll know both the risk and reward in advance, or at the time a contract is struck
• Binary options expire quickly and can generate substantial returns with a few quick, successful trades. Expiry period could range from 15 minutes to up to a week or two.
• Investments could be as little as $10.
• Binary options provide an opportunity to trade with a wide range of assets available all over the world.

Disadvantages of binary options trading

• Since some of the binary options brokers are loosely regulated, you might face the risk of losing your money if your broker opts to hoodwink you.
• Since binary options trading is more of a speculative activity, despite the research and analysis going into it, the outcome of the investment is not always a certainty.
• Earnings potential is limited relative to the movement in the underlying asset. Despite whether an underlying instrument moves $1 or $100 in the desired direction, your return is limited to the price of the binary option.

 

 

Brokers that allow binary options

You’ll find that a lot of brokers allow for binary options trading. However, some of them aren’t trustworthy or fall far below the threshold for acceptable brokerages. You can read more about this in our Best Binary Options Brokers guide.

Final thoughts

Since binary options trading comes with its own set of pros and cons, you’ll have to determine if it’s the right way to go for you. After all, limited regulations and limited profit potential can render it an unattractive option. However, there’s no denying of the fact that binary options are an excellent practice ground for a beginner who wants to take the plunge.

What if Forex

 

What is Forex?

The Forex (Foreign Exchange) Market is the largest market in the world. It is the market where currencies are traded. Each day, more than 4 trillion dollars are exchanged.

Why trade Forex?

24 hour Market

The Forex market is open 24 hours a day, so that you can be right there trading whenever you hear a financial scoop.

Narrow Focus

Unlike the stock market, a smaller market with tens of thousands of stocks to choose from, the Forex market revolves around more or less eight major currencies. A narrow choice means no room for confusion, so even though the market is huge, it’s quite easy to get a clear picture of what’s happening.

Liquidity

The enormous volume of daily trades makes it the most liquid market in the world, which means that under normal market conditions you can buy and sell currency as you please.

The Market cannot be cornered

The colossal size of the Forex market also makes sure that no one can corner the market. Even banks do not have enough pull to really control the market for a long period of time, which makes it a great place for the little guy to make a move.

Simplicity

Use technical analysis (indicators on charts) methods from other markets like equities.

Basic Forex terms

Listed below are some of the key terms used in Forex and CFD/Share trading

Pip

A Pip is the "Percentage In Point" (PIP), sometimes also referred to as "Point". It is equal to the minimum price increase of a Forex trading rate. The most common Pip is 0.0001.

Ask price

The ask price is the price you can buy a currency at. It is also the price at which the market is willing to sell the currency to you.

Bid price

The bid price is the price you can sell a currency at. The market is willing to pay you this price for this particular currency.

Spreads

Spread are the difference between bid price and ask price.

Currency rate

A currency rate against another currency rate.