Binary Options

For a lot of people, the very future of the world of online options trading as well as investing in different assets rests in the hands of a new feature called social trading.

This type of trading has been able to enter the market with little to no resistance, and has already got millions of traders all over the world falling head over heels in love with it.

Whether as a follower or as a trader who sets as example for the rest to follow, social trading is something all traders engage in at some point or the other. In fact, this form of trading has pretty much changed the way the game works for good. It has redefined how traders approach all of the different trades and assets, and has made some changes to how money is managed as well.

• Here is a list of brokers that offer social trading.

Why do People Love Social Trading?

Two of the key features of social trading that make it so attractive to traders are transparency and openness. Traders can look at the actions of some of the most professional and expert traders out there and then copy their trades without having to feel bad about it.

They can also talk to these experts and find out more about the different strategies that they use. While the advantages of this form of trading are many indeed, and while there are countless new opportunities and avenues to success that have been opened up by the penetration of this type of trading into the binary options market, it isn’t like the profits are going to come in just because you follow the actions of some random people.

Analyze the Market to be Successful

The only way in which you can achieve success with this type of trading is to analyze the market as best as you can. You have to be able to identify and create new and improved strategies for trading. These will, in turn, show you as a trader which of the plans, tactics and decisions you make are good for you financially and which are bad. There are a lot of people out there who claim to have the right type of guide to allow you to maximize your social trading profits. The truth is that most of these people barely know what they are doing! You need to follow the advice of true experts if you want to be successful with this type of trading. Take on some of the more practical tips and tricks that you can put into effect in order to be a more effective trader on the social aspect of things.

Social Traders Exist in Millions

The first thing you need to realize is that it isn’t an easy process. One does not simply switch on their computer and become the best social trader the broker has ever seen. In order to become successful and effective at placing and winning your trades, you need to be willing to dedicate your time to the system.

You have to explore every inch of the platform, as well as all the tools and features that are offered to the people trading on it. For the most part, brokers have their own standalone social trading platform that is offered to account holders free of charge. There are other platforms from third parties that exist for the traders who don’t have this luxury. There is also the glaring fact that there are millions of traders doing the same thing, so it might take a while to find the right crowd to follow.

If you are entering a social trading platform for the first time ever, the first thing you need to do in order to maximize your profits is find out who the popular crowd is. You have to get in with the cool kids if you want to be a success in this virtual high school environment. Do a people search and look for the traders who are trending at any given time, and have been for a while. These are the people that you need to keep an eye out for. With the right kind of planning and the right people being followed and used for inspiration, you should be able to make the perfect, profitable social trades in no time at all.

Binary option trades can take place for a range of times.  The most common binary option trades are 1 minute or 5 minutes in length, but there are many other trade lengths available to suit different traders preferences.

Binary Options Trades Only Have Value Upon Expiry

Unlike traditional options, which have value before the expiration date, binary options trades are final (you can not sell them before expiration).  A trader can not sell a position, and once a trade is taken it is considered a final decision.  A trader must hold the trade until the option expires without exception.  The time until expiration is different for each trade, and is determined by the brokerage.  Always consider the time to expiration before entering into a trade, because a trade must be in the money at the precise time of expiration for it to be of value.  If the trade is below the strike price at the time of expiration, the trade will expire worthless.

Most Binary Option Traders Prefer Short Trades

The binary option industry has carved out a niche based upon the human need for instant gratification.  Most brokers dangle trades in front of traders as short as 30 seconds.  This gives a trader the opportunity to make up to 80% profit in less than a minute!  This sounds fantastic, and it can be, but unless you have a system or a read as a trader to make money in 30 second time frames, it is a losing proposition for you.  If you do have a system or read which is capable of some degree of predictability on a trade on a very short basis, make sure that you are sizing your positions appropriately.  If you are taking many positions in a short period of time, you have the ability to lose (or earn) a lot of money very quickly.  While the ability to take short time period positions is useful, a trader must manage this carefully.

Most Trades Are 1 to 5 Minutes Long

The most common time period for binary options trades are between one and five minutes.  The brokerage will display the time period on each trade, and it is up to the trader to monitor these and to ensure that they are entering into a trade for the desired period of time.

Other common time frames may be a half hour, or one hour in time.

Some Trades Are Available For Longer Periods

Some brokerages offer traders for a period of a month or longer.  Before entering into this type of trade, be mindful that your capital is tied up until the expiration date.  A binary option position can not be sold for value once entered into.  This type of trade can be useful for someone who has very high conviction on the direction of a security over a long period of time.  As binary option trading expands, more trades of longer time periods are likely to be made available to traders.

Longer trades are typically offered with foreign currency transactions.  This is largely because foreign exchange traders rarely have a short term read on the direction of a currency, but based upon macro-economic factors traders may have more conviction on longer term trades.  While foreign currency trades are most common for long term trades, they may also be offered in commodities such as oil, gold, and silver prices, or in some stocks.

Different Trade Lengths for Binary Options Trades

Binary option trades can take place for a range of times allowing traders to choose the duration that suits their preferences.

While the most common trade lengths are 1 minute or 5 minutes there are many other options available.

It is important to consider the time until expiration before entering into a trade as the trade must be in the money at the exact time of expiration to hold value.

Additionally many brokers offer trades as short as 30 seconds but traders should use caution with these extremely short timeframes as they require a system or an accurate read on the market for profitability.

Most trades in binary options last between 1 to 5 minutes but longer trades for a month or more are also available for those with high conviction on a particular asset.

Longer trades are often offered for foreign currency transactions where traders may have more conviction on long-term trends based on macroeconomic factors.

Binary options are inherently very risky.  The contracts have no intrinsic value per say.  When you lose, you lose 100% of your position, and when you win, you can win big.  To a new trader, binary options can feel a lot like gambling.  Trading binary options is not the same as gambling, but if you don’t know what you are doing it is as least as risky.  Remember, the advantage of using binary options is that you do not need to trade with a lot of capital to earn a high return.  Respect how quickly you can both earn and lose a lot of money trading this instrument.

Think about binary options trades from a broker’s perspective.  Binary options trades are not matched between buyers and sellers on the open market, the broker always takes the opposite side of the position from the trader.  Why is the broker willing to do this?  They know that if a particular trade pays 80% to a winner, and a losing trade loses 100% of its value, with nonprofessional traders about  50% of the trades will pay out and about 50% will not.  This means that the broker earns a spread of 20% on the trade, on average across all traders.

If you start trading with no system, you will probably win on about 50% of your trades and lose on about 50% of your trades.  If every trade is the same size, you will certainly lose your money over time.  Always keep in mind when you trade binary options that you need to win more than you lose to make money.

Controlling Position Size

A common mistake with new traders is taking too large of a position size too quickly.  As any trader will tell you, things change fast in the marketplace.  Even if you have a good system with a perfect trade setup, and you have very high conviction about taking your trade, the news can change the market quickly and turn your trade from a winner to a loser.

Keep in mind that a loss is not the same as a loss when you are trading in the stock market.  If you lose money on an equity position, your position still has value when you exit it.  This is not true of binary options.  If your trade is a loser, you lose the entire amount of your trade.  This is why you need to take positions which are a very small percentage of your total account balance.  The only way to consistently make money is to systematically control your risk, and take enough good trades to win over time.

What is A Small Enough Position?

If the idea is to make money with binary options consistently over time, you need an average position size which equals a very small percentage of your account.  If by chance you have 5 losses in a row, and you are using a position size that is equal to 20% of your initial account balance, you will empty your account in only 5 trades.  As any professional trader can attest to, losing streaks of 5 trades can happen to anyone.

At How We Trade, we recommend using a position size of about 5% of your initial account balance (you can review this if you are profitable and your account has grown).  At this size, you could take 20 consecutive losing trades before your account balance was 0 (its safe to say that if you have 20 losing trades in a row you need a new system).

This position size allows for small losing streaks to occur without serious disruption to your working capital.  By nature the balance in your binary options account will be volatile.  It is the traders job to smooth out the volatility by taking many small sized positioned trades.

When Is a Big Position Justifiable?

Depending on who you are, how much of your money is in your trading account, and how much experience that you have trading, the answer may be never.  There is a particular case when it may be ok to take a large position though.

If you have a lot of experience trading, and if you were to lose the entire amount in your trading account your personal finances would not be seriously impacted, a large position from time to time is ok.  A large position might be a once a year or less type trade for many people.

To take a very large position you must have extremely high conviction that the trade will work.  This does not mean that the trade definitely will work, because no trades are a sure thing, but the trade setup must be almost perfect.  If you study international monetary policy for instance, and you do not think that current exchange rates have fully priced in a central banks stated goal, you may take a longer term foreign currency exchange trade with your binary options account with a large position.

The key is to exercise discretion here, and understand that the market is a very difficult place to extract profits consistently.  Most traders are very well served to put strict limits on their position size for the safety of their account.

Binary Options are tailor made for a scalping strategy.  The some of the most popular options expire in a span of only one minute!  Other popular options contracts also expire in short time frames,  with 5 minute, 30 minute, and 1 hour contracts being popular.  This short time frame means scalpers are at a huge advantage.

This is not an instrument for investors, not for a fundamental analysis, and the shortest options are not even made for a real swing type day trade.  This is made for traders who spot very short term momentum, or the possibility of a very high probability move in price.  This specialty is the realm of a scalpers.

Binary Options, The Scalpers Paradise

Scalping involves capturing small movements in price over a short period of time.  The challenge with scalping is to make those small movements add up to enough profit to be worth a trader’s time.  With binary options, even the smallest of moves can result in an 80% profit for a trader.  This is why binary options have been called the perfect way to trade for scalpers.

To make money scalping, a trader needs to find a spot of likely short term momentum.  At How We Trade, we like to find these spots by find breaks in significant levels.  Simply take a direction long or short as a security moves through a significant price level, and let the short term momentum carry you in the money.  We find these to be the highest probability trades.

How do you spot significant levels? We have two methods we like to use.  The first is the whole dollar price level break.

Whole Dollar Price Level Break

The whole dollar price level break is tried and true.  This happens when the price of a security moves through a whole dollar price level such as $25.00, or $40.00.  This works absolutely the best when the whole dollar level is a multiple of $10.00, but every dollar level works well.  The move through these price levels are most often quick surges, so take your short term trade as it breaks, and let the option expire for big profits.

Significant Technical Level Breaks

When a significant technical level breaks, there is also a nice momentum surge as HFT programs all take positions in the same direction.  There are many many technical levels a trader can look for, but price levels that work best are a previous long term high or low, such as a 52 week high.  It does not need to necessarily be a full year’s time frame though, a 1 week, or even intra-day high or low may work equally as well, the point is the stock needs a significant level to burst through.  Remember you do not need a lot of movement, you just need a highly reliable small movement.

Other significant levels may be found with indicators such as a 200 period moving average, a significant Fibonacci retracement, or a level that has a huge amount of volume posted on a stocks order book that is getting taken out.  When the books is finally cleared, the price will usually jump quickly in the direction of the cleared volume.  So as an example, if the volume on the book is on the offer, when the buyers clear the book the price will usually jump up quickly, and vice versa for high volume on the bid.  Take a long position through a large cleared offer and a short position through a large cleared bid.

Choose A Strategy

No matter what your choice of strategy, it is always good to compare various options for each security.  Each stock and each security will trade differently, so the wise choice is to watch each security respond to each strategy.  Get a feel for the way it trades, and when you are comfortable begin taking positions.  Once you have a strategy that works well, stick with it as long as you are making money.

Binary Options Scalping Strategy: Finding Profitable Short-Term Momentum

Scalping a trading strategy that involves capturing small price movements over a short period of time is an ideal approach for binary options traders.

With binary options even the smallest price movements can result in significant profits due to the high percentage returns offered by these options.

To successfully scalp binary options traders need to identify spots of likely short-term momentum.

This can be done by spotting breaks in significant price levels such as whole dollar price level breaks or significant technical level breaks.

These breaks often lead to quick surges in price and can be reliable opportunities for scalpers.

By understanding the behavior of different securities and observing how they respond to various strategies traders can optimize their scalping approach and increase their chances of success.

Here is an easy guide to getting started with Binary Options for those of you who are brand new.  This will get you set up and put you on the path to trading successfully.  For those of you unfamiliar with Binary options, we recommend you read our overview of what they are and how they are traded.

To start trading, follow these steps.

1. Sign up for a Binary Options account with a reputable broker. If you are from the US/Canada or Australia then start trading binary options here.

Rank	Broker	Min. Deposit	Max Returns	Features	Review
1		$50	200%	+ $50 CASHBACK	TRADE NOWREAD REVIEW
2		$100	85%	+ CYSEC REGULATED	TRADE NOWREAD REVIEW

2.Deposit your funds so you are ready to take advantage of opportunities when they arise, but do not begin trading live yet.  We recommend starting with a small deposit, not more than between $200-$500 is needed but this is up to you.

3.Set up a demo account, this should be extremely easy with the broker to trade in a sandbox mode.

4.Read our binary option trading tips.  This guide is a basic overview of strategy for new traders.

5.Place at least 20 trades in demo mode before making one live trade.  At this stage your focus is on getting a feel for the trading platform and entering trades correctly, as well as beginning to develop your read on how the market moves and factors that influence movement.

6.Begin placing live trades, not more than $5-$10 dollars per trade.  Remember the goal is not to make a million dollars with one trade, it is to systematically make money over time.  You need to start small in order to trade with a clear head, and to work on your strategy without taking a huge risk at this point.

7.Contact us if you would like help with your trading or developing your strategy from this point, remember we are here for a resource to help you learn and grow as a trader.  Things to keep in mind: what time of the day are you trading? What are you using to indicate a trade setup? Did you write your rules down and are you following them every time?  Are you using larger size when you have more conviction on a trade?  Let us know what you are doing and we will help.

This is a guide to getting started.  For more advanced strategy read our posts and strategy guides, and feel free to contact us.  The more you learn the higher the probability of you making a lot of money, so we recommend it.

How to Develop a Successful Trading Strategy in Binary Options

Developing a successful trading strategy in binary options is crucial to achieving consistent profits.

While it may seem overwhelming at first with the right approach and knowledge you can create a strategy that works for you.

The first step is to understand the market trends and identify potential opportunities.

By analyzing historical data and market trends you can make educated guesses about the future behavior of assets.

This information will help you select the right strike price and expiration time for your trades.

Additionally it is important to continuously evaluate and adjust your strategy based on new information and market movements.

By following these steps and practicing with a demo account you can develop a successful trading strategy in binary options.

Remember research and educated guessing are key to success in this industry.

Binary Options are options that only have two possible values upon expiration.  Either the option will pay a predetermined value for being in the money, or will expire valueless in the same way traditional option contracts will.  Predetermined payout values normally vary between 60%-85% but may be higher.  Binary option times to expiration are typically much shorter than traditional options.

Binary option trading has recently become more popular amongst day traders. Binary options have also have received some bad press lately, mostly for brokerages opening accounts from clients who did not have any risk capital to trade with.  Despite some unscrupulous brokerages making a bad name for them, binary options are a legal instrument, and can create extremely nice returns for successful traders.

Compared To Traditional Options

Binary options are not contracts traded over open secondary markets like traditional options.  Binary options are a contract between you and the brokerage.  The brokerage states a payout if the option expires in the money, at Tradorax usually 80% but the amount varies, and the option will expire worthless if it expires out of the money.

Usually the two options a trader has are to either buy a put or a call option, and the strike price is the exact price of the security at the time the trade is taken.  Essentially a trader is simply betting on whether the security will be higher or lower than the current price at the time of expiration.  It does not matter how far in the money a trade becomes, or if it is even only 1 cent in the money, the option payout price will be the same.  Because of this it is obviously in a traders interest to take low volatility but highly probable trades.

Who Makes Money

A brokerage makes money over time because with a big enough sample size, they will win about 50% of the time and all traders combined will win about 50% of the time.  Below is the payout tree to a trader with an 80% return for each winning trade, a typical payout.

Obviously for a binary options trading strategy to be effective for a trader, they must win on at least 56% of trades, given an 80% payout on winning trades. For this reason demo accounts are a necessity for new traders who need to work on developing a strategy.  Choosing only the most probably trades are vital for binary option traders, since it does not matter how far in the money a trade becomes.

Short Time Frame

Binary option contracts have very short time to expiration most of the time.  Some brokers offer time frames as low as 1 minute, and may offer as long as a couple weeks.  Because the time to expiration is extremely short the vast majority of the time, binary options are very convenient for traders who do not have all day to watch trades.  Trading can take place during a lunch hour, or whenever someone has a few minutes. The short time frame also makes it very enticing for traders to trade more often than they should, and traders must remember to maintain a disciplined approach.

Funding and Withdrawing

After the option expires a traders account is immediately credited with the payout amount or loss, and there are no restrictions on when a trader can withdraw money like traditional brokerage accounts.  There are also no restrictions on funding accounts, and this means day traders must be cognizant of the amount of money they are putting at risk, as they must with any strategy.

To open your own binary options account, click below to use our preferred broker.

Access Denied: Binary Options Regulations and Risks

Binary options have gained popularity among day traders but it’s important to be aware of the risks and regulations associated with this trading instrument.

While binary options are a legal investment option some unscrupulous brokerages have given the industry a bad reputation.

Traders need to exercise caution and choose reputable brokers.

It’s also crucial to understand that binary options are not traded on open secondary markets like traditional options.

Instead binary options are a contract between the trader and the brokerage.

Traders must predict whether the price of the underlying security will be higher or lower than the current price at the time of expiration.

With short time frames and high volatility binary options can be enticing but traders need to maintain discipline and employ a proven strategy.

Understanding the risks and regulations involved is crucial for successful binary options trading.