Welcome to my guide about binary options and binary options trading. My goal with this guide is to help you, the reader, to become a successful binary options trader and help you avoid all the pitfalls that you might encounter. Binary options trading can be very profitable but there are plenty of ways to fail and plenty of people who want to scam you out of your money. Most people who start trading with binary options fail and lose money. My goal with this website is to prevent you from becoming one of them. If you follow my advice on this page, you have a good chance to beat the odds and become one of the traders making money trading binary options. Most traders who make money trading binary options earn a lot of money. There are a lot of traders that earn 1000:s every day but there are also a lot of people who lose money trading binary options.
What are binary options?
Binary options are financial instruments that allow traders to speculate on the price movement of underlying assets such as stocks, currencies, commodities, and indices. They are called “binary” options because there are only two possible outcomes: a fixed profit or a fixed loss.
Here’s how binary options typically work:
- Choice of Underlying Asset: Traders select an underlying asset from the various options provided by a broker.
- Direction Prediction: Traders must predict whether the price of the underlying asset will be higher or lower than a specified strike price at a predetermined expiration time.
- Investment Amount: Traders decide how much money they want to invest in the trade. This amount is known upfront and is the total amount at risk.
- Expiration Time: The time at which the option expires is set beforehand. It could range from a few seconds to several months.
- Payout Structure: If the prediction is correct, the trader receives a fixed payout, usually expressed as a percentage of the investment amount. If the prediction is incorrect, the trader loses the entire investment.
- Example: Suppose a trader invests $100 in a binary option on the EUR/USD currency pair, predicting that the price will be higher in one hour, with a payout of 70%. If the price of EUR/USD is higher at the end of the hour, the trader would receive $170 (the initial $100 plus $70 profit). If the price is lower, the trader would lose the entire $100 investment.
Binary options can be attractive to traders because of their simplicity and the fact that potential profits and losses are known upfront. However, they have been criticized for being highly speculative and resembling gambling rather than genuine investment.
In some jurisdictions, binary options have faced increased regulation or outright bans due to concerns about fraudulent practices, such as manipulation by unscrupulous brokers. Traders interested in binary options should exercise caution and thoroughly research brokers and regulations in their region. It is essential to understand the risks and to trade only with reputable and regulated brokers.
Are binary options a scam?
No. Binary options are not a scam. There are, as mentioned above, plenty of traders who make a lot of money. They are however a minority. Most traders lose money. But this in itself does not turn binary options into a scam. The same can be said for a lot of other things. Only a few succeed. Those who succeed are those that take the time to learn how to trade and how the options work before they start trading with real money. Those who lose are those that jump in head first and get upset when they lose money.
There are a number of fraudulent brokers on the market that will steal your money. It does not matter how well you trade. They will never let you withdraw any money. These brokers give the entire industry a bad name and have played a large part in giving binary options a bad name. The fraudulent brokers never last long in the market but new ones keep taking the place of the old ones. The best way to avoid getting scammed is to trade using a well-established broker with a good reputation such as IQ option. Other brokers that have a good reputation include binary.com, Ayrex and High/Low. If you want to be able to trade with CFD:s as well then eToro is a good choice. Read my review of IQ option and the other brokers to find out more about them and find one that suits your needs.
If you want to try another broker then it is important that you keep the following things in mind.
- Always choose a broker that is regulated and that has obtained its license from a jurisdiction that offers good trader protection. Cyprus and the UK are good examples of this. Avoid brokers that are licensed from less trader friendly jurisdictions such as the Isle of man.
- Be extra sceptical about any broker that is based or owned out of Israel. A large number of the scam brokers have historically been run out of Israel. That a broker is based in Israel does not mean that it is a scam. Only that you should be extra careful to make sure it is not. You should be on your guard for scams regardless of where the broker is based.
- Always read a number of reviews before you sign up with a broker. Be vary of reviews that have nothing but good to say. They might not be 100% reliable.
- Always make a search on google for broker name + scam and see what you find. Do not disqualify a broker simply because you find complaints in the search results. Read the complaints and the responses to see if the complaints are valid or not. Many times they are not. They are simply complaints from traders who have traded without understanding how binary options really work. Traders that have no one but themselves to blame.
- Start by depositing a smaller amount of money. Try trading and withdrawing money. If everything works well then you can deposit more money and make larger trades.
- Do not trust anyone 100%. That includes me. That is why I am telling you to start by doing a small deposit and see that everything is as it should be instead of just telling you that a certain broker is the best choice for you.
Always start trading using your demo account
Trading binary options is harder than you think. It takes a lot of time and effort to be able to skillfully pick the right options that mature in the money. If you just buy random options then you will end up losing money. It is not enough that 50% of your options mature in the money. If you want to make decent money then your goal has to be that 70-75% of all options should mature in the money.
Most traders lose money when they first start trading. This can be avoided by taking full advantage of your demo account. A demo account is a very useful tool that many, but not all, brokers provide that allows you to trade binary options for virtual money. By using your demo account you can avoid losing any real money by trading using virtual money until you have become skilled enough to be able to make money trading binary options. This significantly reduces the risk associated with starting to trade binary options.
Do not be in a rush to start trading with real money. Do not jump to real money trading as soon as you had a week that ended with a profit. Keep trading using the demo account until such time that you are able to continually make a profit week after week. I recommend that you keep trading using your demo account until 6 of your last 8 weeks produced a profit. Then and only then are you ready to start trading using real money.
It is very easy to get tempted to start trading for real money too soon but the key to success is to avoid losing money. If you end up trading with virtual money for a few weeks extra does not matter since you will make a lot of money once you are skilled enough to start trading using real money.
Patience, skill and knowledge are the keys to successful binary options trading.