Tips to Start Trading Binary Options (Source: https://unsplash.com/photos/Gw_sFen8VhU)
Tips To Start Trading Binary Options
Stock market beginners might be overwhelmed by the many assets and strategies you can use. To get used to trading, it helps to stick to simple trading variants first. Binary option trading is a great starting point. The transactions are simple to understand, and the risks can be calculated easily. This way, you can invest safely and in a controlled manner. If you are interested in starting binary option trading, here are the best beginner tips.
What is Binary Option Trading?
Binary options are a simple variant of stock market trading. You make a prediction with a yes or no answer and win or lose depending on the outcome. To make your wager, you simply have to guess which direction an asset’s value will go and pick a date on which the result will be decided.
This way, the result of the trade can only be binary and easily calculated: You either win and increase your investment by the pre-determined amount, or lose the money entirely. In comparison to a regular stock transaction, how much money you make or lose is not determined by the exact value of an asset, but the general direction it took.
To make this investment, you can choose a variety of underlying assets to base your prediction on. It can be simple stocks, ETFs, currencies and much more.
This is How You Can Start Trading Binary Options
The most basic form of binary option trading predicts the movement of an asset’s price until it reaches an expiration date. Next to this simple variant, there are more complex options. These might make you guess if the value will be in- or outside a price range or how many pre-determined levels it will climb or fall.
The basic binary trading variant is the best choice for beginners. Once they are comfortable with this style of trading, they can start trying out variants.
- Chose an Investment Strategy – Do some research into binary trading, the available assets and current market movements.
- Chose an Asset– Chose the asset your prediction will be based on.
- Chose an Option – Chose the call or put option. A call option predicts an asset’s value to rise, a put option predicts it to fall.
- Chose an Expiration Date– Set an end date for your trade. This timespan can be under 24 hours or last multiple weeks.
- Wait for the Result– On the expiration date, you will learn if your prediction was accurate or not.
- Repeat– Take your wins and reinvest them, or accept your loss and readjust your strategy.
Find the right broker
Before we can do any trading, we need to find a good trading platform. Online brokers give us browser or app platforms we can use to access the stock market. They have different providers, prices, features, assets, and service. To find out if a broker is right for you, search for binary options brokers on review sites and look for a demo account for binary options trading on the available trading apps.
Learn more about this trading method
Financial advice is rarely universal. To find out what the best investment strategy is for your specific situation, it is best to not act blindly, but to get yourself informed. There are many resources online that will teach you all you need to know about binary options trading, the current market situation, and helpful strategies.
Use a demo account
Demo accounts are a great option to figure out if a broker is the right choice for you. These test accounts give you practice funds you can use to trade on their app. These demos typically include every feature the service has to offer. This way, they can show you exactly what you would be getting if you started paying for their platform.
Using the demo account gives you the exact same experience you would have when using the app regularly, without the potential to make or lose money.
Know your limits
Setting up limits might be the most important step in trading. Many events can unexpectedly affect the movements of the market. To avoid bankruptcy and total losses, we should always keep an eye on the risks and invest safely.
- Make Small Investments: The ‘small’ applies to the maximum percentage of our total capital that we should use in investments. Experts advise to only use 5 % of our wealth for trading. This way, a loss won’t ruin us.
- Don’t Get Carried Away:Trading can have the same dopamine releasing effect as addictive habits like gambling. Even if we feel in control, it is best to implement some safety measures. A common strategy is to give yourself hard limits. For example, a set amount of hours to trade per day or a number of maximum trades.
- Be Wary of Bonuses:Some trading apps offer bonuses if you join them. These free funds typically are connected to terms & conditions. Read them carefully. Often, you must spend more money than you would like for comparatively small benefits in return.
- Invest Strategically, not Emotionally: This is easier said than done. If you are on a winning streak, or frustrated by losing, you can be incited to keep trading to keep winning or win back the money you lost. By setting up limits, like a set number of trades per day, you can try to control these outbursts.
Binary options trading can be a great way to get into investing on the stock market. The predictions you must make are simple and controllable. You can calculate exactly how much you would win or lose, and can decide which investments are too risky or worth it. Additionally, by setting the time frame yourself, you can effectively control how high the risk of a bet is, by giving the asset more or less time to lose or gain value. By using a good online broker, you can try out binary option trading for yourself.