Trading binary options without knowing what exactly to do is just gambling! What you need is a good binary options trading signal provider. This article will let you know what you have to look for and also help you to make the right decision.
01. Why Trading with Signals?
02. How to Choose a Good Binary Options Signal Provider?
04. Additional costs
06. Trading sessions covered
07. How the Signal is Transmitted?
08. Expiration Dates
09. Are Automated Systems Good?
10. The Best Way to Trade with Binary Options Signals
11. Other Things to Consider
The underlying financial products that make most of the binary options market are the currency pairs. Basically, we’re talking about the same currency pairs like in the forex market. Moreover, forex brokers and binary options brokers are offering the possibility to trade other instruments like commodities (gold, oil, etc.), stock indices (Dow Jones, S&P500, DAX, FTSE, etc.) as well.
The idea behind the above statements is that forex trading and binary options trading are similar when it comes to the products offered for trading and it is no wonder that the binary options industry is developing based on the forex brokers models.
Why Trading with a Binary Options Signal?
Recent years saw online trading exploding in popularity, in line with greater Internet covering, faster connections, and the overall retail trading grew more and more by the day.
The fact that smartphones and tablets appeared, only contributed to this fast-changing environment and nowadays a trading account can be accessed either from your PC/desktop, or smartphone/tablet, etc.
With 3G available almost everywhere, a trade can be taken virtually anywhere, at any time, without much of a technological effort.
However, in order to place a trade, one needs a reason for it as if there is no analysis and logic behind the trade, then trading is pure gambling.
Time is something that people do not have, as they are involved in the day to day jobs and markets are moving 24/5. This means that in order to find good entries for your trades, either you’ll trade for a living, or simply you’ll have a hard time in the trading world.
To avoid that, and keep traders close to the forex market, trading signals providers appeared. It was not long until binary options industry offered the same, and now a simple Internet search will see a lot of signal providers advertising their services.
How to Choose a Good Binary Options Signal Provider?
This is such a complicated question that it is very difficult to find the proper answer.
The first thing to do here is to totally ignore free signals providers. After all, ask yourself the following question: why would anyone that is trading binary options profitably, would want to give away his/her signals for free?
Some of this providers, while offering the signals for free, are pushing for the sale of different programs to trade with or are conditioning the trading only on some specific brokers they have an interest in and they are earning a commission on each and every trader they bring and on each and every trade the new trader takes. This is how it works!
Such offers come in most of the cases with some associated costs, or advertising, or pushing other products for sale and are to be avoided by all means. Having said that, we’re left with binary options signal providers that ask for a fee for their services.
Search for the signal provider’s reputation and this should not come from its website. Look for some other information from other sources, like trading forums, check scam lists in order to see if the signal provider you’re interested in is listed anywhere, if yes, what is the reason for that, etc. All in all, a very solid analysis should be made in order to avoid being trapped in a scam.
Trading forums or chats are very good information sources regarding a broker or a trading signal provider as people share their experiences and through those experiences an idea about binary options in general and binary options signals providers can be made.
If the signal provider asks for a monthly fee for the signals, then there should be no additional costs associated with receiving the signal. Some providers will push for selling some other software or make you open a trading account with specific brokers, and this should be taken with a grain of salt. Make sure you ask sufficient questions and have the right answers before accepting any other additional cost.
This should be publicly available and serious signal providers will always have performance listed on the homepage of their website. Any serious trader will know in advance that in trading there is no holy grail or recipe for winning one hundred percent of the times.
Trading is a tough business and it is normal to have drawdown periods from time to time or even a losing streak. What is important is for the account to grow on the medium term and therefore one should look at the overall performance the signal provider is having, not the fact that is having a few bad months.
Having said that, a binary options signal provider that advertise only winning trades as the overall performance should be avoided as well. That is not accurate information!
Trading sessions covered
Online trading has the major advantage that it addresses virtually to anyone that has an Internet connection, no matter where that person actually lives. This is very important because if you’re living in Australia but the signal provider is active during the London session, you might miss a lot of trading signals. The way to go is to find out when the bulk of the signals are being transmitted and if you can follow them based on your location.
How the Signal is Transmitted?
This is a very important thing to know from your signal provider as it may require some additional steps to follow from your end. The classical way to receive trading signals is per email but this can be done via other communication tools like Twitter accounts, Facebook instant messaging, or SMS.
In order to be able to follow binary options signals, expiration dates that are going to be used are important. First of all, it is impossible to follow short-term expiration dates as simply one may not have the necessary time to do it.nSecond, make sure that expiration date is offered by your binary options provider, not to mention the financial product.
Are Automated Systems Good?
As mentioned at the start of this article, binary options industry took the forex model industry and adapted to it very fast. Automated trading is well-defined in the forex trading industry and binary options one started to adapt it as well and can be a good addition to a binary options trading strategy.
An automated trading system implies that positions are being taken by a robot or Expert Advisor as it is also being called. This allows for trades to be opened when specific market conditions are met.
In the world of binary options there are some binary options signal providers that offer the possibility to trade with binary robots and all you have to do is to open a trading account with the brokers listed by the signal provider, download the software and you’re good to go.
There are usually different risk levels that one may choose from, something like aggressive, conservative, moderate, etc., and the value of an investment can be set as well.
In most of the cases these systems also let you chose the other side of the trade when compared with the actual signal that is generated. This is just to proof that there is no scam and in reality a trader is able to trade on its own as well.
Automated binary options trading systems are good in the sense that trades are being taken without the trader having to take any other additional step.
The problem that arises here comes from a profitability point of view. While it is simple to advertise this kind of programs, it is very difficult to maintain a profitable line due to the various expiration dates used and because, on top of what forex trading implies, binary options trading needs to take the time element into account as well.
The Best Way to Trade with Binary Options Signals
The tone of this article so far left little or no positives for using a binary options signal provider and the reason for that comes from the fact that this industry is subject to many scams.
Therefore, one needs to be really skeptical about anything he/she reads or learns about a broker or trading signal provider, etc., as just because some information is written somewhere doesn’t mean it is true.
Providing one does have a good broker to trade with and is interested in trading via binary options signals, the best way to do this is to hedge your trading account with trades taken from various signal providers.
The way to do that is to have more than one signal provider, like two or three or maybe even more, and let the trading account take those signals. The idea behind this approach is that this way the trading account is partially hedged in the sense that the signal providers are supposed to be traders that do take into account either technical or fundamental analysis.
In other words, it is difficult for all of them to be on the wrong side of the market, but possible for all of them at some moment of time to be on the right side of the market.
This way, when things are tough the account is fully hedged or partially hedged and not much of loss is incurred, but when things align in the same direction of the market, profits can be made.
The key here is for the proceeds from this approach to cover the trading signals provider’s costs and some profits to be left for withdrawing purposes. After all, what is the purpose of trading financial markets if not for a profit?
Other Things to Consider
So far we covered pretty much everything that was supposed to be known regarding binary options signal providers and respecting the steps above one will have a good chance to find a good signal provider as well as a good chance to make a profit.
On top of what was mentioned so far in this article, other things may be useful to consider, like the following:
- Sales push. If a broker or a trading signal provider is trying to push a sale, this is not a good sign, especially if this is made in an aggressive way.
- Avoid bonuses. Binary options brokers are working with providers as well and it is common that a welcome bonus is credited to any new client. Make sure you read and understand the conditions to clear such a bonus as they are really difficult to fulfill. Usually, to clear a bonus one needs to trade a tremendous volume and sometimes brokers will not allow clients to withdraw any amount (including the one deposited) until that trading volume is done. Conditions are intentionally set so high that in the end, the trader will lose most of the funds on top of the bonus received. If the binary options signal provider asks you to open an account with a specific broker, make sure you avoid any welcome bonus.
- Ignore signal providers that advertise only profitable trades and easy money to be made.
To sum up, trading with binary options signals can be profitable if one knows what to look for and understands the overall binary business.
Rookie mistakes and scams can be avoided and trading with a binary options signals provider should be the outcome of a due diligence process that considers both the advantages and the disadvantages of this line of business.
Respecting the points mentioned here are key for successfully trading binary options with a signal provider.