This binary options trading guide will help you to learn the basics in order to make your own first trade. You will also learn some important details on how the market works.

01. What is binary trading?
02. Can I sell an option?
03. When is a binary option profitable?
04. What is a high/low binary option?
05. Are bonuses recommended?
06. Should the broker be regulated or not?
07. Should I trade short term or long term expiration dates?
08. Do I have to wait for one month for an end of month binary option to expire?
09. What financial products to trade?
10. What is the rate of return of a binary option?
11. Can I close a binary option ahead of its expiration?
12. Do I really make 80% profit in 60 seconds?
13. Why should I use long term expiration dates?
14. What other types of binary options are there?
15. How do I know when/what economic data is released?
16. What are the most important economic events to look for?
17. What other economic releases to watch?
18. Why trading binary options?
19. What if the price moves in opposite direction before the expiration? Can I still win?
20. Is there a limited number of options on a financial product?
21. How is binary options trading different than forex trading?

1. What is binary trading?

Binary Options TradingBinary options trading is just another product to trade financial markets and is extremely popular due to its simplicity. A trader should choose the financial instrument to be traded (currency pair, stock index, commodities, a specific stock chart, etc.), the direction (up, down, sideways), set the expiration date and just wait for the option to expire in order to see if it is profitable or not

2. Can I sell an option?

No. Binary options can only be bought. If you think the price is going to move to the upside, you have to buy a call option. On the other hand, if you think the price is going to move to the downside, then you should buy a put option.

3. When is a binary option profitable?

A binary option makes a profit when it expires ITM (In The Money). This means that in the case of a call option, if the price at the expiration date is bigger than the striking price (the price you bought the option at), then the option is being said to expire in the money and a profit is being made. The same is true if after buying a put option and at the expiration date price is lower than the striking price (the price you bought the option at), the option is said to expire in the money.

4. What is a high/low binary option?

Binary Trading BrokerThere are many types of binary options and the most popular ones are the high/low binary options. Under these options, all a trader has to do is to pick the direction (high or low) and trade call or put options with a specific expiration date. If at the expiration date the price of a call option is higher than the striking price, a profit has been made. On the other hand, if the price of a put option is lower than the striking price at the expiration date, the option is a profitable one.

5. Are bonuses recommended?

Binary options brokers offer welcome bonuses based on the amount that is deposited and can go up to a specific sum. Before accepting the bonus a trader must clearly read and understand the conditions for clearing the bonus as this comes most of the times with a specific trading volume that must be done before any withdrawal can be processed. We don`t reccoment to accept these bonuses!

6. Should the broker be regulated or not?

Trading with a regulated broker is always better than otherwise. Regulation refers to the fact that the binary broker is under the supervision of a financial authority and in the case something is happening with it, the financial authority steps in to make sure traders do not suffer. If you want, it is like having an insurance that the broker you are trading with is the right partner for your trading activity.

7. Should I trade short term or long term expiration dates?

The answer to this question comes from the type of analysis one is using before taking a trade. Short term expiration dates range from sixty seconds to one hour, and they are the result of either fundamental analysis (interpreting economic releases in order to have an idea where price will go) or technical analysis (forecasting future prices based on patterns that formed in the past) made on lower time frames (one minute chart up to the five minutes chart). On the other hand, if the analysis comes from bigger time frames, like daily charts or four hours charts, expiration dates should be bigger, starting with the end of day end ending with the end of the week or even month.

8. Do I have to wait for one month for an end of month binary option to expire?

Digital Options Trading PCNo. It depends on very much when the option is being traded. If you trade the option, say, on the 16th of the month, then you’ll have to wait only two weeks for the option to expire and see if it is in the money (made a profit) or out of the money (made a loss). If you trade the option just three days before the end of the month, then the waiting time is just that: three days.

9. What financial products to trade?

The most popular financial products for trading binary options are the currency pairs. They represent the vast majority of products offered for trading at every binary options broker. Beside currency pairs, commodities like gold, oil, silver, platinum, cotton, etc. or indexes like DJIA (Dow Jones Industrial Average), SPX (S&P500), DAX (German index, etc.) are common as well.

10. What is the rate of return of a binary option?

This depends very much on the type of the option traded and the expiration date, as well as on the broker itself and the financial product offered. The typical rate of return can range for as low as 65% to as high as 80% or more for each option that is traded.

11. Can I close a binary option ahead of its expiration?

Yes, you can. However, the rate of return will be smaller than in the case the binary option is being left to expire. As a rule of thumb, the more the option is approaching its expiration date, the more you’ll be rewarded if you close the option earlier. This possibility tests the trader to the limit as booking earlier profits will always be more tempting than actually sitting on your hands until the option expires.

12. Do I really make 80% profit in 60 seconds?

Yes, if the option expires in the money. However, the shorter the expiration date, the riskier the binary option is. As a rule of thumb, short term expiration date binary options are riskier than long-term expiration date ones. It doesn’t mean though that these binary options cannot be traded. With a sound binary options trading strategy and good timing, profiting from such options is possible.

13. Why should I use long term expiration dates?

International Options TradingCurrency pairs tend to be extremely volatile and in order to be on the right side of the market sometimes it is wiser to skip possible fake moves. The only way to do that is to trade with a longer time horizon and in this way fake moves can be avoided. For example, the NFP (Non-Farm Payrolls) in the United States is one of the most important economic releases. Currency pairs make wild moves on the day the NFP is released. What a trader should now is that the NFP is released on the first Friday of each and every trading month, and in order to avoid the volatility surrounding the event, o wise move would be to trade with end of day expiration date, one week or even end of month. This way possible fake moves can be avoided.

14. What other types of binary options are there?

Depending on the broker, there are multiple types of binary options other than the high/low ones. One touch is a popular binary option and the idea behind it is to set a specific price or target to be touched in a specific amount of time (expiration date). If this is happening, the option is a profitable one, and the profit will be credited to the trading account instantly, even before the expiration date if the level was touched earlier. If on the other hand time expires and that level is not reached, the option expires out of the money, and the invested amount is lost. This type of option is recommended when a ranging environment is expected, like the Asian sessions, when price action is really slow. Some brokers even let you build your own option, in the sense that you can choose the product to be traded, chose whatever the expiration date you want, and even the rate of return. This way all factors are being priced in and it all depends on the accuracy of the analysis that lead to the decision to trade the option.

15. How do I know when/what economic data is released?

Very simple. Just go over the Internet and search for the economic calendar. This information is for free and gives the economic releases on each and every trading day, week, month, together with their importance and the forecasted value. Using the economic calendar is a great way to avoid periods of great volatility as well as to understand how an economy is doing. It also offers the time when these releases are hitting the wires so it represents a great tool for setting the right expiration date of an option.

16. What are the most important economic events to look for?

By far, central banks are the most important ones when it comes to trading in general and to currency pairs in particular. Knowing when central banks are meeting to set the interest rate and the monetary policy for the period ahead is key to any currency and very important to any trader. As a rule of thumb, if a central bank is raising the interest rate (also called hiking), this is positive for the currency (or bullish) and call options should be traded. On the other hand, if a central bank is easing the monetary policy or cutting rates, put options for that respective currency should be traded as no one wants to own a currency that pays a lower interest rate.

17. What other economic releases to watch?

Besides the NFP mentioned above, there are other releases to watch that bring a volatile environment. Here are some of them:

  • CPI (Consumer Price Index) or inflation. This is key to central bankers as inflation is part of any central bank mandate. If inflation moves higher, expectations grow that the central bank will raise rates next time they meet and the currency will start appreciating.
  • PMI’s (Purchasing Managers Index). These indicators refer to different sectors of an economy (manufacturing, services, construction) and are interpreted based on the 50 value. Any print above the 50 number calls for a sector that is expanding, so it’s a positive thing for the currency. The opposite is true for a PMI below 50.
  • GDP (Gross Domestic Product)
  • Retail Sales
  • Press conferences, etc.

18. Why trading binary options?

Binary Options Trading AnalysisBinary options are a great way to diversify a portfolio due to the high rate of return that is being offered. Of course, that trading should be done with a sound money management plan as binary options trading allows a trader to put the time element to a trade. When compared with forex trading, for example, there is no stop loss when trading binary options: the actual stop is in time. If time expires, the option is automatically being closed. It doesn’t matter the distance traveled. All that matter is for the price to be higher in the case of a call option or lower in the case of a put option, even if only by a bit. In comparison, on the forex market, setting a take profit and a stop loss is even more important than the general direction the market is moving. Moreover, the possibility of earning 70% plus or more in 60 seconds is always a great incentive for starting to trade. With the help of a binary options trading signals service your start will be easier.

19. What if the price moves in opposite direction before the expiration? Do I still have a chance to win?

Yes. The option may be out of the money for the whole time until expiration. What matters is to be in the money when time expires.

20. Is there a limited number of options on a financial product?

There is no such thing. The only limitation you have is being given by the balance of your trading account. As long that there are funds in the account that are not blocked in other trades, another option can be traded.

21. How is binary options trading different than forex trading?

With binary options trading, the only limitation comes from the expiration date. I would say it is more important to set the right expiration date than the actual direction. On the other hand, in forex trading price is limited by both take profit and stop loss.