Binary options trading continues to grow in popularity, but there are still many who question if you can really make money with binary options. The rest of this post will attempt to answer that question satisfactorily for you.
The answer to the question of whether you can make money trading binaries is a yes. However as binary options is considered a complex financial instruments that is not suitable to all types of traders as money can be lost as well.
As with any financial product the difference comes down to your skill in predicting future price moves of the underlying assets. There are other factors involved as well, such as your money management, risk management, and trading psychology. As you can see, it isn’t really a simple question to answer.
At the end of the day it all comes down to you. If you are willing to put in the work of learning how both fundamental and technical analysis work you’ll improve your chance of success. Learning how the underlying assets you’ll be trading react to various global events can also help. It isn’t impossible to learn, you just need to be willing to invest the time and effort to become a well rounded and knowledgeable trader.
Treat your trading like a business, not like a trip to the casino, and you’ll have a much better chance of consistent success, though there are always risks involved which you should be fully aware of and you may lose all your invested capital.
How do Binary Options Work?
Binary options give you the opportunity to predict the price movement of some underlying asset such as a stock, a currency pair, a commodity, or a stock index, and potentially profitrom your prediction.
Binary options got their name because they have just two possible outcomes. You predict whether price will go up or down, and the binary option is either a winner or a loser, also called finishing in the money or out of the money. When your option ends in the money you win as much as an 86% return on your investment. If the option ends out of the money however, you lose 100% of your investment.
Besides deciding which direction price will take you also need to decide how long it will take for price to move in your favor, which is known as the expiry of the option. This can be as short as 60 seconds to as long as a week or more. This can lead to different trade styles for long-term trades versus short-term trades.
Binary Option Long-term Trades
One of the preferred ways to trade longer-term binary options is through news events. Some traders spend much of their time watching for new product releases from companies such as Apple, because such new products can cause an increase in stock price, at least temporarily.
Basically these traders will watch for new product announcements from tech companies and then mark the date of the release on their trading calendar. A day or two prior to the product release they will purchase a long-term binary option that predicts the price of the underlying stock will increase over the coming 48-72 hours.
Because there is usually several new product releases each monththis can be one way to conduct analysis , even though alone, it is not sufficient. Savvy traders know that it is important to take both fundamental developments and technical factors when trading.
Fundamental analysis requires the patience to consistently mark these product releases on your calendar and wait for them to happen. It is common though not guaranteed to see a stock rising in anticipation of a new product launch, which is what has made this a popular strategy for binary option traders.
Flexibility is a key aspect in binary options trading. Traders can complement their long terms trades with shorter expiries. Short term expiries can be more challenging and risky, and it is imperative to do technical analysis on charts. This technical analysis is done to identify price trends based on historical data so that you can take advantage of them by making a trade that is hopefully profitable for you.
There are many strategies that depend on technical analysis. Some are quite simple, such as moving average crossovers, while others can be extremely complex.All of the technical analysis strategies share one thing though; they are an important aspect to the assessment of the current market situation and add to the traders analysis and research.
Are Binary Options a Financial Product?
The question whether binary options are considered financial instruments (for example like shares) often comes up because some people equate these products as gambling products. As per the European Commission, binary options meet the definition of financial instruments and therefore fall within the remit of the Markets in Financial Instruments Directive (MiFID).
Cyprus Securities and Exchange Commission (CySEC), and certain other regulators, decided to authorise companies offering binary options and/or allow the provision of such services in their jurisdiction on a cross border basis in the European Union.
We encourage you to trade only with regulated brokers in order to take advantage of a number of benefits like transparency, clients funds safeguarding measures, best execution and many more. Remember always to ascertain whether you are permitted to use the services of each broker (even if it is regulated somewhere) based on the legal requirements in your country of residence.
Trading binary options involves substantial risk and may lead to loss of all invested capital