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How To Consistently Make Money With Binary Options Trading.
Are you familiar with the game of baseball? It’s a popular sport in America, Japan, Cuba, South Korea, and a few other countries.
The basic idea is that a pitcher throws a ball at a batter, whose goal is to hit the ball. If he does so without the defensive team catching the ball, the batter will advance to a base.
In baseball, one of the best things a better can do is a home run. This occurs when the batter hits the ball over the fence on the perimeter of the field. When this happens, the batter automatically scores a run.
But in order to hit a home run, the batter must swing very hard. This often leads to the batter missing the ball completely and instead getting what is called a strikeout.
The harder batter tries to hit a home run (also known as “swinging for the fences”), the greater the risk of the batter striking out. Therefore, many batters try to simply hit the ball and move to first base instead.
So, what the heck does this have to do with trading binary options?
Simple. Continually attempting to make huge profits on every trade, rather than settling for consistent, smaller profits, is the same as swinging for the fences.
You Only Need To Get On Base.
With a maximum payout of 90% for winning trades, which the best binary options brokers such as Finpari provide, you only need to be right approximately 50% of the time in order to be a profitable trader.
This means you don’t need to swing for the fences. Rather, you only need to get on base majority of the time.
This means it is crucial to maintain the same exact risk on every trade.
Since it is impossible to know ahead of time which of your trades trades will be winners and which will be losers, don’t risk a greater amount on one trade than another.
Let’s say you make three trades and to them end up being winners. If your capital risk on each trade is the same, you will have made money on the some of those three trades, regardless of which one of those three trades was the losing one.
However, what happens if your losing trade was taken with $1,000 risk, but you only risked $300 in your two winning trades?
The answer is that you would still end up losing money on the sum of those three trades, even though two of the three trades were winners.
Therefore, keep your risk consistent, which will allow you to get on base majority of the time.
In my first blog post, I said you need to have a binary option trading plan that clearly defines the amount of risk you take per trade. Now you understand why.
Should You Practice Trading Binary Options?
By the way, I almost forgot to warn you about paper trading, which is making practice (imaginary) trades without real money.
A lot of beginning binary options traders think this is a great thing to do because it allows you to “test the water” without risking any real money.
However, I’m here to tell you that paper trading is useless and creates false expectations.
Why? Because those human emotions that I talked about in my last blog post (greed, fear, and regret) cause you to make decisions much differently when your own real money is on the line.
So, rather than paper trading, my advice is to immediately start by trading real money, but just keep your capital risk per trade small until your profits start to grow.
Be sure to tune in for my next blog post, in which I will share with you one of the most common mistakes that beginning binary options traders make, as well as a very easy way to avoid falling into the same trap.
I can’t wait to tell you about it!
To receive the best live binary option trade signals, delivered in real-time to your Android device, download Binary Signal App from Google Play store today (progressive web app version coming soon).
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You certainly hit a home run here! Emotions, emotions, emotions, I believe, are the most serious problem to inexperienced traders. The desire to quickly recover a loss or two can and is very damaging to any trader.
How to Win Binary Options Every Time.
How to win binary options every time? – The last five years have been the golden years for binary options. The market has grown phenomenally and traders are joining in the trade in multiples. The binary options have expanded and the systems have become more sophisticated and accurate, especially with the advent of automated systems. Profits have risen and a good number of traders have made impressive profits over this time. Within the same period, there have been traders who did not do very well in the binary options trading. This will happen if you do not develop a plan to profit from binary options consistently. Also selecting a proper broker like IQ Option or Option Robot will help you along the way!
Binary options trades, like any other trading transactions in the assets and commodities markets can go either way; make a profit or lose your investment. The trick is to keep the winnings considerably higher than losses over an extended period of time. Here you will learn what to do and what not to do to create a framework within which you can make winning trades consistently. What you need to do is:
Control your expectations.
Probably the right word to use here is ‘greed’. In binary options, it is very easy to be overwhelmed by your emotions. Such things tend to happen when you are winning, or losing money. The definite thing you need to do is to keep a clear head; keep all your emotions at bay. You must have come across trading platforms in this business claiming of extraordinary successes of making millionaires in a few months after making a small deposit. You probably want to be that person. While there is nothing wrong with that, the bad news is that you probably won’t be that person. With that out of the way, focus on making small consistent wins as a start, and then expand from there. The chances of becoming a millionaire within three months of trading with a deposit of $500 is a million to one; do not make rash decisions to invest all or most of your investment on a single trade just because you just made are on an 85% roll. Keep a clear head.
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2. The Binary Option Robot Will Predict the Price Movement.
Your robot will assess a wide-range of factors, and then make a prediction on how the assets price will move, saying: Call (up) if it believes the price will rise and Put (down), if it believes the price will fall.
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Choose the right broker or trading system.
Your success or failure in the binary options business is considerably dependent on your broker, your trading system or both. Making the right choices here is paramount. Go through as much literature on your shortlisted brokers as you can to aid you in making an informed decision. A good thing is to stay away from brokers and systems promising over the top rewards and those with scanty information on how and what they trade. Give your selected broker’s system a test run with the demo account provided. For a beginner, you are well advised to try your strategies with a demo account other than a real money account. One thing about demo accounts is that you get a true feel of what you should expect. Try a few set strategies with the system and some of your own as well. By the time you come to deposit real money, you will have an idea of what to expect, what to do and what to refrain from doing. Usually the best binary options brokers have demo accounts.
Go for the automated systems.
If you are the kind of person, who does not like keeping your eyes on the financial markets and currency values, or you simply do not have the time, and you wish to try your hand at binary options, the option robots could be your preferred instrument. Unlike the manual trades where the most you get are signals, with automated systems, even the trading is done for you, even when you are off the computer. What happens is that you make the settings yourself, your daily limits, your maximum amounts per trade and things like that. The best thing about this is that you do not have to worry about the effect a Federal Reserve announcement will have on your next trade. The robots analysts and advanced algorithms will handle this for you. They will remove the headaches from binary options trading which is a good thing if you are not a professional trader.
Develop your own strategy and review it from time to time.
The people who make a good income from binary options trading do so because of many factors. Among the most important is the strategy you use to make your trades. For experienced and professional traders, they can make use of the information they have to make winning trades. For novices AND experienced traders, one important strategy is to use the free trade signals provided by trading systems. While they may not be 100% accurate every time, they are way above uninformed decisions that many traders are likely to make. It will make your work easier to develop a strategy that comfortably gives you a consistent profitability. The strategy should not be written on stone all the same: you should give it an intensive review from time to time to see if you are trading at your best. Such a review of your strategy might result in a complete or partial overhaul, a few small changes or it can just remain the way it is. The trick is to keep reviewing it after some reasonable time.
Make your expiry time selection wisely.
The systems may be giving you a signal that your research confirms as one that will make a winning trade, but you lose your money anyway. Chances are that you made the right trade but you chose the wrong expiry time. This is where your own input is called for. If the signal is dependent more on an issue that is about to happen rather than from a trend, your expiry time will be crucial due to the timeline of the said event or issue. Make good use of the analysis charts available from your trading system to choose the right expiry time. This will ensure that the likelihood of losing your investment due to wrong timing is eliminated or minimized.
Stick to trades with high probability.
When trading binary options, remember it is either you win a trade and make a profit or lose the trade and lose your investment in that trade as well. This means that you should stick to trades that offer the highest probability of coming out as a winner. If the movement of the value of an asset is dependent on a news item, make your trade before the rest of the market catches up by trading with options in the seconds, 1 minute options or even the 5 minute options. It will be your experience and knowledge that will enable you to make the right trade within the right expiry period. The lesson learned here is that you should be on top of things when it comes to live financial news and live reports. You can do this by subscribing to paid news sites that will keep you updated at all times. An alternative is to follow such accounts on social media to help you find out what is happening globally in the financial markets.
Trade only when the market is active.
In a 24 hour period, the time when there is significant change in trends can be concentrated to less than an hour. This implies that for most of the day, nothing much is actually happening. What you should do is to learn when to anticipate changes in trends and this is where you are likely to make the most gains which will be much better than when the markets are in a lull.
Accept that sometimes you will lose some trades.
Anybody promising a 100% success rate in option signals is not telling you the truth and you can take that to the bank. Traders who have been in the market for some time and they are making good profits day in and day out understand one thing; you will definitely make some loses here and there. To survive in this business the only thing all your strategies will be geared to is maximizing your winning trades and minimizing your losing ones. There is nothing like total elimination of loses, even by professional traders; they make wrong calls many times too.
Make frequent withdrawals.
You are in binary options trading to make money for yourself and not to trade for the sake of it. What you should do is to minimize the risk of making some rash trades which can put you out of business in a flash. Make frequent withdrawals to pay yourself for your efforts. One good way to do this is to make withdrawals for all money that comes above your deposit and save it. This way, you will find out if binary options trading works for you or not.
These tips are not the definite bible on making winning trades at the binary options, but it will go a long way in getting you into the right picture of what you should and should not do. There are thousands of satisfied traders in binary options; there is no reason why you too cannot join them.
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Author: Michael Allen.
Michael Allen is the main author at binaryoptionrobotinfo. He holds a PhD in Economics and has worked in investment banking for 24 years.
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Michael Allen.
Michael Allen is the main author at binaryoptionrobotinfo. He holds a PhD in Economics and has worked in investment banking for 24 years.
16 comments.
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A Guide to Trading Binary Options in the U. S.
Binary options are based on a simple yes or no proposition: Will an underlying asset be above a certain price at a certain time? Traders place trades based on whether they believe the answer is yes or no, making it one of the simplest financial assets to trade. This simplicity has resulted in broad appeal amongst traders and newcomers to the financial markets. As simple as it may seem, traders should fully understand how binary options work, what markets and time frames they can trade with binary options, advantages and disadvantages of these products, and which companies are legally authorized to provide binary options to U. S. residents.
Binary options traded outside the U. S. are typically structured differently than binaries available on U. S. exchanges. When considering speculating or hedging, binary options are an alternative, but only if the trader fully understands the two potential outcomes of these exotic options. (For related reading, see What You Need To Know About Binary Options Outside The U. S. )
U. S. Binary Options Explained.
Binary options provide a way to trade markets with capped risk and capped profit potential, based on a 'yes' or 'no' proposition.
For example: Will the price of gold be above $1,250 at 1:30 p. m. today?
If you believe it will be, you buy the binary option. If think gold will be below $1,250 at 1:30 p. m., then you sell this binary option.
The price of a binary option is always between $0 and $100, and just like other financial markets, there is a bid and ask price.
The above binary may be trading at $42.50 (bid) and $44.50 (offer) at 1 p. m. If you buy the binary option right then you will pay $44.50, if you decide to sell right then you'll sell at $42.50.
Let's assume you decide to buy at $44.50. If at 1:30 p. m. the the price of gold is above $1,250, your option expires and it becomes worth $100. You make a profit of $100 - $44.50 = $55.50 (less fees). This is called being in the money.
But if the price of gold is below $1,250 at 1:30 p. m., the option expires at $0. Therefore you lose the $44.50 invested. This called out of the money.
The bid and offer fluctuate until the option expires. You can close your position at any time before expiry to lock in a profit or a reduce a loss (compared to letting it expire out of the money).
A Zero-sum Game.
Eventually every option settles at $100 or $0; $100 if the binary option proposition is true, and $0 if it turns out to be false. Thus each binary option has a total value potential of $100, and it is a zero-sum game – what you make someone else loses, and what you lose someone else makes.
Each trader must put up the capital for their side of the trade. In the examples above, you purchased an option at $44.50, and someone sold you that option. Your maximum risk is $44.50 if the option settles at $0, therefore the trade costs you $44.50. The person who sold to you has a maximum risk of $55.50 if the option settles at $100 ($100 - $44.50 = $55.50).
A trader may purchase multiple contracts, if desired.
Another example: NASDAQ US Tech 100 index > $3,784 (11 a. m.).
The current bid and offer is $74.00 and $80.00, respectively. If you think the index will be above $3,784 at 11 a. m., you buy the binary option at $80 (or place a bid at a lower price and hope someone sells to you at that price). If you the think the index will be below $3,784 at that time, you sell at $74.00 (or place an offer above that price and hope someone buys it from you).
You decide to sell at $74.00, believing the index is going to fall below $3,784 (called the strike price) by 11 a. m. And if you really like the trade, you can sell (or buy) multiple contracts.
Figure 1 shows a trade to sell five contracts (size) at $74.00. The Nadex platform automatically calculates your maximum loss and gain when you create an order, called a ticket.
Nadex Trade Ticket with Max Profit and Max Loss (Figure 1)
The maximum profit on this ticket is $370 ($74 x 5 = $370), and the maximum loss is $130 ($100 - $74 = $26 x 5 = $130) based on five contracts and a sell price of $74.00. (For more on this topic, see Introduction To Binary Options. )
How the Bid and Ask are Determined.
The bid and ask are determined by traders themselves as they assess the probability of the proposition being true or not. In simple terms, if the bid and ask on a binary option are at 85 and 89, respectively, then traders are assuming a very high probability that the outcome of the binary option will be yes, and option will expire worth $100. If the bid and ask are near 50, traders are unsure if the binary will expire at $0 or $100 – it's even odds.
If the bid and ask are at 10 and 15, respectively, that indicates traders think there is a high likelihood the option outcome will be no, and expire worth $0. The buyers in this area are willing take the small risk for a big gain. While those selling are willing to take a small – but very likely – profit for a large risk (relative to their gain).
Where to Trade Binary Options.
Binary options trade on the Nadex exchange, the first legal U. S. exchange focused on binary options. Nadex provides its own browser-based binary options trading platform which traders can access via demo account or live account. The trading platform provides real-time charts along with direct market access to current binary option prices.
Binary options are also available through the Chicago Board Options Exchange (CBOE). Anyone with an options-approved brokerage account can trade CBOE binary options through their traditional trading account. Not all brokers provide binary options trading, however.
Each Nadex contract traded costs $0.90 to enter and $0.90 to exit. The fee is capped at $9, so purchasing 15 lots will still only cost $9 to enter and $9 to exit.
If you hold your trade until settlement and finish in the money, the fee to exit is assessed to you at expiry.
If you hold the trade until settlement, but finish out of the money, no trade fee to exit is assessed.
CBOE binary options are traded through various option brokers; each charge their own commission fee.
Pick Your Binary Market.
Multiple asset classes are tradable via binary option. Nadex offers trading in major indices such as the Dow 30 (Wall Street 30), the S&P 500 (US 500), Nasdaq 100 (US TECH 100) and Russell 2000 (US Smallcap 2000). Global indices for the United Kingdom (FTSE 100), Germany (Germany 30) and Japan (Japan 225) are also available.
Trades can be placed on forex pairs: EUR/USD, GBP/USD, USD/JPY, EUR/JPY, AUD/USD, USD/CAD, GBP/JPY, USD/CHF, EUR/GBP, as well as AUD/JPY.
Nadex offers commodity binary options related to the price of crude oil, natural gas, gold, silver, copper, corn and soybeans.
Trading news events is also possible with event binary options. Buy or sell options based on whether the Federal Reserve will increase or decrease rates, or whether jobless claims and nonfarm payrolls will come in above or below consensus estimates. (For more on this topic, see Exotic Options: A Getaway From Ordinary Trading. )
The CBOE offers two binary options for trade. An S&P 500 Index option (BSZ) based on the the S&P 500 Index, and a Volatility Index option (BVZ) based on the CBOE Volatility Index (VIX).
Pick Your Time Frame.
A trader may choose from Nadex binary options (in the above asset classes) that expire hourly, daily or weekly.
Hourly options provide opportunity for day traders, even in quiet market conditions, to attain an established return if they are correct in choosing the direction of the market over that time frame.
Daily options expire at the end of the trading day, and are useful for day traders or those looking to hedge other stock, forex or commodity holdings against that day's movements.
Weekly options expire at the end of trading week, and are therefore traded by swing traders throughout the week, and also by day traders as the options' expiry approaches on Friday afternoon.
Event-based contracts expire after the official news release associated with the event, and therefore all types of traders take positions well in advance of - and right up to - the expiry.
Advantages and Disadvantages.
Unlike the actual stock or forex markets where price gaps or slippage can occur, the risk on binary options is capped. It's not possible to lose more than the cost of the trade.
Better-than-average returns are also possible in very quiet markets. If a stock index or forex pair is barely moving, it's hard to profit, but with a binary option the payout is known. If you buy a binary option at $20, it will either settle at $100 or $0, making you $80 on your $20 investment or losing you $20. This is a 4:1 reward to risk ratio, an opportunity which is unlikely to be found in the actual market underlying the binary option.
The flip side of this is that your gain is always capped. No matter how much the stock or forex pair moves in your favor, the most a binary option option can be worth is $100. Purchasing multiple options contracts is one way to potentially profit more from an expected price move.
Since binary options are worth a maximum of $100, that makes them accessible to traders even with limited trading capital, as traditional stock day trading limits do not apply. Trading can begin with a $100 deposit at Nadex.
Binary options are a derivative based on an underlying asset, which you do not own. Therefore, you're not entitled to voting rights or dividends that you'd be entitled to if you owned an actual stock.
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