Categories: Finance

How to Succeed in Binary Options

It’s hard to overstate just how many people want to trade in binary options. Binary has been a rapidly growing form of online financial trading, due to its simplicity, ease of execution, and convenience. With so many people logging on to trade, it’s only natural to want to join them. But before doing that, it’s important to fully understand how to succeed in binary trading.

Success in binary is possible, no matter what the detractors say. It is certainly true that trading in binary options is similar to casino gaming. It is also true that the structure of most binary options do not favor the trader. And it is true that in most cases a trader will need to be successful at least 60% of the time in order to turn a profit when trading in binary. But with all of that said, it is possible for a savvy trader to increase the odds of success.

The first step toward success is to understand exactly what a binary option is. Simply put, it’s a financial trading instrument with only two possible outcomes. This is the source of the name, as ‘binary’ means ‘something having two parts.’ A trader investing in a binary option places his money on a choice – that the asset (a currency, a stock, a commodity, etc.) underlying the option will increase or decrease in value, and reach a set price within a set time period. It’s really a lot easier than it sounds.

The next step is to internalize that binary options are not a traditional stock investment. Rather they are essentially a bet on short-term market movement. A binary option isn’t an investment on an asset. It’s a bet that the value of the asset will move in a predictable fashion.

The trading option is structured so that the trader will get a high return (usually 60% to 85%) on a winner (an option that moves in the predicted direction by the predicted amount), and lose 100% on an incorrect guess. This structure means that a trader will have to aim for a win rate of about 60% in order to start turning a profit. Fortunately, that is possible, and brings us to the final point.

The final, and most important, thing to understand in order to be successful in binary trading is the underlying asset. Because a binary option will automatically exercise, the trader doesn’t need to worry about actually buying or selling that asset. They only need to predict the asset’s movement. The asset underneath a binary option can be anything: a currency pair, a commodity, a stock index, or an individual company’s stock shares.

To choose the asset, the trader should learn as much as possible about it: what market factors influence it, how it responds to economic conditions, is it used as a safe haven, and other similar questions. Learning as much as possible about the underlying asset will give the trader the information needed to make more accurate predictions on the binary option trade.

They’re not difficult steps, really. Succeeding in binary is mostly a matter of self-educating self-discipline, to learn what makes an asset move and to apply that knowledge to the binary trades, and at the same time to avoid making elementary trading mistakes such as chasing losses or doubling down on a losing option.

Master these things, and any trader can succeed in binary options.

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Binary options trading has risks and rewards.
Anne Lawson: Anne Lawson is a British writer who keeps her eye on business and trending issues that affect us all. She loves to delve into the real story and give us interesting tidbits we might otherwise miss.