Binary options for beginners

Trading binary options online, be that through desktop computers or mobile devices, may seem simple at first glance, but it is a much more nuanced activity than many new and inexperienced traders realize. There are many tricks of the trade trading veterans are well aware of, so take a moment to study the subject if you’re new to all of this. The rewards could be big. Our binary options for beginners section contains all the most important lessons you should know before entering the market. Sure, it may take a little time to go through them all, but it will be time well spent because your chances for success will improve dramatically. With this guide, you will learn how to choose the right broker, what drives the market, which trades to open and much, much more. So, let’s get started.

STEP 1: How to trade binary options?

Before you choose the broker you want to trade with, you will need to prepare yourself to enter the market. If you’re a beginner, you need to learn the binary options basics or, at the very least, go through them a few times just to make sure you’re all set. The main premise of binary options trading is fairly simple – you choose an asset and decide whether its price will go up or down. But, as we have said introduction, there’s much more to that than simply randomly guessing.

Due to the fact that binary options eliminate many variables and offer pre-determined profit, many people are easily attracted to them. However, you need to know that this type of trading is done only online. The amount you stand to gain if your trade ends up in the money is usually above 70% and some brokers even offer payouts beyond 90%, so this number will surely influence your decisions at some point. As a matter of fact, some trading modes can give you returns of several hundred percent, but they require some special conditions to be met, obviously.

Once you’ve made all the necessary preparations, it’s time to open your first trade. We have to stress here that putting your eggs in a single basket is a very bad idea in this business. Since you can win roughly from 70% and 95% if your prediction is correct (in the basic trading mode) and lose 100% of your invested money if it’s not, you have to be right MORE than 50% of the time to be profitable. Don’t invest everything you have in a single trade – divide the money and you’ll have better chances for overall success. You would, for example, do well to study the potential causes of market movements for the trade you’re about to open, and only then make a prediction on how the asset you’re targeting will behave.

There are many other elements to every trade you open, but we’ll cover that in later steps. For now, we will say that good preparation goes a long way and that you should at least know how these trades work before you start. Hopefully, this first step gave you a clear picture of that. And if you know how this type of trading works and want to participate, finding yourself a broker is the next step.

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STEP 2: How to choose a broker?

You can’t trade without a binary options broker, so choosing the right one is exceptionally important. A binary options broker is your link to the market and a partner which enables you to place your investments and consequently earn money from them. While they do all provide the same basic service, i.e. they connect you to the market, the way they do that can differ dramatically. Not to mention that there are different financial parameters to take into consideration with each of the companies, something binary options beginners may be unaware of. So how to choose a broker? Well, first of all, define what you want from this experience and how you want to achieve it.

Whatever you decide, it should come after careful deliberation and examination of all available educational resources – gaining information is the best possible tip we have for binary options beginners. Luckily, the best brokers always have a trading academy full of videos and articles which will help you quickly grasp the basics. Some of the brokers even offer webinars, 1-on-1 training sessions etc, and these are the companies you should always consider.

Knowledge is the foundation of your success in this business. Given the fact that all business in this industry is conducted online and that there are literally millions of traders around the world, a broker‘s reputation becomes exceptionally important. Word travels fast in today’s world and if a broker has been approved by the trading community, then it really is a good choice. But let’s be honest, the most important aspect of any broker’s offer are their financial requirements. The minimum deposit needed to start trading can vary from just a few dollars to 250$ with most companies, so you will want to check that before you open an account and commit to a broker.

Additionally, the amount needed to open a trade can also differ wildly. Make sure the financial aspect of a broker’s offer fits with what suits you. You need to feel comfortable making every single trade. By knowing what a broker’s strengths are and what kind of offer they have, you will be able to choose the perfect trading partner for yourself. It would be a real drag to open an account and make a minimum deposit, only to find out that you don’t enjoy trading with that company or that they don’t have the assets you’re most willing to invest in. After you’ve created your account and made a deposit, however, there’s one more thing you will have to do.

STEP 3: How to verify an account?

Once you decide which broker you want to trade with, you will need to open an account. This is a fairly simple process because all you have to provide is some basic information about yourself, but make sure the info you provide is correct. Opening an account with an overwhelming majority of companies can be done in a couple of minutes, and shortly after making your initial deposit, you are able to enter the market. However, one of the most important things related to your account is the verification process, and it is because of this that you need to be certain that all info in your account is correct.

This is because you will need to verify your account sooner or later if you want to be able to withdraw your profits. The purpose of this process is to increase the overall security of the whole industry. Without providing mandatory documents, trusted brokers won’t allow withdrawals of any kind. The reason behind this is that they need to be sure where the money they’re sending will end up. In other words, they need to be sure that the person withdrawing the funds is indeed who they say they are, not some shady third party. That’s why you need to confirm your identity, and you need to do it only once. After you send in the required documents, they will be checked to see if everything matches the data you provided when you were creating your account, and after that, you’ll be able to withdraw every time you want to.

Therefore, if you have any fears related to this process, you can be sure that this procedure is necessary to increase your trading safety. However, always make sure that you are doing this with a legit broker (we will discuss what that means in greater detail in Step 8), so that you know your personal info is in trusted hands. But which documents do you need to provide? The account verification process is nothing more than the process of proving your identity. Depending on the broker you decide to trade with, your withdrawal page may have a different location. Usually, it’s placed under the “My Account” section. When attempting to complete your first withdrawal, you’ll be taken to the account verification page, but you can complete this process before that if you want. Here you’ll be asked to provide some personal documents, and you may also be asked to confirm your email and/or phone number.

The first document is a color copy of your photo ID document. This can be your personal ID, passport or, in some cases, driver’s license. The second required document is a copy of a bill, usually for utilities, with your name and address clearly visible. This document serves as a proof of address, as well as a proof of identity. Also, if you plan to use your credit or debit card for banking, you will be asked to provide one more document. It’s the photocopy of the card’s both sides. After you send all these documents to the support team, and after they take a detailed look at them, you’ll be able to withdraw. And that’s pretty much it.

Again, make sure that the info in your account matches the info in the documents provided because the broker will hesitate to release the funds if that is not the case. So, now that we have everything set up, it’s time to start trading. And when you come to the trading platform, you will be faced with one or more charts on which an asset’s price is shown. There is a lot of information that can be extracted from this screen, so let’s go through all of that a bit more thoroughly.

STEP 4: How to use charts properly?

Trading interfaces are usually pretty well designed and easy to understand, but some traders have problems when it comes to charts usage. Charts are your best friends when examining an asset’s performance because they can show you how the asset you want to invest in has been behaving over a longer or shorter period of time. It is therefore exceptionally important you be able to read the chart correctly. There is so much info you can extract from them.

The first thing you need to familiarize yourself with in order to know how to use charts properly is chart types. The simplest type is the line chart, created by joining closing prices of a selected asset over a period of time. The drawback is that it doesn’t provide you with any type of history like opening prices for every individual point. However, the closing price is pretty much everything you need to predict right, so this type of chart will do the job just fine, especially if you’re a beginner. Bar charts, on the other hand, display information about high and low prices, as well as opening and closing prices for each point. They consist of vertical bars interconnected with horizontal dashes that represent the opening and closing prices. Their colors depend on rising or falling of their price and this makes it easier for traders to understand future trends.

You will also come across candlestick charts, which are very similar to bar charts. However, there are some differences regarding their visual construction. Candlestick charts contain one wider bar that represents the difference between the high and low price for every time point. These bars can contain one of three different colors depending on the asset’s price direction. Through any of these charts, traders are able to recognize trends or trend indicators and then act accordingly. These boil down to patterns. Basically, patterns are recurring parts of your chart that are used for predicting current and future asset fluctuations.

There are two main types of patterns – reversal, signaling that previous trend will reverse after the pattern is complete, and continuation, which signal that rising or falling will continue after the pattern is complete. Many popular chart pattern types, such as the head and shoulders pattern, the cup and handle pattern, triangles and others that have been proven to work fairly reliably on the market, but we cover them in our Advanced Binary Options Strategy text. So, once you’re done with this article, you know where to head next.

The concept of charts also ties in nicely with Step 2 because you will want to choose a broker that delivers this kind of information efficiently, i.e. has a reliable trading platform where charts clearly show what’s going on on the market. You want to be able to get the general idea with a single glance, so the balance between simplicity of use and the amount information a platform provides through its charts has to be well struck. Charts have a whole lot to teach you, so don’t overlook them when making your preparations. These preparations include choosing the right strategy, a decision of utmost importance for your trading success.

STEP 5: How to choose the right strategy?

If you aim to be a serious trader, a sound strategy is essential to your success. In the world of binary options, trading strategy is what separates successful traders from unsuccessful ones. The market is often chaotic and unpredictable, so you need to have a set of rules in place that will guide you through everything. Not every trader knows which strategy fits their trading personality best, though, so mistakes become quite common. Moreover, a surprisingly small number of traders actually manage to pick their ideal trading strategy.

Therefore, getting some advice seems like a good idea. After you find your ideal strategy, you’ll experience instant changes in your understanding of binary options, as well as in the number of successful trades. If you want to know how to choose the right strategy, you must first know your trading persona. Some traders, for example, are more fond of opening trades of shorter duration. On the other hand, some traders are more prone to long-term trades with bigger time spans. We’ll cover both of those types of trades in Step 6. However, traders can also be divided based on their investment amount. Some traders decide to invest more money on trades that they believe are going to be successful. On the other hand, there are traders who make smaller bets on a bigger number of trades. Basically, it’s all about knowing how to choose the right trading principle.

Also, education is crucial, so be sure to read and revise all the materials you can find, primarily in your broker’s educational library. That way, you’ll know which trading modes suit you best. Consequently, it will clarify how to choose the right strategy based on your trading behavior. We would also like to mention some trading tools and methods that could be of assistance when you’re trying to decide how to choose the right strategy. They are pretty common in the industry today, so you can find them with virtually any broker.

One-Touch mode enables you to define a price that you believe your asset will reach („touch“) before the trade ends. It is very risky, but if it’s based on a thorough market analysis, it can yield really high incomes. Ladder is pretty much One Touch on steroids, a mode where you make a series of trades by defining the price movement for each one. Also, you should consider using Double Up which enables you to double the investment amount while your trade is still open.

There are also some tools embedded in trading platforms like Fibonacci numbers, Oscillators or Bollinger bands. We advise you to take a detailed look at them, too. A good binary options strategy will take as many of market-influencing factors into consideration as possible, so that the probability of unpleasant surprises is reduced to its absolute minimum. However, some basic knowledge of how economy works is certainly required because traders need to be able to extract relevant information from all the data coming their way. Only then can an adequate strategy be applied to predict market trends.

If you feel that you don’t have a firm grasp on the things we’re talking about here, take a moment to learn about the basics of creating your binary options trading strategy. A special extra step is coming up, and it’s dedicated exclusively to that. On the other hand, if you feel you don’t need further clarification when it comes to the basic principles your strategies should have, proceed to Step 6.

EXTRA STEP: If you’re a complete binary options beginner and don’t know anything about the topic of trading strategies and feel you need to learn more before you make your choice, just keep reading this extra step.

Psychology plays a major role in this business because traders, especially those who are new to the market, often need to exercise self-control and keep a cool head about their investments. Beginners often experience two emotions which interfere with their decision-making: fear and too much confidence. Try to analyze your emotional state before you start trading and clear your head before you begin because the rational part of your mind has to be in charge here. A lot of planning and calculating is required to conduct successful trades, and if something is disturbing your concentration, the results won’t be as good. The emotion of fear is often experienced by rookies, and the reason for that is most often the fact that they are not 100% certain about their decision.

The origin of this insecurity is in most cases the lack of knowledge because these traders simply don’t know if they have made the right call. They are not familiar with all the tools and strategies that can help them in their particular situation and they gradually become more and more passive on the market because they are convinced they will lose money. Thorough education is the best medicine for this, since you will be able to make the best decision once you know exactly what your options are.

Fortunately, every serious broker has a good trading academy designed to help all traders acquire basic knowledge about binary options trading, and most will offer you a free demo account, so we sincerely recommend you make the most of all the education materials available. But too much confidence can also be a problem because inexperienced traders often feel a rush of adrenaline when the money starts coming in. Keeping a cool head is especially important in these situations because you don’t want to start investing erratically and jeopardize your winnings. Stick to your binary options strategy at all times – in a place as unstable as the market, you need something to rely on. Patience is the virtue traders will need in order to become successful in this line of work because investing in something which has high payouts but low probability of success will get you nowhere.

Take small steps, believe in your binary options strategy and your prize will surely come. There are loads of different and well-known strategies you can use, and finding the right one will depend on what kind of trader you are. One big investment or several smaller ones? What to do when you win? What to do when you lose? These are just some of the questions your online trading strategy has to have an answer to. Don’t rush things, ask yourself what you want from your investments and then see which strategy you’ll go with. When you start trading, find an asset you’re familiar with or at least an asset that can be easily checked for more information.

Now, if a price is constantly rising or constantly falling, we are talking about a trend, and identifying one of these is probably the most important thing to do before placing an investment. Almost every basic binary options strategy relies on this and once a trader recognizes a trend, it becomes much easier to predict how an asset’s price will behave. Trends can be bullish and bearish (rising and falling), but keep in mind that they all eventually reach their end, so it’s very important to recognize the signs which tell you a trend is about to reverse.

Furthermore, they are not that common, since the market spends more than 50% of its time in the so-called consolidation areas, so acting quickly once a trend forms becomes even more important. Recognizing trends and correctly predicting their shifts and duration is the trickiest part of the trading business and those who master this always achieve significant profits. There are numerous tools to help you with that, and most platforms come with their own trend indicators, but caution is still needed, no matter how you look at it.

You see, each binary options strategy, no matter how popular, will only instruct you how to be successful most of the time. There is no universal strategy or tool which will bring profit all the time and sometimes you have to endure hardships to come out on top in the end. This is why we said small steps and patience are necessary to become successful in this business – like we said, you don’t want to put all your eggs in the same basket. With that, let’s get back to our scheduled steps.

STEP 6: How to choose the expiration date?

Every binary options trade has to close at some point. It doesn’t matter if you know how the market will behave if you don’t know when that behavior will occur. What makes this type of trading so interesting is that you get to say when your trade is going to close. It’s one of the most fundamental aspects of binary options trading. First and foremost, you can’t choose your expiration date blindly – your choice has to be founded on facts. In other words, you need information on upcoming big market events because these events have the biggest influence on the market and the way prices will move.

If you know that a big market event is coming, then you also know that the prices will become very unstable in its aftermath, since it takes time for the market to “swallow” new information. At the same time, you also know that the market should remain fairly stable prior to a big market event because everyone will be preparing for the upcoming information. That’s the period you should aim for if you have a plan to trade in fairly long terms. Probably the most important tool you can use in this case is your Economic Calendar. It contains information on all scheduled market events in the foreseeable future, so you can easily come up with your strategy. Examine it during the weekend, when the market is closed, so that you can get a glimpse of how the market will behave.

Try to pinpoint major events and where they will occur, so if you know, for example, that the following week in Europe is going to be calm, you may want to open trades related to assets from that part of the world. Naturally, if you, for example, see that the US is heading into a turbulent week, you might want to avoid investing there or at least set a longer expiration date, so that the situation can calm down. Therefore, you have a decision to make – are you more interested in short-term trades, some of which can even be open for just a few minutes, or are you willing to wait for a while for the market to position itself perfectly according to your predictions.

Both approaches have their pros and cons, and they both can yield wonderful results if you can utilize them properly. And one of the most important characteristics of every successful trader is that they know when to quit, no matter if they’re winning or losing. You will need that skill too, and we’ll discuss how to develop it next.

STEP 7: How to know when to quit?

Online trading can be lots of fun (and potentially quite lucrative), but some limits have to exist. No matter if you’re on a roll or on a losing streak, you have to be able to tell when you need to quit. Proper education, thorough market research and calmness are vital factors for succeeding on the binary options market. If you fail to fulfill only one of these conditions, you’ll experience nothing but bad trades and financial losses.

Many traders often find themselves in a hopeless scenario where they try to compensate these losses by investing more and more money in new trades. The trades are often chosen in a rush and are therefore very risky. In the end, these people just keep losing money, blaming their brokers for badly chosen trades. As you can see, psychology is a major factor in this case, and in this lesson we show you some simple tricks how to stop yourself from going too far. For example, you should always know that your predictions cannot be correct 100% of the time. Therefore, try to spread your investments across several trades you believe are likely to bring profit.

If you see that high potential payouts are becoming hard to resist, stop trading and clear your head a bit. Also, don’t let winning or losing streaks cloud your judgment – if you start investing just because you experience euphoria over a few successful trades or just because you want to quickly cover your losses, it’s time to take a break. Analyses and careful calculations are what you have to rely in this business.

How to know when to quit? Well, if you realize you’re investing less and less time into planning, that’s a pretty good sign. Also, be patient, gather as much data as you can and analyze, analyze and then analyze some more. Without that, your chances for success will be significantly diminished. It’s all about keeping a cool head and not letting positive emotions and trading fears get in your way. A neat trick that can help you with all of this is determining the limit after which you will stop trading. Do this BEFORE you start trading because your head will be clear of any distractions from the market then. Once you reach your threshold, just stop – no matter if you’re winning or losing, stick to your plan.

Strategy and self-discipline are vital in this case, but there’s also a lot you can do to help yourself even before you start trading. Approach the subject carefully and you will have clear thresholds which will immediately tell you when the time to quit comes. That’s one way of protecting yourself while on the market. However, you are not the only person that can get in the way of your profit. There are some sites that are best avoided if you want to participate in online trading, and you need to know how to recognize them.

STEP 8: How to protect yourself while trading?

Given that binary options trading is an online activity, beginners should learn how to conduct it safely. True, these days the industry has become very safe because the best and most reliable brokers have already proven themselves and have gained a large following. However, there are some tricks you should be aware of that can help you save a lot of funds. Knowledge is your best protection in this business. You have to think ahead and know everything there is to know about a broker before you deposit money with them because once you deposit money with a scam broker it’s already too late.

Luckily, most brokers these days are legit, but you can check just how legit yourself. A great indication of a broker’s reliability is whether or not the company is regulated by any financial authority. Most of the legit brokers in Europe are regulated by CySEC, for example, meaning they abide by all financial rules, regulations and requirements of the European Union. Aim for those brokers. In addition, you also might want to check the type of software powering their platforms – you don’t want to miss out on profit because the software is not up to the task. Also, you want to talk to people who have first-hand information about the broker you’re interested in.

Furthermore, you need to learn how to spot a scam broker. If, for some reason, you decide you want to change the company you’re working with, you need to know what to check first, especially if you become interested in some less known company. A good indication of a scam broker is the amount of effort they put in providing their clients with quality support. If there’s nobody to talk to on the live chat, if they don’t answer no matter how you contact them and if there are no materials you can read or watch that would benefit you and help you grow as a trader, you will want to stay away from that company and their trading website.

Again, these days there really aren’t that many scam brokers around as was the case six or seven years ago, but caution is never a bad thing. If you’re worried, just sign up with one of the most famous and widely recognized brokers in the world (like IQ Option, for example), and you can be sure you will be in good hands.

Conclusion

And that’s about it for this article – with these eight steps of our beginners guide to binary options, you will be prepared to make your first moves on the market and hopefully see your account balance grow. However, don’t stop learning and growing as a trader. Keep investing in your education for even better results, and once you feel you’re up to the challenge check out our article for advanced traders. There are many more things you can learn and many more details that can help you make the right investment decision. Keep investing time and effort into yourself as a trader and the results will quickly come.