If you are reading this article, it is probably that you searched in Google « binary options for dummies », or you found this headline on the social media. I guess you got interested in the subject after you saw some very attractive claims of people saying you can make a lot of money in a very short timeframe. It’s true… but only after you accumulate the right knowledge and a certain experience. But what is binary options, how to trade them, how to get started ? Here is everything you need to know in our digital options for dummies guide
Binary options for dummies : definition
Even if you trade it for a very short timeframe, you usually buy an asset with the hope of selling it later at a higher price to book a profit. Or you short sell, which means you bet that the price of an asset will go down, whether it is a currency, a stock, a commodity, etc.
Binary options are different. With this type of trading you simply have to say whether the price of an asset will go up or down in a certain timeframe (from one minute until one hour, one day or one month). If you are right you win the trade, which means you get back the amount that was at stake plus your profit, which will range from 50% to 80% depending on the asset type and the time of the trade. For example, if you win an option of 100 dollars, you should get something like 170 dollars. So if the timeframe chosen is 5 minutes, you can make 70 bucks during the time one might spend in the toilet.
This looks great, of course. But it also means that you can also lose $100 in five minutes, which is not so attractive. That’s why binary options are called a high risk high reward asset class. That’s in short binary options for dummies.
Can I make money? Is binary options legit?
People often ask if binary options are legit, if it’s really possible to make money so easily. There are two problems when it comes to being successful in binary trading :
- Binary options are not that easy: it takes skills and experience to make money
- If you become a successful binary options trader, then you might end up having troubles getting your money from your broker
In order to make money with binary options you need to understand very well technical analysis and market sentiment. This is not something you will get by simply staring at candlesticks. You might make profits with the self-taught approach. But without knowledge such as Bollinger bands, moving averages, candlesticks theory and chart patterns, you cannot be successful unless you are a natural born genius. My advice is to read as much as possible on the Internet about binary options, or even better follow a quality course such as the Blue Sky Binary training.
Then once this obstacle is overcome (which takes at least a year, often more), you might end up having a lot of troubles with the binary options broker you chose. Delays when it is about withdrawing money, strange behavior of the price action on your chart… A lot of binary brokers have a shady reputation, even for the regulated ones. Sometimes they are pure scams. Check this article from the UK regulator (FCA) for more info about those crooks.
How to get started with binary options ?
It makes sense to start trading digital options during your education process. At the end of the day, practice has always been and will be the best teacher. But since money is at stake, best is to learn with a binary trading demo account. One might say that trading with « fake money » is not the same, that the pressure that comes from the wagers after the decision process. I actually completely agree with this opinion, that’s why, even though I’m still learning, I trade with real money. The platform I use, Spectre (register here), allows you bet as low as one dollar. If you think it is too little to put any kind of pressure on you, you can raise that a bit, but keep it low to avoid losing too much money while you learn.
I recommend you to use Spectre.ai, the first broker less binary options trading platform. They do not have access to your funds, the withdrawals are made instantly once you request them. This is possible because Spectre runs on the Ethereum blockchain. You can from the same account simply register at the more account or a real money account. Residents of the United States cannot use it, FYI (and a few other countries such as Venezuela). If you want to trade a couple of bucks per option, you would have to go true the KYC process as Spectre is a regulated entity.
Your first binary options trade as a dummy
Trading binary options is very simple in theory : you click on the green button to bet that the price of an asset will go up, on the red button to predict that the price will go down. As you can see on the example below, we bet on the the currency pair Euro/Swiss franc (EUR/CHF), it is for the moment at 1.1755, which mean you get 1.1755 Swiss franc with one Euro. If I think the Euro value will rise I click on the green arrow. You will be able to set your criteria and validate the trade in the next step.
A pop up window will appear, in which you have to set the value of the option (one dollar min), the expiry (after how long the option will expire). It will indicate the potential ROI (return on investment, the profit you will make). In the example below I will get 74% on top of my call (if I bet 10 dollars and I’m right I get 17.4 dollars). Not that the actual price that you see in the window might differ with the actual options because the price moves constantly : this variation is known as slippage. It is usually negligible… unless you are caught in a big spike of volatility at the moment you click.
Once the trade is validated, all you have to do is to wait for the expiry. If you correctly predicted the price movement, you will pocket a 74% profit as per the example. If you are wrong, you lose everything.