Binary Options Trading: An Explainer

All you need to know about the thrilling world of binary options trading.

16/03/2017 09:32 GMT

Find out all you need to know about the thrilling world of binary options trading and how using a fast, reliable and easy-to-use trading platform can help you to maximise the time you spend online.

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What is binary options trading?

An investment based on observing the movements in the exchange rate or share prices within a set time frame. You’re not taking ownership of the asset in question, only predicting the direction of the market. It’s called binary because there are only two options available for you to choose from – rise or fall, or yes or no. At the point of expiration, if the option settles at your prediction, you receive a pre-specified sum of money. If it doesn’t, you get nothing.

How does it work?

You pick an asset from any number of trading opportunities – whether that’s the cost of gold, a company’s stock or a country’s currency – then study its pricing behaviour and wager according to an agreed payoff. It could be as simple as being asked to predict whether the price of a particular share will be above a certain amount this Thursday at 10am. A potential payoff will be offered, say at 50%. If you invest £100, and the price finishes in line with your prediction come 10am, you’ll get £150. If it goes the other way, you’ve lost your £100, never a penny more.

How many different types of binary options are there?

Also known as digital options, two-way options, all-or-nothing options and fixed-return options, there are three major types. The basic form is predicting whether the asset will go higher or lower (known as call/put trade in the industry). With the second option – the one-touch trade – you’re given a target price at the start of the trade and, should the asset reach or surpass it, you get a payout. The third type is boundary trading – you’re given a range of prices and you have to determine whether the price of the asset will be within or outside the given range.

IQ Option

Is it guesswork?

Absolutely not. This is not for the impatient, impulsive or those who go with their gut instincts. You need to be able to use technical indicators, follow trading strategies and have experience in trading stocks. The thrill of binary options trading comes from recognising patterns in the market and knowing you’re making informed decisions. The adrenaline rush of pitting the risks against know-how is what makes binary options trading so exciting.

How risky is it?

Any broker that tells you there’s little or no risk involved is not to be trusted. Also, the media’s get-rich-quick stories and the penchant for brokerage firms to exaggerate incomes means a lot of novices are drawn in thinking it’s easy money, with plenty of opportunists out there ready to take advantage of them. There are hundreds of binary trading sites and, as with any online platform, where there’s a market, there’s going to be a scam. 

How can you recognise an honest broker?

They encourage prospective customers and novice traders to do their homework and take full advantage of the various tools available, such as historic quotes, video tutorials and access to a free practice account which help traders work out the best market conditions for trading. Novice traders should try out IQ Option – it offers a demo mode to practice on, allowing inexperienced traders to gain valuable knowledge and experience without incurring any losses.

In addition, a respected broker will not use pressure-selling tactics or make unrealistic promises about returns. Above all, they have to be licensed and regulated by a trusted financial regulatory agency. IQ Option, for instance, is licensed by CySEC in the register of the EU regulator – IQOPTION EUROPE LTD is EEA Authorised. IQOPTION EUROPE LTD is licensed and regulated in Cyprus, a European Economic Area (EEA) country which allows the company to offer certain products and services to other countries.

IQ Option

Where do I start?

Binary options trading specialist IQ Option has developed a refreshingly open go-to-market model, which is similar to a freemium marketing strategy. The IQ Option app comes with a comprehensive range of features, including the ability to analyse the price of assets, detailed and easy-to-read graphs and an overall trading process that’s designed to be simple and rewarding. IQ Option delivers a consistent, high-octane user experience that conveys the anticipation, thrill and energy of day trading to a global audience.

For further information, visit iqoption.com.

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