Binary options signals: how they work and whether they should be trusted
Binary options attract a low entry threshold. But not all traders, especially beginners, are able to trade independently. A possible way out is to use signals that can be found for free or bought from experts. Such signals act as hints, helping the trader to choose the right action. But in order for them to benefit, it is important to understand how binary options signals work and how to use them correctly for trading.
How Binary Options Signals work
The signals are suitable for beginners who are poorly versed in the nuances of the stock market. They are usually presented in the form of a table, where the recommended action is highlighted in red: buy or sell.
Sometimes brokers provide signals for free. Brokers can also sell signals, and give them free of charge only to VIP clients and those who have made a large deposit amount.
Relatively accurate tools based on technical analysis of the dynamics of the asset price have been developed for stock market analysis. They are used by professional experts to generate signals. But it should be borne in mind that many signal sellers are just scammers. After all, it is impossible to check the quality of the forecast at the time of purchase.
Sometimes scammers use free signals to entice traders to join various communities or trade with a certain broker. As a rule, their goal is to get a share of the deposit merged by newcomers. There are many such communities on social networks.
Fraudulent brokers may have problems withdrawing funds earned by users.
What are the signals for binary options
Conditionally , they can be divided into 3 groups:
- signals from brokers.
Various techniques are used to generate signals, for example, technical analysis, which is based on the prediction of price dynamics using mathematical and graphical methods. Such an analysis allows, for example, to identify trend reversal points where it is recommended to switch from buying to selling, and vice versa. And the widespread introduction of computers made it possible to work with large amounts of data.
But in any case, regardless of the methods used, the effectiveness of signals cannot be 100%, since working with binary options is always associated with financial risks. Even a proven strategy of an experienced expert can fail, and the buyer of the signal will lose money.
Paid and free signals for binary options
According to experts, high-quality paid and free binary options signals work almost the same way, because they are based on the same technical analysis tools. Usually, sellers listing paid signals of their advantages is just a marketing campaign to attract buyers.
Most financial market experts do not recommend buying signals at all and using exclusively free signals.
How to work with signals correctly
As a rule, the trader receives signals in the form of a table in which recommendations are highlighted in red. Following the recommendations, a trader can buy or sell binary options without delving into the subtleties of technical analysis.
Modern analysis systems contain tools for checking signals, which are recommended to be used to refine the forecast.
However, it should be borne in mind that even if the signal provider is proven and reliable, there is always a chance to make the wrong choice and lose money.
How to work with news signals
This type of signals is especially often used when trading currency pairs and commodities. There are websites with different types of economic calendars, which describe different events and give forecasts. For convenience, the news is printed in different colors. For example, for neutral news, a black font is selected.
Negative news is highlighted in red. In this case, you can expect a drop in the asset price, so it is recommended to buy down options.
The news highlighted in green is positive. In this case, an increase in the asset price is more likely, and it is recommended to buy options for an increase.
The news may reflect the behavior of the consumer price index, changes in the deposit rate and other aspects of economic behavior.
How safe is it to use binary options signals
The main advantage of using signals when trading binary options is saving time: a trader can trade without delving deeply into the specifics of financial markets. To trade on signals and the economic calendar, it is enough to devote several hours to this process without spending the whole day at the computer.
At the same time, the risks in binary options trading are quite high. To minimize them, it is better not to invest the entire amount in one option, but to diversify the portfolio. It is also recommended to check the signals with additional indicators and consider them not as a call to action, but as a recommendation. If someone promises a guaranteed profit when using the recommended signals, this is an accurate sign of fraud.
There is no unambiguous opinion on the use of signals among experts. Almost all of them advise never to buy signals. And some experts do not recommend using free signals, considering them a kind of fraud.
Published: 13 May, 2022