How to trade binary options correctly: a complete guide for beginners

Binary options trading, as a separate sector of the market, attracts newcomers with its capabilities and relative simplicity, because the whole process is carried out in a few clicks. But before you start trading binary options, you need to understand the principles and nuances of their work, which are especially important for beginners.

The principle of trading binary contracts

It is possible to purchase two types of options: for an increase or a decrease. The term (expiration) of the option can vary from 30 seconds to several days.

Binary options are based on a betting mechanism that works on the principle of “all or nothing”. If the trader’s forecast about the dynamics of the asset price turns out to be incorrect, the money remains with the broker and is used for payments to the winners, with the exception of commissions to the broker.

Choosing a broker

There are many platforms where binary options are one of the possible trading options. One of the most famous platforms is Alpari.

You can also choose specialized brokers that trade only binary options. Such sites are usually more convenient for traders, especially beginners.

When choosing a broker, you should not focus only on reviews on the Internet, since both good and bad reviews can be customized.

Binary options trading platform

Here are some examples of popular binary options brokers.

Intrade Bar is popular in the CIS countries. When trading, it is possible to automatically limit losses.  You can withdraw money very quickly.

The Binarium binary options trading site allows you to display several charts on the terminal at the same time. The number of traded assets includes cryptocurrency. You can trade for rubles. There is a demo mode on the site, as well as the ability to trade by copying the transactions of other brokers.

There are several brokers operating under the Binary brand, this is one of the most popular platforms.

Important! Options, like other market sectors, are not protected from fraud. Experts recommend carefully choosing a website for trading.

Transactions must be accompanied by certain information and documents describing the contract: name, lot size, deadlines, price step. The trading platform must be regulated by certain rules. If there is no solution to such organizational issues, it is better to refrain from working on such a site.

Are binary options different from classical trading

Binary options do not have much in common with classical trading, since the owner of the options does not trade real assets and is not their owner.

As with normal trading, in the case of binary options, you need to monitor the dynamics of the asset price, but take into account various nuances. For example, when changing tactics at trend reversal points in binary options trading, the decisive factor is the reversal time. So, if a downward reversal occurs slowly, a trader who bought a downside option may lose money.

Binary Options trading strategies

There are many binary options trading strategies. It is better for beginners to work them out on a demo account without risking real money. Preference is given to transactions whose percentage of profitability is 60-65. Novice traders are also not recommended to use complex strategies.

Example

One of the simplest strategies recommended for beginners is “two candles”. It is based on the fact that after the appearance of two red candles, a downward course is most likely, and at this point you should buy a downgrade option. Such a figure on the chart is called three “crows”. A similar figure of green candlesticks, which is a signal to buy an option to increase, is called “three soldiers”.

Novice traders often make deals with a period of 4-5 minutes using various template schemes. For example, the “Binary Gambit” combination implies the purchase of two options (for raising and lowering) for one asset and the early closure of a losing position.

It is not recommended to apply the Martingale technique, popular in Forex, to binary options, according to which it is necessary to get rid of “drawdown” assets as soon as possible.

Experienced professionals prefer to make long-term deals, because such trading requires a large deposit.

It is better to use any strategies in combination with other indicators.

Using trading robots

Robots for binary options are specialized platforms with automation of trading operations according to specified algorithms. The advantages of using robots are obvious:

• the influence of the human factor, including emotional, is excluded;
• trading takes place 24/7;
• the transaction is made instantly after the optimal moment.

Robots can work completely autonomously. But the user can also choose a semi-automatic mode, when the robot gives a signal to buy or sell, but the decision remains with the trader.

Risk management

To reduce the risks, it is necessary to stop trading and analyze the situation when losses occur. The desire to recoup is the most common reason that a trader quickly drains the entire deposit.

It is recommended to allocate an amount for trading that is not critical for the trader’s budget, and use no more than 5% of the deposit for each transaction.

Psychology of trading

The most common mistakes are the following, related to the psychology of the trader:

• trading in a state of excitement;
• fear of failure;
• unwillingness to study financial markets (“Pinocchio syndrome”).

A successful trader in the futures market, L. Borselino, claims that success consists of 90% psychology and 10% technology. It is necessary to treat binary options trading not as a game, but as a way to earn money without succumbing to emotions.

Practical tips for beginners

There is a set of proven recommendations, especially important for beginners:

• do not blindly trust various signals and expert opinions, take into account your own experience;
• not to react emotionally to losses;
• follow the rule “one signal – one transaction”.

When a period of losses occurs, it is recommended to stop trading and wait for some time, as well as analyze the trading strategy.

It should be remembered that scammers are often found in binary options trading. For example, the network offers to buy unprofitable “author’s” strategies under the guise of profitable ones. Such purchases almost always lead only to a loss of funds.

Published: 7 May, 2022