Note from Kalen: This article is for informational purposes only. If you’re interested in binary options, this shows some things you need to know. Trade binary options at your own risk, and if you do decide to give them a try, learn what you’re doing before diving in head first.
Binary options have become a popular way of trading financial assets online because of their simplicity and high returns. Nonetheless, various researches still show that only less than 30% of retail traders achieve profitability trading this market. For this reason, most investors often question whether it is possible to really make money trading binary options. The short answer is YES, but the long answer is that it requires hard work, commitment and dedication to consistently churn out profits from the binary options market.
Most critics of the legitimacy of binary options trading usually cite the risk/reward ratio that traders are exposed to when trading this market. On platforms such as Option.FM, traders can receive returns of up to 91% on trades they place in the market. This is one of the highest returns in the industry. Such a return means that, if a trader places a $100 trade, he stands to gain $91 if he is right. However, if he is wrong, he will lose $100. His risk is essentially greater than his potential reward. This is the reason most critics dismiss binary options as a derivative of gambling.
However, what the critics fail to acknowledge is the ease of trading binary options as well as the potential to return profits within a quick turnaround time. In binary options, traders will book definite profits if the asset price closes higher or lower (even fractionally) than the strike price. In other market such as forex, the amount of profits will depend on how far away the asset price moves from the strike price. In such a market, traders need to perform more thorough and in depth analysis than in binary options. If the markets are less volatile, traders in such markets will also have worse risk/reward ratios than in the binary options market.
In binary options, traders have the opportunity of returning profits quicker than in other markets. On platforms such as Option.FM, traders can trade contracts with expiry times of up to 30 seconds. This gives traders the chance to make money within a quick turnaround time. Making huge returns within such a short time is not possible in other markets.
How to Make Money Consistently with Binary Options
1. Choose the Right Asset to Trade
The first decision a trader has to make before placing a trade in the market is selecting an asset. This is not an easy task because the binary options market allows traders to speculate on prices of over 150 financial assets that include stocks, forex pairs, commodities and indices. It is important that traders select assets that have sufficient liquidity and volatility because money in binary options is made from price movement. Such assets include EURUSD, Oil, USDJPY and Gold.
Traders should also trade the right assets at the right time. Different assets have different ideal times for trading. For instance, American stocks and indices are ideal for trading between 1300hrs-2300hrs GMT when the New York market is open whereas Japanese and Australian stocks and currency pairs are ideal for trading when the Tokyo stock market is open (0000hrs-0900hrs GMT).
2. Incorporate a News Trading Strategy
Incorporating a news trading strategy as part of their trading plan can help traders minimize their trading risks and boost their profitability. This is because economic data is one of the major catalysts for price movement in the binary options market. Due to the wide range of tradable assets in binary options, there is usually at least one high impact economic data release daily that will significantly spur price movement in the markets. A trader who tracks economic data releases will have the opportunity to profit by anticipating such movements.
Economic data releases are usually tracked by economic calendars which can be found for free in many online sites such as www.forexfactory.com. Tracking economic data can also help traders reduce their trading risks. Traders can avoid trading assets that are likely to be impacted by scheduled economic data release if they are unsure of the effect such data will have on the prices of the underlying assets.
3. Diversify your Trades
It is important to sign up with a broker that will allow you to trade different types of binary options contracts. There are various ways traders can trade the price movement of their favorite assets. Diversifying your trades will help boost your profitability in the market. For instance, on platforms such as Option.FM, traders can trade contracts such as short term options, long term options, Call/Put options, while other trade contracts available in the industry includes, Pairs, No Touch options, One Touch options, Ladder options and weekend options. In contracts such as weekend options, traders can make returns of up to 500% on a single transaction.
4. Protect Your Capital
Amateur traders usually focus on making money but professional traders mostly focus on risk management. Managing risk is the proven way of achieving consistent success in the financial markets. Traders should always ensure that no more than 5% of their capital is risked on any one trade. There are many trading opportunities in the market and no trade is better than the other. Traders should also use the various innovative in-trade management features available in platforms such as Option.FM to reduce their risk exposure as well as to boost their potential profitability. One such feature is the Early Close which allows traders to exit their positions before expiry. Traders can use this feature to reduce their overall loss by exiting bad trades. This feature can also be used to lock in profits by exiting good trades that may potentially turn bad.
5. Take advantage of Robots and Signals
To ensure that you are always ahead of the other traders out there, you may want to take advantage or binary robots and signals. The advent of the Internet has changed how people do their trades. Your brokers can offer you binary robots—these are software that are create to automatically trade for you whenever you can’t. The robots will trade whenever an opportunity is available based on the preferences that you set. It is important that you learn what you are doing to maximize the benefits you can get from binary robots.
On the other hand, binary signals is a type of service that automatically notifies you when is the best time to put or call your chosen asset. Signals will prove to be helpful for people who are always on the go and are unable to check for latest market trends to make an informed financial decision. Using signals will keep you always at ease because you can never miss an opportunity to earn huge profits. The notification will go straight to your phone or email for your convenience. Both beginners and expert traders use signals to step up their game in binary options trading.
It is possible to make consistent profits trading financial assets in the binary options market but traders need to work hard and to strictly follow a sound trading plan that will reduce their trading risks while enhancing their potential profitability in the market.