How To Trade Binary Options


The advantage of binary trading is the simplicity of the format, making it easy for traders of any type to grasp. There are several variations of binary options, but they all share one key similarity; traders are able to choose one of two potential choices. If the trader is right then they will make a pre-specified amount of profit, while if they are incorrect they’ll lose the funds that they initially put down on the option.

Trade Size

Trade Size

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Trade Size

You start by making a decision on how much money you will place on the trade. Potential profits are calculated as a percentage of your initial stake, so the more money you put down then the bigger your profit could be.

As an example, imagine we put £20 into a binary trade which promises a 70% return. If we won we’d receive a return of £34, yet had we put £200 down as our stake, we would have seen a return of £340.

Of course, the risk is that by increasing your stake you also increase the amount of money you could lose if the trade proves unsuccessful. With a £20 stake the most we could lose is £20, while if we put down £200 we could lose the whole £200.

WHICH SIDE OF THE TRADE?

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Which Side of the Trade?

With the amount of the trade decided, we now choose the side of the trade we’re going to opt for. When trading with High/Low options, we have to decide if a product is likely to go up or down within a pre-set duration of time, with commodities, currencies, equities and indices all options to trade on. For example, we have the option of taking a position on whether Microsoft shares, Natural Gas prices, or the US Dollar vs. the Japanese Yen will be higher or lower in an hour’s time. If we predict correctly we’ll make a gain. If we’re wrong, we’ll be unsuccessful.

One touch options give traders the ability to decide whether they think the product in question – currently trading at a certain level – will at the end of a pre-arranged time period finish above or below a certain threshold. For example, if gold is currently trading at 1166.86, traders would need to decide whether they think by the end of the trade gold will have risen above a level of 1168.02, or below a level of 1165.74, for example. As with High/Low trading, by predicting correctly we’ll make a profit, but if we’re wrong we’ll lose our stake.

The Time Period

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The Time Period

Having decided upon our stake and product, we now have to decide on the timescale of the trade. There are some products with set time periods. So, if the time was 16:20, we could be presented with a choice of three trades for a product, concluding at 16:30, 16:45 and 17:00.

Long-term and short-term options are also offered for many products, which gives us the opportunity to choose the length of time that we want the trade to last for. We could open a trade that will last a mere 60 seconds, for example, or one that runs for as long as a month. It’s sometimes possible with certain types of binary options to close the trade early, to confirm a smaller profit or loss, dependent on the current position of the option.


Binary Options are not regulated by the Financial Conduct Authority

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