Binary options for beginners are very attractive. It is a high-risk-high-return investment method and is getting more popular these days.
In this blog, we will provide detailed initial binary options definitions for dummies. The complete guide is also illustrated for beginners in the easiest way to understand. You might not master the fine art of trading binary after this blog. But you will be fully equipped to take further steps into this promised profitable market.
Let’s get straight to the point!
Some definitions of Binary Options for beginners
The idea of Binary options
The idea of Binary options is similar to a $100 football game bet. You will predict your favorite team to win or lose.
In trading, instead of a football team, you will bet on the asset’s value. There are only two possible results: high or low.
Call and Put option
Based on the two possible results, there are two trading options for traders:
On one hand, you will order a call trade if you think the asset’s value is bullish. It means you consider the anticipated price will be higher than the current one.
On the other hand, you will order a put trade if you think the asset’s value is bearish. It means you predict that the future price will be lower than the current one.
After expiry time, you will know the result. If your anticipation is right, you will win the money based on outcome payout. If not, you will lose all of your betted dollars.
Expiry time
The expiry time is defined as the amount of time that an asset changes in value. Traders can decide his or her preferred expiry time. It means you can choose when your prediction comes true!
There are three types of expiry time:
- Ultra-short expiry time: An ultra-short expiry time is from 30 to 300 seconds. Traders usually choose 60 seconds or 5 minutes as their expiry time. Due to this type of expiry time, binary options for dummies or for professionals are extremely profitable.
- Short to medium expiry time: These expiry times range from 5 minutes to a few hours. Some examples are 5 minutes, 15 minutes, 30 minutes, 1 hour, 2 hours, or 4 hours.
- Long-term expiry time: Traders can choose the expiry time from a few days to weeks, months, and years.
Different traders will get used to certain types of expiry times. Some will mix them together in order to fit their investing strategy. However, most of them will choose to master one type of expiry time and optimize their investments.
Payout rate and Broker
As we mentioned above, if you predict the right result, you can “multiply” your account quickly. The prize will depend on the payout rate which is decided by Brokers.
Broker is the trading holder who operates all the trading systems we have discussed so far. Different brokers will have different payout rates. Thus, experts normally choose the one who gives the best payout rate to start investing.
The payout rate is various. It also depends on expiry time or types of traded assets.
Types of currency pairs can be traded
There are various types of currency pairs that you can trade, such as EURUSD, AUDJPY, USDNZD, GBPUSD, etc.
We highly recommend choosing the currency pair that you are familiar with. So that you can understand the market’s fluctuations and optimize winning percentages.
Basically, the asset’s value will change over time.
Types of binary options
Example IQ Option brokers have two different types of binary options:
- The Binary Option: You will not lose money in this possibility.
- The Digital Option: You will lose money in this possibility. However, if you win, the payout rate will be higher than the binary option.
Example of a binary options trading for beginners
A 3-line example is applied to explain these definitions above. Now, let’s assume you are wondering a question: “How will the value of gold be after the next 5 minutes?”
- If you think the value goes higher than the current price, you order a Call trade. On the other hand, you order a Put trade.
- You bet $100 on your prediction.
- Let’s assume the payout rate is 85%. So, you will win $85 if you are right and now you have a total of $185. Or you lose $100 if your anticipation is incorrect.
Binary options for beginners are just that easy!
For dummies, binary options give you full control of what you will gain or lose after a certain amount of time. You can practice and experience the market by yourself. So that you can have the most profitable investing strategy with binary options.
Are Binary Options gambling?
Binary options for dummies might be misunderstood as a type of gambling. Because of its low entry barrier and ease of trade, many people take it as a form of gambling.
However, trading experts do not want to rely on luck. They rely on numbers and information to analyze and make decisions.
Therefore, as a blog of binary options for beginners, we strongly advise that you should first master the demo to test your trading strategies before attempting with your real money.
The Pros and Cons
| Advantages | Disadvantage |
| Time-saving: Binary options are fast-paced trading. You just need to concentrate on your market assumptions. Then, make money within a minute! | Legitimacy: This type of trading is banned from certain locations. Because the government considers it as a type of gambling or has not had management policies for it yet. |
| High return on investment: Average return on investment per trade around 65%-99% depend on brokers, compare to forex trading is at around 10% | Losses are substantial: 90% of beginners who lack knowledge about binary options trading, will take a loss. |
| Easy: Binary options trading is easy for beginners. Everyone with basic mathematical skills can become a trader. | All loss: Compared to forex trading, you will have stop loss if your trade is incorrect, it means you lose just 5%-20% based on your setting. But in the binary option, you will lose 100% if your trade is incorrect |
To reduce risks from binary options trading, we highly recommend starters practice with a demo account. Moreover, you should follow the binary options trading guide we provide below.
How to start trading binary options?
Herein, we provide an easy binary trading guide for you to follow. The binary options trading for beginners includes seven steps:
Some detailed explanations about these seven steps in the binary option trading guide:
- Choose your broker: Every broker will have its own rules of trading. It means, they will have different payout rates for specific assets. Therefore, choose the one that provides the best profit to your projection. Some recommended brokers are IQ Option.com, Binary.com, Binomo.com, etc.
- Choose assets to trade: Start with currency assets that you are most familiar with. There are many types of currency pair you can choose such as EURUSD, AUDJPY, USDJPY.
- Choose expiration time: You will decide the time to see the result of your prediction. It can be very flexible from 30 seconds, a minute to a week.
- Set amount to trade: It is how you value your trade. The value can start with a very small amount such as $1.00, $5.00, and so on.
- Potential payout: When you choose the amount to trade, the broker will automatically calculate the expected profit that you will earn if you win. We highly recommend you choose the assets which have a higher payout rate than 70%. It means if you trade $1.00, you will get at least $0.70 if it is right.
- Set the trade: It is time to start the trade. If you speculate the price of the asset will be higher than the current value, then click “Call”. If it is lower, click “Put”.
- Result: After the expiration time, you will know the result!
At the very beginning, if you can follow this binary trading guide, you will easily control your projections.
Forex and Binary Options trading, which one is better for beginners?
Depending on trader’s perceptions, there are still arguments of experts of which type of trading is better than the other. We provide some insights that show you their differences:
| Factors | Forex trading | Binary Options Trading |
| Return on Investment | You do not know exactly how much you will earn, except you set take profit & stop loss. | You have full control of how much you will get based on payout after an expiration time. |
| Dependence | You can use leverage to make a higher profit. | No use of leverage |
| Closing trade | You can exit earlier to protect a part of your investment. However, not all brokers offer this option. | You cannot cancel a trade that is pending order. |
| Capital | Forex trading requires a larger amount of money to access than Binary Options. | You can start a binary options trade with a very small amount of money, you can start at $1 per trade. |
Are Binary Options good for beginners?
Before trading with real money, trade a demo account to become thoroughly familiar with how binary options operate.
Conclusion
As we have stated at the beginning, you might not master the art of trading binary after this blog. However, for beginners, you will have an overview of binary options.
The blog provides basic information about the Binary Option trading guide and how good binary options are for dummies.
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