Binary Options Day Trading in the 2020

Trading binary options depends on a simple question – will the underlying asset be above or below a certain price at or at a specific time? If so, you can earn significant profits with one of the easiest financial instruments to trade. But what exactly are binary options, and what are their advantages and disadvantages? This page will answer the questions as well as outline how to get started day trading binary options, including strategies, tips and regional differences to be aware of. Use the broker list to compare the best binary brokers for day trading in 2020.

 

 

What are binary options?

First, let’s see how it all works. Simply put, binary options is a derivative that can be traded on any instrument or market. They appeal because they are simple. You know exactly how much you could win or lose before you trade. No complicated math and calculator needed. That is why they are also known as ‘all or nothing’ trades.

If you anticipate news announcements, quarterly reviews or global trends, you may be able to determine whether the price will rise or fall at a certain point in the future and profit.

There are quite a number of derivatives to choose from. You can trade binary options on commodity value, such as aluminum and crude oil. You can opt for a stock price, like Amazon and Facebook. There are options for foreign exchange rates, including all major and minor pairs. Even cryptocurrencies like Bitcoin, Ethereum and Litecoin are on the menu.

A Brief History

If you want to start trading binary options full-time, a detailed understanding of their origins will help. Binary or ‘digital’ options have been around for decades. Originally, only large institutions and the extremely wealthy had access. However, in 2008, the US Securities and Exchange Commission opened the floodgates by allowing binary options to be traded through an exchange.

The internet and technology have since given the whole world access to these ‘digital’ options. As it stands, with low barriers to entry for smart day traders and a simple premise, the demand for these digital trades will only increase.

Option Types

There are a number of different types of options to choose from. The most popular types are listed in the short glossary below.

• Up / down (high / low) – The simplest and most common binary option. Will the price be higher or lower than the current price when the expiration time arrives?
• In / Out (Range of Boundary) – A ‘High’ and ‘Low’ figure will be set. You then determine whether the price will end up inside or outside these limits.
• Touch / No Touch – Levels will be set that are higher or lower than the current price. You then enter a position as to whether the price will ‘hit’ these levels between the time of trade and expiry. Payout will occur as soon as the touch occurs.
• Ladder – This is similar to up / down trades. However, instead of using the current price, the ladder will have predetermined levels that are up or down. This usually requires a significant price movement. The flip side of this is that returns often exceed 100%. Although worth noting, both sides of the trade are not always available.

 

Expiration dates

Another important component of binary options is expiration times. This is when the trade will end and the point that determines whether you won or lost. These times can vary from 30 seconds and 1 minute (turbos) to a full day (end of day), and even up to a whole year.

However, as an intraday trader, you are more concerned with trading 5 and 30 minute binary options. However, choose binaries with 1 minute expiration times and you have the ability to make a large number of trades in one day.

Is trading in binary options legal?

Despite the somewhat negative reputation, the reality is that binary options are legal. The majority of businesses operate fairly. Opinions are divided because there are some people who use scams.

Regulation in certain regions has meant that binaries have been withdrawn from the retail market. In the EU for example. But professional traders can still use it. In regions like India and Australia, binary is legal – but traders should make sure they use a reputable broker, and read our section below on avoiding scams.

 

 

Fraud and Fraud

The binary’s reputation has suffered from dishonest marketing and cybercrime. Too many unregulated brokers promise quick cash while running a scam. Regulators are on the case and these concerns should be alleviated soon.

Binaries themselves are perfectly legitimate, but steer clear of ‘direct money’ promises, brokers calling you, and confirmation leads, plus any claims that you can ‘trade binary options for free’.

So it’s not a question of whether it’s good or bad, it’s simply being alert to the dangers and knowing what to watch out for. If you are unsure about a broker, ask the question in a live trading room to make sure it is well regulated.

Binary Options vs CFD Trading

Although similar in some ways, there are some important differences between binary options and CFDs. With CFDs you have potentially unlimited risks. If the price of the asset moves significantly, the value of the trade can grow very quickly – for better or worse.

While binary options work slightly differently. While you are still investing without owning the asset in question, the profit and loss rate is fixed. With a call option, it doesn’t matter if the price rockets, you keep the same percentage as if it went up by just a few pips.

Likewise, if the price drops to zero, you will only lose what you put in. So to define the difference – with binary options you get fixed risk.

With that being said, it’s just like binary options versus forex, keeping your profit potential.

Why trade binary options?

If you want to profit from trading in binary options, you must first understand their pros and cons. You need to make sure that binary options will suit your trading style, risk tolerance and capital requirements.

Advantages

There are a number of attractive benefits associated with trading binary options. The biggest benefits are outlined below.

• Simplicity – Because you determine only one factor, direction, your bet is simple. The price can only go up or down. You also don’t have to worry about when the trade ends; the expiration time takes care of that. While in other markets you may need a system to limit your losses, such as a stop loss.
• Fixed Risk – Trading stocks, gold and crude oil, you have a large number of factors to contend with, from slippage and margin to news events and price quotes. With binaries, your risk is minimized with far fewer parameters.
• Trade Control – Because you know what you stand to gain or lose before you enter the trade, you have greater control from the start. For example, trade in stocks, and you have no guarantee that your trade will make the entry price.
• Profit Potential – Compared to other trading, the returns in binaries are exceptionally attractive. Some brokers promise payouts of up to 90% on a single trade. If you are looking for simple trades with high profit potential, binaries may be worth looking into.
• Choice – Rather than being limited to a specific market, for example cryptocurrency or stocks, binary options offer a gift trader the opportunity to trade instruments in virtually all markets, allowing you to trade currencies, indices and bonds if you will.
• Accessibility –  In the game of binary options, these are always the best trading hours anywhere in the world. So you can log in at night or on weekends and join the groups of eager traders trying to make daily profits. Real-time charts are available for every market, so if you have the time, you can invest 24 hours a day.

Risks

There are many reasons to trade in binary options, but there are still some disadvantages that are worth highlighting:

• Reduced Trading Realities – Although you can profit from trades that offer over 80% payouts, this is often when the expiration date is some time away from the trade date. If the odds of your successful binary trade are exceptionally high, you may have to settle for a reduced payout odds.
• Limited Trading Tools – Although most brokers offer advanced charting and analysis capabilities, the trading tools for binary traders are often not up to the mark. Fortunately, there are other online sources for these charts and tools, and brokers are working quickly to increase their supply.
• Price to lose – Your odds are tilted in favor of trades. About every 70% profit, the corresponding loss of the same trade would result in an 85% loss. This means you need a winning percentage of at least 55% to break even.
• Risk Management – Unlike other markets, brokers often set a trading floor with minimum accounts that a trader needs to enter the market. This means that losing capital can happen with ease. Although a stock broker may allow you to open an account with $250, micro-lots are traded, but most binary brokers may not allow $50 trades. So, even with $250 in your account, just five trades that aren’t yours could see you in the red.

How does binary options trading work?

Binary options for beginners are simple. Simply follow the steps below.

Step 1 – Find a broker

This is one of the most important decisions you will make. You need a broker that meets all your requirements and will improve your trading performance. But with so many options out there, how do you know what to look for?

Costs

If you trade daily with high frequency, the commission and the cost will increase quickly. You want to maximize your profits, so look for brokers with a competitive and transparent fee structure, and remember, different asset classes pay out different amounts.

Deposit

One point worth investigating is rules around minimum deposits. Some brokers will trade binary options without a minimum deposit, but many expect a deposit of close to $50 and around $100. A broker that offers low minimum deposits is ideal if you are cash-strapped. Binary trading with JC and GCI is a good choice if you are looking for low deposits.

Asset-specific

Some brokers specialize in certain assets. If you’re into crude oil, it might be worth your while to find a broker that targets those binaries. You can benefit from relevant news feeds and the most sensible option choices available. For example, binary stocks trading with 212 is ideal for those interested in stocks.

regulation

If there are scams out there, it is important to make sure that your broker is properly regulated by the relevant financial institution, e.g. FCA, CySec, CFTC. Trading with 247 Binary Options, IQ Option and Binary.com are all safe bets.

Platform

Binary options platforms are your gateway to the market and where you will spend many hours a day. There are now many online trading platforms; So make sure it’s easy to use and offers all the charts, patterns and tools you need to make smart and accurate trading decisions. For example, will you trade binary options with candlesticks or more obscure charts?

Both Keystone and Nadex offer strong trading platforms for binary options, as well as MT4. Before buying it, you should perform a thorough comparison of the trading platform and check the reviews.

Reliability

Any problem can cost you time, and as an intraday trader, can cost you some serious cash. So, check if the broker offers reliable support. Some brokers offer 24/7 customer support via calls, live chat and in a number of languages. Binary options trading with Etrade and 24 Option are smart moves if you want top quality support.

 

 

Dissertation programs

An increasing number of people are using mobile devices and tablets to enhance their trading experience. However, binary options trading software varies widely. So it’s worth checking if your broker offers cross-platform capabilities. Also, check if the mapping equipment you need will work on your iOS or Android device. For example, binary options trading with IQ Option offers fantastic trading apps.

Extras

Many brokers will sweeten the deal with some helpful add-ons. Some may offer free trading plans, courses and lessons. So first check if they offer free courses online to improve your trading performance. Some brokers also offer free binary trading trials so you can try before you buy.

You can also benefit from trading bonuses, tips, the best strategy and reviews on trading signals, plus free, demo accounts. Not to mention, some brokers allow for binary options trading using Paypal. However, don’t be put off by no deposit bonus for binary options, it could be a sign of possible scams.

Demo Accounts

For beginners, it is a wise idea to start a demo account. You can try various assets and options, with money simulated. It’s the perfect place to make mistakes and learn before putting real capital on the line. In addition, you will find that most free binary options demo accounts require no deposit, so you can start practicing while saving that initial capital.

There is no universal best broker, it really depends on your individual needs. Some brokers offer minimum trades of just a few pounds, while others require hundreds or even thousands. The solution – do your homework first.

Consult our broker page for more information on the right choice.

Step 2 – Choose an instrument / market

You can trade binaries in almost anything, including stocks, forex, indices and commodities. You can bet on everything from the price of natural gas to the stock price of Google. Choose an asset that you have a good understanding of and that offers promising returns.

Step 3 – Decide on an expiration time

As a short-term trader, you will probably be more interested in the 30-second, 1-minute, and end-of-day expiration times. You need to balance binary options trading volume with price movement. While the more trades mean your greater profit potential, it is better to make fewer and more accurate trades. Also, find a time that compliments your trading style.

Step 4 – Decide on size

In the game of binary options, size does not matter. The bigger your investment, the bigger the profit possible. Remember, first and foremost, the entirety of your investment is on track. You need an effective money management system that will allow you to make sufficient trades and still protect you from all your capital.

Step 5 – Choose an option

There are a number of options above to choose from. Think carefully about how confident you are in your determination. Consider factors that compromise your investment and choose an option that gives you the best chance of success. Don’t automatically choose a leather trade because you want big returns. Consider which options are relatively safe bets.

After making the decision, check and confirm your trade. Then you can sit back and wait for the trade to pay out.

Binary trading strategies will vary from trade to trade. What might work for a ladder option in forex may be useless in a range option for gold. Having said that, there are two reasons why you should have a strategy.

First, a strategy prevents emotions from interfering with trading decisions. Fear, greed and ambition can all lead to mistakes. A strategy allows you to focus on math and data.

Second, a strategy allows you to repeat profitable trading decisions. After you find out how and why that binary option works, you can repeat it to create consistent profits.

Building a strategy

There are two important elements in your binary options trading method, creating a signal and deciding how much to trade. The second is mainly money management. So how can you determine these two steps?

Step 1 – Creating a signal

The signal will show you which direction the price will go, so you can predict ahead. The two most important ways to create signals are to use technical analysis and the news.

Charts, patterns and indicators

If you can identify patterns in your charts, you may be able to predict future price movements. They are based on the idea that ‘history repeats itself’. You can start trading binary options using Heiken-ashi, other candlesticks and line charts. Armed with charts and patterns, successful traders will build a strategy around their findings.

You can then build indicators into your strategy, which can tell you when to make a binary option, and which binary option to go for. These technical tools can be invaluable, so make sure your broker offers the features available to perform thorough market analysis.

One of the great things about binary trading is that you can use any number of your normal indicators, patterns and tools to predict future movements in binary options. So you can start trading with/using:

• Support and resistance levels
• Price action
• Stochastic Oscillators
• MACD indicators
• trends
• Babypips
• mirrors
• Options near expiration

Consult our charts and pattern pages for more information.

 

 

News

You can trade binary options without technical indicators and rely on the news. The advantage of the news is that it is relatively simple to understand and use. You should look for company announcements, such as the release of financial reports. Alternatively, look for more global news that could affect the entire market, such as moving away from fossil fuels. Small announcements can send or shoot prizes.

If you are in the know, you can trade your binary options before the rest of the market catches on. To do this, you need to be tuned into a variety of news sources. You can browse online and have the TV or radio on in the background. Some of the most useful news sources regarding trading information are:

• Yahoo Finance
• CNBC
• Business Insider
• Bloomberg
• Financial Times

Step 2 – How Much You Should Trade

If you’re just starting out, it’s best to keep things simple. It makes sense to trade the same amount on each trade until you find your feet. Below are 3 binary options trading strategies for beginners as well as experienced traders.

Martingale strategy

Binary options using the martingale trading strategy aim to recover losses as quickly as possible. To do this, you trade larger amounts of money after a loss. So, you set an amount that you trade each time, say $250. However, if you lose on that $250, you will bet $500 on the next trade. If the trade wins, you will already be back in the black, rather than holding on to the breakeven point.

The problem with this strategy is that if you start a loss, you can lose a serious amount of capital in a short period of time. So only use this strategy if you have a relatively accurate way of making trading decisions. If you are still in the trial and error phase, consider a different approach.

Percentage strategy

A percentage based system is popular among binary options traders and other traders. The idea is that you specify a percentage that you are willing to risk. Between 1-2% is common. So, if you have $10,000 in your account, and your risk value was 2%, you could trade $200 on a single trade.

If you have a higher risk tolerance and consistent results, you’ll want to increase the risk margin to 5%. The advantage of this system is that you should never lose more than you can afford. This makes it an ideal approach to use when trading binary options.

Straddle Strategy

This example is best used during periods of high volatility and just before breaking major news announcements. This technique can be used by traders of all experience levels. This gives you the ability to avoid selecting a call and sit option, and instead set it to a specific instrument.

You intend to use puts when the value of the instrument has risen, yet you think it will soon fall. After the descent begins, place a call option on it and expect it to bounce back quickly. You can also do it in the reverse direction. Simply call the assets’ prices low and use the rising asset value.

This increases the chance that at least one of the trading options will produce a profitable result. If you are in a volatile market, you can see attractive profits in this simple system. It works well as a binary options strategy that trades 60 seconds, and will also cover expirations of up to one day.

Collisions and algorithmic trading

After you have honed a strategy that makes you consistent profits, you can consider using an automated system to implement it. These robots usually rely on signals and algorithms that can be pre-programmed.

The bots then do all the legwork, trading options on your behalf. The plus side is that it can make many more trades than you can do manually, increasing your potential profit margin. They can also trade across different assets and markets.

It is worth investigating your brokers that offer this at car trading and checking robot reviews. Many you can build a program with relative ease. You can use your own entry points that rely on Bollinger Bands, RSI / MFI patterns and moving averages.

Even if you are up and running with your system, you cannot trade binary options on autopilot, but you must stay informed. If there are errors, you must be there to correct the problem. Technical crashes and unpredictable market changes can all cause problems, so stay vigilant.

timing

Many binary options strategies pdfs fail to adequately consider time variables. Certain strategies will perform better with specific time options. You may specifically want to look at a 5 minute binary options strategy. Alternatively, trading 15 minute binary options may suit your needs better. So, whichever strategy you choose, make sure you factor in time.

Summary Strategy

Trading binary options successfully relies on finding a strategy that compliments your trading style. So consider the instrument you will be trading with. Then use an effective money management system and use charts and patterns to create telling indicators. Also, use news announcements to your advantage.

If you are trying a new hedge, gap, hedge or any other binary strategy for the first time, why not try it on a practice trading account first? This will allow you to address any issues before investing your own money.

Consult our strategy page for more information.

Tips

Education

Binary Options Trading 101; immerse yourself in educational resources. As Benjamin Franklin claimed, ‘an investment in knowledge pays the best interest’. The top traders never stop learning. The markets change and you have to change with them.

Make use of the resources below.

• Books & E-books – there are quite a few books and e-books out there that can be invaluable about day trading options. You can benefit from the knowledge of binary options trading from experts with decades of experience. The good thing about a book is that you can learn at a pace that suits you. One book that made trading binary options easy is ‘Trading Binary For Dummies’, by Joe Duarte.
• Video tutorials and seminars – Enjoyable and easy to follow. There are numerous online video tutorials that can help you trade. Seminars also allow you to answer questions and learn the basics of binary options trading, plus some brokers offer weekly seminars to keep you up to date with market developments.
• PDFs and manuals – these give you a clear outline of the steps you can follow and apply. The best part is that you can find many online that are free and easy to download, whether you use Android, Windows or iOS. The pdf dissertation options ‘Abe Cofnas’ are particularly popular.
• Forums & Chat Rooms – This is the perfect place to brainstorm ideas with binary options gurus. You can benefit from recommendations and learn in real time while investing in your binary options. You can also trade live grab screens to utilize other binary methods and tactics.
• Newsletters and blogs – these are brilliant for keeping up to date with upcoming developments that may affect your markets. Moreover, you could hear about contests about binary options (yes, they really exist).
• Copy Trading – This is when social trading networks / platforms are combined with binary trading tools. You can follow experienced traders, analyze their strategies and then repeat their trades. Check copy trade reviews before signing up.

All of the above will play a key role in your binary options trading education. Free trading videos and examples will help you take advantage of the rest of the market, and use it as much as possible.

Trading Journal

There is currently no university for binary options. It can be difficult to explain why the option did not work. Keeping a diary of all your binary options results can solve the problem. A detailed record of every trade, date and price will help you improve your strategy and increase future profits.

Whether you keep it as an Excel document or use custom software, it can help you avoid future hazards. As an added bonus, this can make filling out tax returns at the end of the year much easier. A journal is one of the best kept secrets in binary options, so now you know, use one.

Psychology

Trading successfully in binary options is not only about the right strategy. If you cannot control your emotions, you will make costly mistakes. As Robert Arnott said, ‘what is comfortable is seldom profitable’. When push comes to shove, fear and greed can distract you from the numbers.

You have to accept that losses are a part of trading and stick to your strategy anyway. If it is based on accurate math and careful technical analysis, you should keep your faith. Once you start acting inconsistently, your profits will suffer.

Regional differences

Regulation

As the popularity of binary options grows worldwide, the regulatory bodies are rushing to get in order. This means that where you trade and the markets you enter may be governed by different rules and restrictions.

United Kingdom

For example, if you are trading binary options in the UK, you will need a license from the UK Gambling Commission. Opting for a broker regulated by the Financial Conduct Authority (FCA) will ensure an extra level of protection. Beware that some brokers register with the FCA, but this is not the same as regulations.

Brexit brought complications to the trade regulations. The MiFID II guidelines were to be implemented in Europe to enforce rules around binaries, but the UK may not implement the guidelines now. This means the UK is no longer under pressure from Europe to reclassify binaries as financial instruments.

USA

Binary options trading for US citizens is limited by a choice of only two brokers. Nadex and CBOE are the only two licensed options. Fortunately, these are both large companies that offer competitive prices and a variety of assets to trade binaries with.

Rest from the world

In Australia, the Australian Securities and Investments Commission (ASIC) runs the show. If you are interested in brokers in Cyprus and Israel, make sure they are regulated by CySec. In Dubai and the rest of the UAE, binary options are regulated by the Dubai International Financial Center (DIFC).

You can also start trading binary options in Canada, India, Pakistan, South Africa, Malaysia, Kenya, New Zealand, Nigeria, Vietnam, Indonesia and the Philippines. Each have their own regulatory bodies and different requirements.

So, if you want protection, make sure you do your research before signing up with a binary broker on the other side of the world.

Taxes

Another important distinction in the region comes in the form of taxes. Some countries consider binary options a form of gambling, such as the United Kingdom. It contains important advantages. HMRC does not charge any tax on profits you earn from binary options. However, in the future, binaries may fall under the umbrella of financial derivatives and incur tax liabilities.

Having said that, if day traders are your only form of income and you consider yourself a full-time trader, you may be liable for income tax. While you’re probably still exempt, it’s worth checking out.

Outside of the UK, tax regulations differ enormously. For example, binary options in Japan and Germany have very different tax obligations. Before you start trading, you should get advice to determine whether you are exempt from tax. If not, will you pay income tax, capital gains tax, business tax and/or any other form of tax?

Consult our tax page for more information.

Can binary options trading make you rich?

Although it is exciting and dynamic, you should use this page and other sources as guidelines to trade binary options. Can trading binary options make you rich? Done right, yes, it can. There is no question of profitable binary options, this is evident from numerous millionaires. However, to get there, you need the right broker, an effective strategy, and you need to invest in your trading education using the resources above.

Further reading

Questions