In this course, I will teach you the fundamental steps to place Binary Options trades in the market. By the end of this class, you will know how you can enter Binary Options trades in your trading platform.

How do you make a Binary Options trade?

The traditional binary option trade requires a set of steps that are as follows.

Select from the available underlying instruments like currencies, stocks, cryptocurrencies, indices and other commodities.

  • Choose an expiry date/time.
  • Choose a Call binary option if you are confident that the price of the underlying asset will be higher than the entry level after expiration, or you can choose a Put binary option if you believe the market could slide.
  • Input the preferred premium sum that will represent your investment risk in the purchase of the binary option. This is the maximum amount that you are going to lose in case you are wrong about the direction of the market.

It’s important to remember that you are able to calculate the possible payout of a binary option when you have entered your trade. The platform should show you the amount that you are going to earn after expiration if you are right about the direction of the market.

The payout rate varies between brokers, though it usually ranges between 50% and 95%. You can check the brokers with the highest payout rate binary option brokers here. 

Choosing the Market for Binary Option Trading

The initial component of a binary options trading strategy is deciding on the asset to be traded. Some binary option traders prefer to concentrate on one particular market or an asset, whereas other traders take part on a wide range of markets at the same time.

It is crucial to remember that you must choose the right asset for your needs which best fits the style of your trading and your analysis. What you choose to invest in will determine whether trading will end up with profits or loss.

Company Shares
Company shares are a form of ownership within a firm. They can also be called equity or shares. Many stocks are traded every day on the market for stock exchanges around the world. The stock market is reviewed every day through the daily news channels.
Some examples of currency pairs include EUR/USD, GBP/USD and USD/JPY. These currency pairs tend to fluctuate in accordance with the economy of their respective countries, economic data and central bank policies. The majority of traders earn money by accurately predicting the direction of price change of those currency pairs.
Cryptocurrencies allow you to exchange them to purchase goods or services as you would with conventional money or even trade them to earn profits. But, in contrast to conventional currency that is controlled and issued by ceentral banks, digital currencies aren’t centralized and have an unidirectional authority that is responsible for the issue.

The very first cryptocurrency invented was Bitcoin in 2008 by an unknown entity or person going under the moniker Satoshi Nakamoto. The introduction of Bitcoin was just the start of an explosion of various different cryptocurrencies, which were all created to replace Bitcoin. Other currency types that followed Bitcoin are now referred to as altcoins, which are alternatives to bitcoin.

Nowadays, many brokers offer binary option trading in cryptocurrencies with their underlying asset.

People are shopping for commodities everyday by purchasing gas from the gas station or orange juice at a supermarket in your neighborhood. The price of commodities is determined through market-driven factors at most prominent commodity exchanges. The traders can reap huge gains through the purchase of Binary Options on commodities if they are able to come up with a reliable market analysis, even though they don’t have sufficient funds to invest with futures market.
A stock index is calculated using the values of the components that are traded in included stock exchanges. The principal indexes for the market of stocks include the NASDAQ and the Dow Jones Industrial Average, the S&P 500, the UK’s FTSE 100, and the German DAX. When trading index binary options, the trades are dependent on the price of the stocks that compose the underlying index. Index binary options are among the most effective instruments available for traders who want to make bets on stock index changes.
Future Contracts
Futures trading is a way of speculating whether price of the asset being traded will go upwards or downwards. The contracts for futures are standardized to protect a specific amount of the asset, in addition to the type of delivery and location of commodities. The majority of futures contracts are traded for the quarterly delivery date that is standardized like March, June and September, and December. Most popular contracts for futures have their roots in financial instruments such as the interest rate and currency exchange rates as well as stock market indexes such as those of the S&P 500 or the Russell 2000

In this way, you can select one or any mixture of assets you believe is appropriate for you. It is possible to choose one asset or a combination of assets.

Knowledge Based Decision Making

If you’ve been trading on forex market, it’ll only be sensible if you opt to trade Binary Options that use currencies as the primary asset. Similar applies to those who are experienced trading on the stock exchange. The most sensible base asset for trading binary options market would be stock of a company.

If you aren’t familiar with one of these assets you are considering, it is best to select one that appeals to you. Educate yourself as best you can. Then, take a deep dive into what happens to that particular asset in response to changes in the market. If you are a beginner in trading, you should select one particular asset and study it thoroughly before moving to a different type of assets.

Market Based Decision Making

Different markets do not have the same characteristics which is the case with the many Binary Options markets available. Certain markets are more fluid, dynamic and volatile than others. As an example, indices have lower volatility than the currency market. Indicators are less prone to price movements in normal trade times and show dramatic changes only whenever there’s a significant market disruption.

Inexperienced traders will be more successful on markets with a steadier structure that are easy to understand and read about. But adventurers and skilled traders would prefer most dynamic markets that provide higher profits, greater obstacles, and much more fun.

News Based Decision Making

Every day, people are affected by events throughout the world which can have a variety of effects on the financial performance of markets as well as the underlying assets. One such incident that shook nearly every financial market around worldwide was terrorist attack of September 11, 2001.

An investor can choose strategies that take advantage of the events that occur to form predictions about price actions for their binary option trade. One of the main reasons to choose this strategy is because it guarantees that you will be in a market that is active and has the highest chance of earning profits.

However, since it is a constant hopping between one market or asset to the next based on the news, you don’t really get a complete understanding of the specific investment or market, and you could miss out on certain highly profitable trades, or even experience losses.

The Choice of an Expiry Date / Time

The following binary option decision is to choose an expiration date at which time the option will end. The binary option broker typically offers contracts which expire in seconds, minutes, hours, days, weeks and even months. Seconds and minutes are the most used periods for expiry time by binary option traders.

It is vital to select a suitable expiration date for you to profit from your view of the market. The chosen time frame must ensure that the binary option is profitable on the moment of its expiration in the event that your forecast of direction turns into a fact.

But sometimes it is possible to find you’ve made the right predictions about pricing direction movements however, you have done the wrong decision regarding the expiry date. In these instances, you can choose to delay the expiration date of the binary option contract, allowing an investment that had been at risk of losing money to be recouped and then turn into gain. This is referred to in the Binary Options roll forward feature. This feature has benefits and drawbacks.

  • Advantages of Rolling Forward Feature:

In requesting an extension of the time of expiration on binary options, you can improve your chance of earning profits on trades that appeared to initially being a loss. It is best to extend the contract only after conducting a thorough study.

  • Disadvantages of Rolling Forward Feature:

Although extending your contract can be an effective way to avoid the risk of losing money, it must be done with caution. In the first place, make sure you do a thorough and accurate study to ensure that you do not add losses to the ones already suffered. This feature is only employed when you’re confident of your forecasts, but just requires the extension of time in order to reach the goal you have set.

The most important thing to keep in your mind is that broker is likely to charge an additional cost for providing the extension. Because of the huge returns that can be made when your prediction is accurate, it is generally more than the cost. It is also important to avoid using the feature too much or in a way that is not intended because of the desire to believe that you can reverse the course of any losses incurred.

Put or Call Option?

The job of a binary option trader is to predict the direction in which the price of an asset will take. Investors who think the asset’s price will go up may choose to purchase a Call or Above binary option.

Contrarily traders who believe that the value of the asset in question will decrease could opt for a Put or Below binary options. A precise forecast of the market’s direction could yield the highest return, which could be as high as 90%. The return is almost twice the initial investment in this binary options.

Calculation of Income and Risk

The last stage of making a trade with Binary Options involves entering your preferred premium amount that is the amount that you would lose in case you predict the market wrong.

Binary options trading offers the opportunity to make fast return. Many advantages are available for trading in financial markets by using Binary Options. One of the major advantages of trading Binary Options is that the risks involved are known from the beginning. Learning Binary Options in a way that is efficient will allow you to pick more accurate trades that maximise the profit you earn from your investment.

An Example for Binary Option Trading

Let’s go over a binary option trading example with 60 Second Binary options.

Binary options that last 60 seconds will allow you to make quick gains in a very short period of time. Those type of binary options asks you whether the price of underlying asset will be higher or lower than current price at the end of 60 seconds.Steps to take a 60 second binary option trade follows.

Pick the asset which you would like to trade.Pick Call if you believe that the price of the asset will increase within the next 60 seconds or Put, if you believe the price of the asset will drop.

Choose an amount to invest from the drop-down menu.Press “Approve” for the trade to go on. The system allows you to track the results of your trade at a real-time.

You are going to earn the investment amount X payout ratio if you are accurate with your prediction at the end of 60 seconds. On the other hand, you are going to lose your initial investment amount, if you are wrong with your prediction.

Pau Ivorra

By Pau Ivorra

12 Years of Experience in Trading Forex and Binary Options. Triathlete. Tech Reader. Author.