Binary options are quite new investment techniques which have grown by leaps and bounds because of the simplicity of the trading concept, limited riskand easier accessibility through online or mobile trading platforms. As indicated by the name, every trade in binary options has only two possible outcomes. If you succeed in your trade, you can gain as high as 80% returns and if you lose your trade then you will lose the amount invested on that particular trade. Since the returns are good and risk is also pre-determined, it has become a preferred trading method among novice investors. In order to get started with binary options, you can follow some simple tips mentioned below,
- Choosing the right broker:
The first and foremost tip to get started with binary options trading is choosing a reliable and trusted broker. You should ensure that your broker is regulated by a trading commission and licensed to operate in your region where you will be executing your trades. There are many fake brokers prevailing in the market who will try to lure you with unrealistic payouts and free accounts. Never choose any unregulated broker just because the payout percentage is higher. You should do proper research about the broker and read the testimonials of existing customers. You should look for various factors while considering a broker such as payout percentage, withdrawal and deposit facilities, binary options types, regulations, hidden fees or commissions, mobile trading facility, customer support etc. The payout percentage can vary among various brokers and you should ask for feedback from existing customers before you choose any broker. A broker like anyoption.com which is regulated by CySEC (Cyprus Securities and Exchange Commission) and offers payouts as high as 80% is considered to be a good choice.
- Understanding market trends and getting educated:
As a beginner, you should first understand the basic of binary options trading and go through various training materials which will help you get an idea about market trends. Since binary options involve predicting the future price movement of various assets, you should improve your market knowledge in order to succeed as a trader. You can read e-books and online tutorials, go through training videos and attend various webinars to get familiar with various trading techniques and boost your market knowledge. You should also do some fundamental analysis about various underlying assets which you plan to invest in. You can take part in some training course for beginners to improve your trading skills with binary options.
- Choosing your trading strategy:
Once you have got some basic market knowledge, you need to gain insights about various trading strategies and techniques used by experienced investors. For example, some investors make use of hedging strategy to minimise their losses. There are various strategies like risk-reversal strategy, trend trading strategy, straddle strategy, support and resistance strategy etc. You should understand these techniques and decide which is more suitable for your trading style. Investing randomly on various assets without implementing good trading strategies is prone to failure.
- Setting up your trading account:
Once you have chosen a regulated and licensed broker based on careful research, you should set up your trading account with that broker. Every broker will have a certain minimum deposit to open a trading account with them. Some brokers also provide free demo accounts which you can use to practice and improve your trading skills. You should also plan how much money you are going to invest for each trade. Based on your risk tolerance and investment potential, you should allocate a certain fixed amount of funds in your trading account for different categories of underlying assets. Money management is very important for any investor and hence planning the amount to be invested for each trade and choosing your assets is very important.
- Coming up with an effective trading plan:
If you need to start a new business, you should have a clear business plan on how to generate profits, how to market your products, how to increase customer base etc. Similarly, before you get started with binary options trading, you should have a clear and detailed trading plan which should explain your exit and entry criteria, risk tolerance, asset allocation, trading strategies etc. You should always have a long-term plan and increase your investments gradually. You should never invest all your capital on any single trade as it can be risky and lead you to bankruptcy. You should always stick to your trading plan and avoid making investments based on emotions like fear or greed. You should understand the risk-to-reward ratio of binary options and evaluate it carefully before creating your trading plan.
- Learning the use of Technical Indicators to predict market trends:
In order to become successful in binary options trading, you should learn how to predict the price movement of various underlying assets accurately. Since binary options are based on speculating future price movements based on market trends, it is essential for any trader to understand the use of technical indicators. By using candle-stick charts, Bollinger bands, MACD Indicator, Fibonacci series and other technical indicators, you will be able to accurately predict the price movement of the assets. You can also learn the use of support and resistance levels as part of your technical analysis to precisely speculate the future market trends.
Before you start with binary options trading, it is important to educate yourself with various trading strategies and improve your trading skills. You can also join any social trading network to follow and execute the trades of other successful investors. You should also do some research and fundamental analysis on various underlying assets in which you plan to invest. You can also get expert advice from experienced investors with proven track records. By following these tips, you can also become a successful binary options trader and make decent profits.