Tip for Beginner Traders

As you have known what binary options are and I told you why this type of trading is becoming so popular. It isn't as easy as most of you would want it to be, but it is certainly not as difficult as Forex trading. Unfortunately, binary options trading is not simple at all, so in order to achieve satisfying results, you’ll have to spend a lot of time learning, but at least you can rest assured that eventually all the hours spent reading and testing different trading strategies will pay you off.

There isn't a formula accurate enough to instantly teach you how to trade binary options, but I want to give you some better understanding about binary options trading. However, in this article we won’t be teaching you any technical skills related to binary options trading. Instead, I’ll give you some hints on how to be a more successful trader and how to make sure that your trades will have a higher chance to expire in the money even though you're beginner traders in this market.

User-Friendly and Reliable Broker Services

In our previous posts we have already taught you how to pick a binary options broker, so we assume that you've already made your choice. However, if you haven’t done this yet, we advise you to take a second look at this article and start searching for a binary options broker, who meets your requirements and needs, and most importantly – is a good choice for beginners.


Betting Limitation

Don’t forget that you should spend at least several weeks trading with a demo account before exchanging to a real money account. Of course, exchanging to the real money account means that your trades will now bring you profits or losses. This is why you should set a limit on the amount of money you are ready to place on a single trade. Certainly, risking your total balance on one single position isn't a good idea, although the idea of a big payout may seem rather tempting.

My advice to you is to determine what part of your bank balance you are ready to put on a single trade and stick to your decision. Most binary options traders stick to either 10% or 15%, but braver traders easily bet with $20-25 of their bank balance. Since you are a beginner, it is a better idea to trade with smaller amounts of money, so you can start by trading with 5-10% of your budget. As you finish more trades and gain confidence and experience, you can start increasing the amount of money you bet until you reach a percentage that suits your needs.

For example, if you've made an initial deposit of $250 and you've decided that the maximum amount of money you are ready to place on a single trade is 10% of your bank balance, you’ll open positions, which worth is no more than $25.

Emotional Management

One of the most common mistakes novice traders makes is letting their emotions lead the way. Don’t forget that binary option trading is a job that is entirely based on analysis, complex calculations and understanding of the global markets. Every experienced trader knows that there aren't things as luck, good feeling, intuition, etc. The only one you can trust on when trading binary options is yourself, the news and the data provided by the technical tools you use. If you are having a bad day and you've lost a lot of money, it is probably a good idea to stop trading for the day, because you won’t be thinking accurately and you may make some mistakes, which you’ll regret for on the next day. Trust your strategy, develop your analysis skills and never trust on things such as luck, intuition or ‘having a good day’.

Information Updates

The job of the binary options trader is a time-consuming one. You must always read about the latest events in the global markets in order to keep up with the most recent information and updates. Experienced and successful traders usually trade with several assets and they rarely change them. This is why as soon as you learn how to trade binary options you should pick 5-6 assets that you think are the easiest to predict. Always read the news related to the assets in order to be able to react effectively in case the market news predict a extreme change in the price.

Being Quick and Be Wiser

Depending on the types of binary options you are trading with, you may be forced to make very fast decisions. However, acting fast doesn't mean that you should leave everything to your instinct. Every binary options trader is responsible for opening some positions by quickly making a well-informed decision that has a solid foundation in the form of fundamental and technical analysis. One of the key issues you should remember about binary options trading is that you should first minimize your losses and only then start working on maximizing your profits.

Endless Process Learning

Don’t think that binary option trading is something that you can learn in a day, week, month or even a year. Trading platforms are commonly updated with new information and new technical tools, and you can find hundreds of binary options trading strategies on the Internet. The goal of the binary option traders is to constantly improve themselves – keep reading on this topic and never lose your desire to learn. With each read book, article and idea you read about; you’ll gain valuable knowledge, which you’ll be able to apply in your trading strategies sooner or later. Some of the most successful binary option traders say that one of the main secrets behind their success is the fact that their learning process has never stopped, which allowed them to keep in touch with the latest changes to the binary options market and always be the first ones gaining profit from the newest strategies.

My Final Words

You are just in the beginning of your binary options trading career, but you've already expanded some valuable knowledge thanks to my article tutorial. The tips and hints above are just few of the things that you should be aware of before becoming more serious with your binary options trading career. Don’t forget my pieces of advice, because they can make the differences between success and failure in many cases. Finally, after you have some understanding with above pieces of advice, I recommend you to find out a trusted brokerage company and ask them for a demo account to trade with (that could be 3 days or a week.) in order to make you getting more and more familiar on this market before you go on live.

Differences Between Forex and Binary Options

The Differences between Binary Options and Forex:

1- Margin
Binary Options: No margin but still make a large return on your investment
Forex: There are margins, like: 1:100, 1:200, 1:500... to make a large return on your investment

2- Payouts and Losses
Binary Options: Before trading, you know your maximum payout such as 70%, 82%, 200%, 500%...etc. You can minimize your loss by clicking "sold" or "loss back" which are provided by brokers.
Forex: You don't know you maximum profit you can make on a trade. You can control your loss by using stop loss. The Maximum Loss with Forex may be all of the money in you trading account.

3- Closing a Position
Binary Options: Before you make trade, you have to select when you want the option to expire (Ex: 60s, 15mns, 1h, 1week from now...etc.
Forex: You can close your position anytime the market opens.

4- Orders Types
Binary Options: There are 5 orders types, like: Regular, Long Term, 60 Seconds, One Touch, and Pairs. (APBinary)
Forex: The most important ones are the market (Buy/Sell) orders. Also, there are more advanced orders such as: Limit, Stop, OCO, Trailing Stop, Hedge orders, and others.

5- Trade Size
Binary Options: As low as $5 per trade and the maximum can be up to $1000 or $5000 or more.
Forex: Example of EUR/USD with Leverage 1:100, Micro lots is 1000 units ~$1.000; a Standard lot ~$100.000/lot. The maximum can be up to 100 lots~$10.000.000

6- Trading Costs
Binary Options: No Spread, Rollover/Swap or Commission
Forex: Spread, Rollover/Swap and Commission are included.

Trading Put Options in Downwards Moving Markets

Trading Put Options in Downwards Moving Markets

In the binary options marketplace, you have one main decision to make: is the price of the asset in question going to go up or down? The beauty of binary options is that you can make money off of either direction; prices don’t need to go up for you to be successful. For this reason, learning how to trade put options will be extremely beneficial. When currency prices are set to go down, when you have a solid put option open, you can make money trading even if markets everywhere are going down in price.

Your first step is to identify opportunities. Which currencies are struggling overall? With binary options, you will only rarely want to go against the prevailing trend, so your first step is to figure out which currencies are going down and which are going up. When a currency is going down in price there will still be short term ups and downs, but the majority of the movement will be with the overall trend.

Trading put options is a great way to make money when a lot of other traders are losing money or even sitting out of the marketplace. But just identifying overall trends is not enough to be successful. If it were this easy, everyone would be making money trading and as you know, this is not the case. Binary options are especially tough to make money in because you are at an immediate disadvantage because of your broker. Think about it this way: when you are right, you get an 80 percent return on your investment. But when you’re wrong, you lose 100 percent of the money you risked. This immediately puts you behind the broker. This isn’t a bad thing—brokers do need to make money after all—but it is a difficult thing to overcome. Your correct trade rate needs to be much higher than 51 percent if you want to make money here.

In order to give yourself a higher profit rate, you need to come up with a strategy that allows you to predict downward momentum within a currency at as high of a rate as possible. Short term movement—essentially what you are trying to predict with most binary put options—becomes more reliant on technical indicators. Your entry strategy is the only part of the trade that you have complete control over. Once you execute the trade, it is completely out of your hands. You are essentially at the mercy of the market. Therefore, you want to time these as perfectly as possible. When getting ready for a put option, you will want to make sure that there is room for a drop in price. For example, if the currency is at its support level, odds are that it will increase in price as other traders recognize this fact. This is true even if the overall trend is down. Utilizing price channels can be extremely helpful here. A channel, like a support level, designates a zone that the price moves within. When a currency is overbought, it will appear to be at the upper portion of the channel. While this is certainly not foolproof, enough other traders recognize this fact and will act accordingly and back off. For the put trader, this means that other traders will close out their positions, causing a brief drop in price. When the currency is at the top of the channel, it is time to enter a put position.

Designing price channels can quite easily be done with a good charting software program. These are constructed taking into account exponential moving averages and channel coefficients. Then, a couple lines are superimposed upon the price chart, giving you an easy visual of what prices are doing and how they are moving. This is one of the easiest ways to identify trends and short term movement. When prices move upward and out of the price channel, you can expect prices to drop in the near future.

Of course, one method of analysis is never enough. If you are looking at a currency that has broken through the top layer of its channel, this does not necessarily mean that the price will drop. If a currency has strong fundamentals, the price might keep going up for a while. Look at the relationships that surround the U.S. dollar. If the Euro is already weak because of the Greece bailout (as it currently is), and the price of gold is dropping too, the U.S. dollar is probably poised to go up in price, regardless of whatever channel or trend it is currently experiencing. These two factors rely on fundamental analysis and even if the dollar has weak technical prospects, these factors might influence the price in a way that technical indicators cannot predict. So price channels are a good way to identify potential trades, but if you are going to trade put options, you want to make sure that the fundamental prospects of the currency are also weak.

Trading binary options is tough, but with the proper research you can identify many opportunities. Using downward sloping price channels is a good way to point out prospective put options, but you will always want to double check fundamental factors before entering a position. This two pronged approach to entering a trade will boost your correct trade rate and make you a more profitable trader.

OTC

Over the Counter

A market conducted directly between dealers and principals via a telephone and computer network rather than a regulated exchange trading floor.

Stocks of small companies, bonds, and other securities that aren’t traded over a formal exchange can be traded over the counter. In over-the-counter markets, dealers, also known as market makers, buy and sell securities from their own inventories. As such, if an investor wanted to buy or sell a certain security, he would contact a dealer of the particular security and ask for appropriate bid or ask price.

In the U.S., the OTC Bulletin Board (OTCBB) is a popular electronic inter-dealer quotation system through which over-the-counter securities are traded. The OTCBB, and other inter-dealer quotation networks such as Pink Quote, is regulated by the Financial Industry Regulatory Authority (FINRA).

Forex trading also takes place in over-the-counter markets as transactions are executed outside of a centralized exchange. This is what allows forex traders to trade 24 hours a day as trading isn't limited by the market hours of a formal exchange such as the New York Stock Exchange. Instead, traders are able to buy and sell currencies through a network directly connecting various banks, dealers, and brokers.