How to trade Binary Options – Trading Tutorial

In classical trading, the trader makes a directional decision regarding the future price development of a certain asset or economic good that serves as the so-called underlying for the binary option. If the trader assumes rising prices, he buys a call option. Put options are used to bet on falling prices accordingly.

Binary Options method

For this reason, many brokers refer to classic trading as call/put or up/down trading. This means that both market directions can be traded, which is not a matter of course in conventional stock trading and often requires special trading accounts with correspondingly high capital investment. Trading in binary options is already possible with a low investment per trade with many providers so that beginners can slowly get to grips with the subject. A detailed overview of the minimum trading amounts can be found in our Binary Options Broker comparison.

See the list of trusted Binary Options Broker below:

Broker:

Rating:

Advantages: 

Start trading: 

IQ Option logo
5/5

+ Yield up to 100%
+ Best platform
+ 24/7 support

Deriv logo
4.5/5

+ Yield up to 95%
+ Auto trading (bot)
+ MetaTrader 5

Pocket Option logo
4/5

+ Yield up to 92%
+ Bonus program
+ Accept any clients

Only at the end of the term is settled

Brokers offer Binary Options on a wide range of underlyings. These include prominent currency pairs, leading indices, international stocks, and the most important commodities. For example, traders can trade options on the development of the euro, the S&P500, or the gold price with almost all providers. In addition, options with different terms are available, usually ranging from a few minutes to several months, so that both very short-term speculation and medium-term positions are possible.

Assets you can trade with Binary Options:

Binary Options expiry time limit

The price at the end of the term of a Binary Option is decisive for whether the trader earns money at the end. If the trader’s market assessment is correct, the option is “in the money” at the end of the term and the broker pays out a pre-defined return. In classic trading, this is between 65 and 85 percent of the stake, depending on the provider. To conclude a trade positively, the price at the end of the term must be higher (call option) or lower (put option) than at the time of entry.

Limited risk

When introducing Binary Options Trading, the risk must of course also be addressed. With this relatively new trading instrument, this is always limited to the respective use – and this can be chosen by the trader himself, although brokers usually set a minimum trading amount (between 1-25 dollars). There are only rarely limits at the top.

You can only lose the investment amount or sell the option before the expiry time.

Furthermore, it is irrelevant how the price of the traded asset behaves during the term. Only the current price at the expiration date of the option counts. Traders of Binary Options are spared the premature stopping out of the trade in the case of extreme price fluctuations, as in stock or forex trading. Many brokers grant a repayment of up to 15 percent of the investment as compensation in the event of a loss. Traders will also find repayment rates in our comparison table.

Other trading types and additional functions

In addition to classic trading, many brokers also offer special types of trading, some of which allow very high returns of several 100 percent, whereby these are naturally associated with a correspondingly high risk. Depending on the trading platform, there are also additional functions to support risk management. The various types of trading and additional functions are discussed in detail in a separate article.


Binary options – attractive return opportunities with calculable risk

Trading Binary Options require comparatively little training and offers attractive return opportunities for ambitious traders who are not afraid of risk but like to keep it calculable. Interested traders are invited to use the trading resources on day-traders.net for an introduction to trading and to get an overview of the exciting world of Binary Options.

The risk of Binary Options is only the investment amount:

Do binary options have disadvantages?

In addition, Binary Options have of course some disadvantages. Beginners often do not know that it is a highly speculative financial product. This means that trading is associated with very high risk and the trader can lose his entire capital, so if necessary he must bear a total loss. Furthermore, the profit is also limited in its amount.

While with other financial products it is possible to determine the profit by closing the position, with Binary Options the profit is always fixed from the beginning. With regard to the return, it makes no difference whether a price doubles during the term or is only one pip above the entry price. However, the return is generously calculated.

A further disadvantage can also be the fact that Binary Options Brokers can only ever act as market makers. This means that the broker would actually have to hedge against the client’s trades, which in turn creates a conflict of interest.

Disadvantages of Binary Options:

  • Beginners underestimate the risk
  • There are bad online brokers
  • There are Binary Options spammers and scammers – be aware!

Introduction to Trading: Are Binary Options Gambling?

The accusation that Binary Options can be compared to gambling is often made against this financial product. In fact, the principle applies that chance plays a much greater role the shorter the terms are. It is hardly possible to reliably forecast how the price will develop within the next 15 seconds. There are, however, some situations and maturities in which developments can be predicted with greater accuracy. Binary Options are, therefore, at least in principle, not comparable with gambling.

You can not compare Binary Options with gambling. You have always a higher chance of 50% to make money.

Andre Witzel, author of day-traders.net

However, traders of turbo options in particular should be aware that trading can have a high potential for addiction due to the fast sequence and the secreted happiness hormones in case of success. But caution is also advised in the case of a loss, as increasing ambition can have similar effects.

How much money can be earned with binary options?

In principle, there is no limit to the amount of profit that can be made with binary options. However, beginners should be aware that it is not quite as easy to make a lot of money with binary options as some brokers advertise. It is easy to understand how binary options work. However, even after a very good introduction to binary options trading, it is almost as difficult to be successful in the long run as with other financial products.

What is needed for trading?

The technical requirements for trading with Binary Options are very low. All that is required is an Internet-capable PC or a mobile device. In addition, this device should also have a current browser and, depending on the trading platform, be able to use a current version of Flash and Javascript.

Screenshot of a Binary Options platform

How much capital is required for trading Binary Options varies and also depends on the conditions of the respective broker? – For some, a minimum trading amount of one dollar is possible, while other brokers require more than 20 dollars. Beginners usually tend to be undercapitalized, i.e. to have too little capital available. Anyone who starts trading after an introduction to binary options trading should therefore not forget that they risk losing all their capital. Accordingly, a trader should never put the money he needs into trading.

In addition, there are some other financial products that are better suited as investments; Binary Options should always only make up a small part of the total investment due to their highly speculative nature. As minimum capital, however, at least 100 times the minimum stake should be available. Only in this way can approximately reasonable money management be carried out. A higher capital would of course be even more recommendable in order to have more room to maneuver and to be able to compensate for several bad trades more easily.

Of course, traders should also acquire the appropriate expertise. Knowledge in the following areas is recommended:

It is also advisable – but not always necessary – to know as much as possible about the underlying that are traded most frequently. Knowing how prices are influenced and what developments are typical under certain conditions increases your chances of long-term success. Since many binary options brokers do not offer comprehensive analysis tools or sufficient alternative charts, it is also advisable to use an additional tool. The industry leader is currently MetaTrader.


Binary Options Trading Tutorial: How to trade

In the following steps, I will present you how to trade Binary Options. It will show you the principle of a classic option:

1. Choose the market you want to trade

As discussed before, you can trade a lot of different markets with Binary Options. Most brokers are offering 100 or more markets to trade with. See the screenshot below for an example:

Binary Options markets

Tip: Trade assets which are liquid and have a high trading volume. These markets are popular for many traders because the broker will give you the highest yield there.

2. make a forecast of the movement

Now it is important to make a forecast of the price movement. You can use a trading strategy, analysis, or fundamental data for it. There are many ways to create a trading idea. Personally, I am using support and resistance areas in the chart combined with indicators. See the example below:

Binary Options chart analysis

3. Choose the expiry time of the Binary Option

Binary Options are possible to trade with a lot of different expiration time. Choose for example 60 seconds, 5 minutes, or one day. In the screenshot below you see the variety of expiry times. For a successful trading strategy, you have to implement the time factor.

Binary Options expiry time

You need to know exactly when you want to go out of the trade. In my opinion, it is very useless to analyze the 5-minute chart and trade 60-second trades. Combine your analysis with the expiry time. I recommend trading one candle. That means if you analyze the 1-minute chart you will choose the 60 second expiry time.

4. Choose your investment amount

Binary Options are possible to trade with any amount of money. The brokers which I recommended allow you to trade Binary Options with an investment from $ 1.

Binary Options investment

But this is not so simple as you might think. For a constant growing trading account, you will need money management. That means you do not invest your whole account balance into one trade. Professional traders risk 1 – 5 % of their account balance per trade.

5. Open the trade

When you are finished with the setup you open the trade. If you make a forecast that the price will rise you take a call option (higher) and if you make a forecast that the price will fall you tak a put option (lower). After the trade is open the price have to be above or below your strike price (entry point).

Open the trade

6. Wait for the result (Profit or Loss)

There are only 2 outcomes of the trade (3). You can win the high yield of up to 100% (depending on the broker) or lose the investment amount. The 3rd options happens when the end price of the option is the same as the entry point (strike price). You will get your money back.

  • Win the fixed amount of money (yield)
  • Lose your investment amount
  • Get your money back by hitting the strike price directly (no price change)

What types of trading are available in binary options?

Although binary options are still comparatively young, there are now various trading types that make trading even more varied and versatile:

  1. Classic call/put options
    With the most common call or put options, the trader either bets that the price will rise or fall at maturity compared to the entry price. This type of trading is the best-known way to trade binary options and is most clearly derived from the classic binary options.
  2. Range Options
    In the case of range options, the trader must decide whether a price is within a certain price range at maturity or whether it is outside of it. Accordingly, most brokers also differentiate between in and out options. With the former, the price must close within the range, with the latter outside it. However, there are also binary options brokers who require the range option that the price never leaves the specified range at any time during the term. Traders must, therefore, check the conditions in advance.
  3. Touch Options
    Touch options are one of the few types of trading where the term is not fully utilized, but where the end of the term also depends on the price trend. Here, the price only has to touch a certain limit. How it then develops is no longer relevant. However, the trader has lost if the price limit is not reached – even if he has correctly indicated the basic direction.
  4. Pair Options
    With Pair Options, traders bet on the price movement of two underlyings in relation to each other. The related underlyings are specified by the broker and often have a high correlation coefficient. Securities from one sector or the commodities silver and gold would be typical examples. The aim is to identify in advance the underlying asset that performs better than the other.
  5. Turbo Options
    Turbo options are also offered by most brokers. These are usually call/put options with extremely short terms, usually 15, 30, or 60 seconds, two and five minutes.
  6. High-yield options
    High-yield options are also frequently call/put options, although range options are also occasionally offered. For various reasons – such as overnight maturity or tight limits – they are associated with a particularly high risk. Traders are, however, also rewarded with an above-average return in the event of a profit, which can be several hundred percent.

Binary options trading: Is a strategy necessary?

A Binary Options Strategy is highly recommended. If it is a good and sufficiently formulated strategy, it has the following advantages:

  • It prevents emotions from influencing trading.
  • It limits losses.
  • It increases profits.
  • It reduces the overall risk.
  • It enables the trader to make quick decisions.
  • It can be evaluated and improved.

Even if beginners cannot yet appreciate the importance of a good strategy, one of the first steps in binary options trading should be to take a closer look at the different strategies.

How does a trader know how the price will develop?

There are different ways in which a trader can estimate how the price will develop within the term of the investment. The most popular option when trading Binary Options and in the short to medium term is the technical analysis of the price development. It is based on the assumption that certain price movements are repeated and that it is possible to deduce from specific patterns how the price will develop. Basically, two further different approaches can be distinguished here: Chart patterns and technical indicators.

On the trading platform you can add indicators and choose chart types

The price forecast within the chart patterns is mainly visual. Depending on the type of chart, different patterns are known here, which can either announce a trend reversal or its continuation. For example, patterns like shoulder-head-shoulder or a double high are an announcement that the trend is about to break, while triangles and rectangles signal a continuation of the trend. Which patterns are used also depends on the respective form of presentation? Candlestick charts, for example, display many patterns of their own, while simple line charts are more likely to display the patterns just mentioned.

Technical indicators are another way to better assess the price trend. They provide an alternative view of the price trend and make it possible to reduce the price to certain information. Usually, a distinction is made here once again between trend-following indicators and oscillators. The former indicates whether a price is currently in an up or down trend, whereas oscillators are supposed to find turning points. Both types of technical indicators are usually used together to confirm trends more clearly.

Put the knowledge to work at IQ Option now!

IQ Option trading platform

After taking a look at the introduction to binary options trading, it’s time to find a suitable provider. IQ Option is our test winner in the area of binary options and is distinguished with regard to conditions not only by trades starting at 1.00 Dollar (alternatively USD/GBP) but also by the fact that an account can be opened for as little as 10 EUR/USD/GBP. The EU broker is regulated by the Cypriot CySEC. However, the Broker IQ Option stands out with its free demo account, which allows traders to use it for an unlimited time without prior deposit.

Here is an overview of the most important information about IQ Option:

  • Regulated EU Broker (CySEC)
  • Call/Put, Turbo Options (30 seconds trading)
  • High returns (*amount credited to the trader’s trading account if the forecast is correct) on offer
  • Minimum deposit amount is 10 Euro (USD/GBP)
  • Mobile trading is possible
  • Free demo account
  • 24/7 support in more than 15 languages

This allows traders to try out Binary Options trading with IQ Option with little money and without having to invest large amounts of money.

The knowledge learned here should now be applied to the binary options test winner. Simply open a free account and start trading with your own strategies.

(Risk warning: Your capital is at risk)


Conclusion: Start Binary trading with a solid basic knowledge

An introduction to the trading of Binary Options should not be underestimated; after all, financial instruments are highly speculative products that always involve a high level of risk. However, with the appropriate expertise and suitable binary options strategies, traders can protect themselves at least to a certain extent against substantial losses. Of course, it is recommended, especially for beginners, not to invest large sums of money at first.

However, one aspect that should not be underestimated is the choice of a suitable broker. The best Binary Options broker is currently IQ Option. The EU-regulated provider enables the trading of Binary Options. IQ Option offers a free demo account, with which traders can test the trade. Trades are possible from as little as 1 Euro (USD/GBP) so that traders do not have to risk large losses immediately.


Most asked questions:

Can you really make money with Binary Options?

Yes – You can really make money with Binary Options. The question is how? – You will need a trading strategy and knowledge for making money with Binary Options. Knowledge is always king. Learn how the markets are working and where to open a trade. With analysis tools and a fundamental analysis you can trade Binary Options sucessfull.

What is the minimum deposit for Binary Options?

The minimum deposit for Binary Options is depending on the broker and trading platform. With most brokers, you can open an account with only a $ 10 minimum deposit. It is possible to trade with small amounts of money.

What is the best Binary Options app?

In my conclusion, IQ Option is the Best Binary Options app. It is available for Android and iOS. IQ Option is the world’s biggest Binary Options Broker and you can also trade Forex, CFDs, Crypto, Stocks, and more on the platform. From my experience, it is very user-friendly software with a lot of different tools. The yield can be up to 100% what is impressing to me.


Read my other posts about Binary Options:

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