What are binary options?
Binary option is a type of option in which the payoff can take only two possible outcomes, either some fixed monetary amount (or a precise predefined quantity or units of some asset) or nothing at all (in contrast to ordinary financial options that typically have a continuous spectrum of payoff). The two main types of binary options are the cash-or-nothing binary option and the asset-or-nothing binary option. The cash-or-nothing binary option pays some fixed amount of cash if the option expires in-the-money while the asset-or-nothing pays the value of the underlying security.
In Binary Options, you only need to predict either with a “Call” or “Put”. Binary Option trading has only two investment possibilities, either you win or you lose. After you select an asset, you will then predict whether you think that asset will go up or down in price. After the chosen expiry closes, if your prediction was correct, you will usually earn up to 85% on your original investments. If your prediction was wrong, you’ll lose all the money invested. Some Binary Options brokers usually refund 3% when your prediction was wrong, but this is not so common anymore.
Choosing an asset is the first step of your investment. Most Binary Options brokers offer a wide variety of tradable assets, from indicies to stocks, currencies and commodities. After choosing the asset, you’ll then choose an expiry in which you’ll predict if your chosen asset will appreciate or depreciate in value. After this step, you’ll then determine how much you want to invest. It is advisable to only trade or riskabout 5% of your account. This will help minimizes loses if they occur.
To trade binary options, you need to create an account with a binary options broker. You can create a Real account or a Demo account. After this step, you will need a profitable nd consistent strategy. This is the most important part. You need to be able to make proper market analysis in order to place and make profitable trades with Binary Options. Trading strategies determine your success in the markets. From Price action, to Fibonacci, Gann, Pivots, Custom indicators etc, you’ll need to find a profitable trading strategy and master it. Once this part is figured out, you can then trade without limits.
How To Trade Binary Options
To become a successful trader, it is important to know how to trade. This is a question every trader has asked, at one point in his/her career.
- Learning the basics: It is important to become familiar with binary options trading terms. Some of this include; Call, Put, In the Money, Out of Money, Expiries etc. After mastering these terms, you’ll be able to navigate binary options platform and know exactly what you are looking for.
- Picking a Data source: Each trader should have an external source of data and not rely solely on the one provided on the trading website. It could be online charts or other trading softwares like Ninja trader, e-charts or the most popular one, Meta trader.
- The next thing to do is to find a strategy that gives a profitable win-loss ratio. This is the most important, having a strategy that works. For novice traders, you could use charting softwares to create strategies using inbuilt indicators like Moving averages, Stochastics, Bollinger bands etc. Once you have a strategy that has an edge, you are ready to start trading.
- The following step is obvious, you’ll need to create and fund an account in order to start trading. You can check out this page to see some of our recommended brokers. Before funding an account, it is important to look at the platform and see if it meets your requirements. For example the minimum and maximum per trade, minimum per deposit, and also to do some research and find out if the site is reliable. All this matters when you want to invest your money in a binary options broker
Choosing the right currency pair?
In the financial markets, currency pairs tend to behave differently from one another. Some are highly volatile for example the GBP pairs and some generally slow and with low volume, like the NZD pairs. What currency pairs are the best in binary options trading? The answer is they are all great, depending on the strategy, you can make profit on any given pair in the markets. The most popular currency pairs are the EURUSD, GBPUSD , USDJPY and AUDUSD. These are the most traded pairs in binary options.
If your trading strategy is a reversal based strategy, slow moving pairs will be more profitable, and for trend following based strategy, volatile pairs will give you the best results.
Working on different Chart time frames?
When working with a charting software or web based data feed, it is important to know what timeframes are the best to work with. Depending on your trading strategy, different timeframes offers different results. For example, if you specialize on turbo trades, you’ll want to concentrate on 1 minute and 5 minute charts, anything higher will be defective to your strategy. Likewise, using 1minute chart for hourly expiries is also dangerous. You’ll need to find a balance between the timeframes and your desired expiries.
A good clue into knowing what chart timeframe will work best for you is by testing and comparing the results. This might be time consuming but it’s worth it. To make the process easier, you just need to be open minded and ready to accept the facts about your strategy and the best timeframe they seem to work on. All this, keeping in mind your targeted expiries.
Market Sessions to trade binary options?
In Binary Options, timing is everything. It is important to know the trading sessions and the right time to trade. There are 3 major trading sessions; the Sydney, London and New York trading sessions. It starts with Sydney and ends with New York. For every trader, the best trading session will depend on their strategy, the overlay of London and New York trading session is the most volatile, and it is very risky for turbo expiries.
It is important to avoid trading an hour before and after the closing/opening of a trading session. Markets are usually very uncertain and irrational. This can be seen in the form of giant gaps and spikes.
How to install MT4 indicators and templates
To install Mt4 indicators and templates, login into your Mt4 platform, go to the top left on “File”, scroll down to “Open Data Folder”.
Click on it, thenproceed to a folder named “templates” and “MQL4”. You should copy and paste your template files in the template folder. Then, inside the MQL4 folder, you’ll see a sub folder named “indicators”. This is where you should copy and paste your indicators. When all this is set and done, restart your Mt4 and load the template on the chart. Also, the new indicators that you installed will be available on the “Navigator” content.
Here’s a video to show how to install the Mt4 indicators and templates:
How to install Renko Charts?
To install renko chart, you’ll first need to find a working renko EA, Indicator or Script. They come in different forms and with different codes. So basically, not all renko charts look/work the same. Once you’ve decided the type of renko that you want, the next thing to do is to download and install the renko. If it was an Indicator, you’ll need to follow the steps to install an indicator, If it is an EA or a script, you’ll need to go into the “MQL4” folder, and look into the sub folders for “Experts” or “Scripts” respectively. Once you’ve copied and pasted the file, close and reopen your Mt4.
Renko charts only work when the markets are opened. Once you load the renkoea/script or indicator on your chart, there will be a notification on the chart, letting you know when the offline chart has been created. Once you see this notification, go to the top left of the platform, on “File”, click on “Open Offline”. Here, you select the offline chart that you created. Here is a video on how to install renko charts:
How to create your own binary options trading strategy?
This is the prime question for every enthusiast. How do I create my own strategy? Well, each trader usually comes up with a unique trading strategy, but they all follow the same steps along the way. First, you’ll need a software to provide live data feed. There are many free softwares with MT4 being the most popular. Once you’ve installed your Mt4, then you can start the process.
First step, you’ll need to load onto the charts the various native indicators of platform, from trend indicators to the oscilators. If you are a novice, I know this will be confusing and overwhelming. Load each and every indicator on your chart and just watch them for a while.
What are we looking? We are looking for buy and sell opportunities. The tricky part is to learn how to read these indicators properly. To create a trading strategy, you’ll first need to understand that there are basically 3main kinds of strategies; the trend, reversal and a combination of both.