Binary options are based on a simple 'yes' or 'no' proposition: Will an underlying asset be above a certain price at a certain time? Traders place trades based on whether they believe the answer is yes or no, making it one of the simplest financial assets to trade
A binary option is a fast and extremely simple financial product which allows investors to bet on whether the price of an asset will go up or down in the future, for example the stock price of Google, the USD/GBP exchange rate, or the price of gold. The time span can be as little as 60 seconds, making it possible to trade hundreds of times per day.
Before you place a trade you know exactly how much you stand to gain if your prediction is correct, usually 70-95% – if you bet $100 you will receive $170 – $195 on a successful trade. This makes risk management and trading decisions much more simple. The outcome is always a Yes or No answer – you either win it all or you lose it all – hence it being a “binary” option.
To get started trading you first need a broker account. Pick one from the recommended brokers list, where only brokers that have shown themselves to be trustworthy are included. The top broker has been selected as the best choice for most traders.
If you are completely new to binary options you can open a “demo account” with most brokers, to try out their platform and see what it’s like to trade before you deposit real money.
Choosing the Right Broker
Your foray into options trading will be more successful if you choose the right trading platform or binary options broker. Making sure you have the right trading platform or broker involves reading reviews and doing research to make sure you’ve chosen a reliable one. With us , this work is already done for you. A comprehensive list of the best brokers and trading platforms is available to you when trading with us, along with helpful hints on the best way to choose the right platform for your needs.
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The Broker has Sufficient Capitalization
When choosing a binary broker, it is important to consider the broker’s market capitalization, meaning, does the broker have adequate capitalization to hedge against the risk of losing all capital if the trader places a winning trade or the broker goes bankrupt.
When a firm is regulated in the U.S., they are required by the Commodity Futures Trading Commission (CFTC) along with the National Futures Association (NFA) to have at least $20 million in capitalization to function. To check if a firm is sufficiently capitalised, directly refer to the CFTC website.
Furthermore, some firms underwrite their risks with third parties to afford to compensate winning trades. Some brokers also trade larger trades at another brokerage house to hedge against losing a considerable amount in a single trade.
Ask the broker about their capitalization and whether they hedge their risks using third parties.
The Trading Platform
Entering a binary options website is similar to walking into an investment firm; it should be neat and well-organized.
Upon entering the site, inspect that it is professional and fully functional. Check that all links are working properly and that the site is compatible with various PCs.
Examine the trading platform and design. This aim is not to search for the best looking site, but rather to determine how compatible it is with various skill levels. For example, new traders may require a trading platform that is relatively straightforward and easy to use; whereas, the more experienced trader may need more advanced features.
Ideally, the trading platform should offer charts with a good history time frame, preferably spanning as far back as a week. It is also important that the platform has no slippage. Slippage refers to the time between placing a trade and the actual execution of the trade, in which case, even just a second can make all the difference, especially when trading via the 60-second option. Likewise, be sure the broker experiences little downtime on their server.
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