In the world of commerce, online digital trading allows the trader to make some significant amount of money through stock and shares, currencies, indices, commodities, etc. All of these underlying assets, promise a good amount pay off if you conduct the trading skillfully and methodically. Otherwise, the outcome will be nothing at all. Before you jump on the wagon of binary trading, you have to go through a proper and thorough education on binary options. So, in this article, we are providing a well-guided tutelage, to save you from burning your finger.
Binary Options Trading for Beginners | From where, a beginner should start?
It is quite a topsy-turvy for the newcomers, from which point they would probably start learning binary options. One can not learn it overnight. A concrete plan and a few simple steps can pull you out from this utter muddle:
First, you must learn the basic theory of binary options trading; learn the function of the candlesticks and charts.
Second, go through the basic trading strategies available online.
And third, test the chosen strategy on a demo account.
Binary Options Trading for Beginners | What is the basic theory of binary options?
First, make sure that you seriously want to enter in this business arena. Therefore, before you jump your heads down, you have to learn about the basic theory of binary options trading. If your will power is strong enough, then it will not be a hard nut to crack.
While trading for the first time, acquiring all the initial information and knowledge about options trading is very crucial. The best way to learn the primary knowledge is to sign up to any of the many free educational brokers websites. They provide enough information covering up all the important topics that a beginner should know. Here, our primary concern is to provide the newcomers, the basics to some extent.
Binary Options Trading for Beginners | The meaning of binary option
In short, a binary option is nothing but a trading contract, with a fixed risk and a fixed return. There are many types of binary options—Call/Put, Pairs, Boundary, Ladder, One touch, etc. Amongst them, the Call/Put option is mostly preferable.
Binary Options Trading for Beginners | Call option in a bull market
The term “bull market”, refers to a financial market of a group of securities, where the price of the contract or option is going upwards. A call option is used, when the market maker predicts, the price of the underlying asset is rising above the current price. So, definitely, a call option is related to the bull market. In binary options trading, the price of an underlying asset inclines to rise and fall in the blink of an eye. Analyzing the market details, if you find that the market is steadily standing on a bullish point, then, there is a possibility to rise in the price. It is the best time to attempt the call option.
Binary Options Trading for Beginners | Put option in a bear market
The term “bear market”, refers to a financial market of a group of securities, where the price of the contract or option moves downward. A put option is used, when the market maker predicts that the price of the underlying asset is going to fall below the current price. It is clear; a put option is related to the bear market and just the opposite to the call option. Analyzing the market details, if the price of the underlying asset is moving towards a steady bearish point, then it is time to undertake a put option. Always try to keep a watchful eye on your option, even a tiny fluctuation of price can make the option expire out of money.
It is a tough job for a beginner to analyze whether the market is a bull or a bear. We recommend the beginners a thorough understanding of the candlestick chart patterns.
Binary Options Trading for Beginners | What is a candlestick?
A candlestick is a type of indicator, forecasting the price direction of the asset. Therefore, the candlestick is comprised of information and the candlestick chart (made of many candlesticks) shows the high, low, opening and closing prices of a contract for a single day. If you understand the formation of the candlestick chart along with the wicks, it will be much easier for you to analyze the price movements in near future.
Binary Options Trading for Beginners | How to identify candlesticks chart pattern?
The structural formation of the candlestick charts can show you the intensity of the buying or selling pressure on the option. The red or filled bodies stand for the pressure on buying while the green or empty bodies stand for the pressure on selling.
When the body of the red candle is engulfed within the open and close of the next green candles, there lies a great possibility for the movement from the downward to upward. Hence, a bullish one, and the call option come forth.
The bearish pattern seems to be just the opposite of this. When, a green candle gets engulfed by a red candle’s open and close, the possible movement is from upward to downward. It is definitely, a bearish pattern and put option is preferable.
Binary Options Trading for Beginners | Strategies for Beginners
Support and Resistance– This strategy is the most popular among the newcomers. According to this strategy, you have to identify the right spot first. Then place the call trades in the support area and the put trades in the resistance area. Now, the question is, how to identify which area is support and which area is resistance? Folks, the only way to identify this, are, to notice the price movements in older areas. So, it will be easy for you, to predict the price movement when the price comes back to these areas. To conclude, we can say that, following this strategy, you have to predict the future analyzing the past.
Follow the trend— In finance, the word ”trend” means ”a direction” — in which the price of the underlying asset changes. Following the trend, you can determine the direction of your trade through creating an uptrend and a downtrend line. If you intend to draw an uptrend line, then figure out the higher high points, and the higher low points. Now, draw a line connecting one corner to another; connecting two higher lows. This uptrend line shows the price is going upward. It is time to call the call option.
The downtrend is just the opposite of uptrend. If you want to draw a Downtrend line, figure out the lower high point and lower low points first. Draw a line, connecting two corners. If you see the formation of lower lows, then it represents the downtrend. Your trade is moving downward. Use a put option.
MACD Histogram Entry Strategy— MACD indicator and the signals from it, help the traders to determine the trend of their trade. And MACD Histogram is the difference between the MACD and the signal line. MACD entry strategy has become popular among the newbie for its straightforwardness and simplicity. The green histogram or the ”bar chart’’ refers to the difference between the MACD and Signal line. When the MACD goes above the signal line, the bar is positive. If the MACD is under the signal line, it means that bar is negative.
When, the price of an option, moves strongly towards the direction, then the histogram increases in height. And when, the market slows down, the histogram begins to shrink.
If the MACD histogram is below the zero line, it is definitely then a buy signal. When the histogram moves above the zero line, it is a sell signal.
Focus on a single asset— An asset, is nothing but a resource having positive economic value. In binary trading, the option or contract is based on the underlying asset. It is the changing of the price of the underlying asset that decides whether the option will expire ‘‘in the money or out of money”. So, from the pile of different types of underlying assets, you have to choose the suitable one for you. There are four types of assets out there: commodities, currency pairs, stock, and indices. The trading hours, option types, and even payouts depend on which an asset you select. If you are sure choosing your asset, then gather every single possible information about your asset—past trend, chart pattern, economic impact, the timing of the call and put, etc. And it is possible only when if you focus on a single asset. Some people believe in diversity, but I, think that, in the long run, constancy in a single asset will bring you success.
There are many other strategies out there, telling you what to do and don’t. But honestly, no method or strategy can make you rich overnight. They can only help you in managing your money and risk factors. The key to making your success tangible only depends on tenacity, professional discipline and, of course, a thorough and proper education on binary options trading. And the moment you sense that you are ready to dive in, you have to choose a broker, and trading platform.
Binary Options Trading for Beginners | Broker Selection
It is quite a difficult job to choose a right broker to execute your trade. Binary options trading offers you so many brokers from every nooks and corner of the world. Among them, some are swindler-types, and some of them are doing a phenomenal job discussing with you every possibility to make a profit or to lose your money. Every broker’s offering varies to another— different quality of services, free signals, demo account, strategies, and bonus system. We suggest, do not be in a rush to deposit your money without considering the following factors:
1) Select a trading platform that is multilingual and offers you software, tools of high usability. In binary options trading, you do not afford to lose even a single moment. So, you need fast-paced and easy to use software, which acts promptly. Besides, the platform, should offer you the advanced binary options features (hedging, sell back, roll over, double up etc.) that will enable you to control the risk factors and increase the profit.
2) Make sure, the broker you choose, offers you a wide range of assets of the different exchanges. If you want to trade in currency pairs, then check out whether your broker has a miscellaneous collection of currency pairs or not. If the broker does not have the asset, you want to trade with, then why are you wasting your time?
3) Please check the types of the option the broker is providing. The Call/Put option is not the only one out there. There exist other types of options also, such as Pairs, Boundary, Ladder, One touch, Short term expires, Long term expires, etc. So keep your eyes open.
4) While choosing a broker, the rate of return or profit and bonuses is the most important thing. This factor is all-importance. If one broker offers you 84% return, and the other is offering you 86%, then, of course, you should go with the first one. Even the 2% difference means a lot in binary options trading. Getting bonus depends on how much you trade and increase your deposits. A few brokers even offer 100% bonus on your deposits. Moreover, a good end efficient broker always allows the trader to choose the expiry time himself.
Above all, you have to be rational. If you take decisions being emotional, you will never survive for long. So, considering all these factors, if you think that you are ready to enter into this business arena, invest your money and hit the button to execute your trade.