How to Trade in Binary Options

Before you commence trading in binary options, you need to look for an account and work out how to perform a trade. Here is a guide on how to begin making trades in binary options.

Pros and cons of binary options

ProsCons
Easy to set upIt is gambling
High potential returnLosses can exceed any profits
You could make a profit fastYou could lose money fast

Binary options companies would not charge you for performing a trade or charge a commission for making use of their platforms. Instead, they earn profit from the losses you make on trades.

Choose an account

Before you trade in binary options, you should open an account. To pick the right account, consider:

  1. The potential payout
  2. The amount of what you want to trade at one time
  3. The amount you need to deposit to open the account

Open the account

When you discover an account, visit the website of the company and register with them. You will need to provide:

  1. Your personal details
  2. Your contact details
  3. Your bank details

A lot of companies will ask you to provide an initial deposit before you can begin trading in binary options, such as £100.

Perform a trade

To trade in binary options, you are required to  select:

  1. An asset to trade: For example, gold or shares in a company
  2. A time limit: This is the time when your trade will end
  3. An amount to trade: Any profit you make will be a percentage of this

 

You then get to pick from two options:

  • Call: If you expect the market to increase
  • Put: If you expect the market to decrease

You are then going to be offered a possible return based on your trade, for example, 180%. If you are correct, you earn an 80% profit, if you are wrong, you lose the money that you traded.

You could opt to sell or cancel your trade before the time expires for a partial payout. However, not all companies offer this feature.

Examples of Binary option trade

When the rate is 1.29, you want to trade on the currency pair EUR/GBP

  • The potential payout is 78%
  • You trade £100
  • You picked a duration of one hour

Here are some possible outcomes after an hour, if you were to call and put based on the binary option trade above:

Call option

Rate at the end of tradePayoutProfit/Loss
1.20£0-100%
1.28£0-100%
1.29£1000%
1.30£17878%
1.40£17878%

Put option

Rate at the end of tradePayoutProfit/Loss
1.20£178100%
1.28£178100%
1.29£1000%
1.30£0-78%
1.40£0-78%