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So you have learnt the history of Binary Options and now you want to know how to profit from it?
Trading Binary Options is easy to do because you either win or lose, you don’t have to do any trade management like you would with Forex. When placing a Binary Trade you have four choices to make.
The picture above is an example of a trading platform for Binary Options by one of our partnership brokers. You can see its clearly marked out and its this what makes Binary easy to understand.
When you place a trade you have to decide which way the market will go within a given time period. For example if I was to say EUR/USD PUT 15 MINUTES.
What that means is, I believe Eur/Usd will go down within 15 minutes. If my prediction is right, I will win a fixed pay out. Choosing the expiry time of the trade is important because after the time is up, your prediction has to be right for you to win. It doesn’t matter if you win by 1 pip or 100 pips, a win is a win in Binary. The next choice you have to make is whether the price will go up or down within that time period. Again very simple to understand as it can only go two directions, up or down.
ITM = In The Money (WIN)
OTM = Out The Money (LOST)
CALL = Up Trade
PUT = Sell Trade
The Pay out you receive from Binary is always fixed like a match bet at football. Each broker will offer different pay out percentages but on average it will be around 75-80%. It could be higher or lower but on average its that. What this means is: Say you risk £100 on a trade and the pay out is 80%. If you lose the trade you will lose £100 but if your prediction is right and you win the trade, then you will receive £180 back (£80 profit).
Placing a trade on the Go Markets MT4 Platform (Partnership Broker)
As you can see from that example above its very simple and easy to place a Binary Trade and lucky we also won the trade. Is it always that easy to win though?
The simple answer is no. If it was that easy everyone would be successful in Binary.
Even though Binary is the easiest form of trading for beginners its actually the hardest to be successful in too. When you place a Binary trading the odds are already in the brokers favour as you as a trader have to predict the movement of a currency pair within a given time. Its not just simply place a trade and let it do its thing. Binary is a skill and its a skill some traders pick up straight away and for some it can take years. It makes even more tricky by the fact you trade it on the one/five and fifteen minute time frames which moves very fast.
The risk reward ratio is also low when compared to Forex.
If you were to place a £100 trade then your return in profits would be around £70-£80 depending on your brokers pay-out percentage. In theory you are risking more to make less and this is the problem. Unlike Forex where you can risk £100 to make an unlimited amount of money from it. Yes I say unlimited because you could place a Forex trade risking only £100 and be in that trade for hours, days or even weeks capitalizing on the movement and pips. In Binary you received a fixed pay out regardless of how deep of a winner it was.
The risk reward ratio for Binary with a 80% Pay out is 1 : 0.8
This means you are risking £100 to make £80 profit.
Lets now look at a simple Money management plan with Binary Trading.
Imagine for a minute you take five £100 Binary Trades with a pay out of 80%
You win three of them and lose two of them.
WINS 3 X £80 = £240
LOSSES 2 X £100 = £200
Result = £40 Profit.
Now the problem is here is that you always have to win more trades than losses and that’s the biggest problem with Binary. Not only do you have to predict the currency movement in a given time, you always have to win more trades than losses. This comes down to what I said about Binary being a Skill. Binary is about knowing when to enter a trade and then timing the execution perfectly and getting it right more times than not. This is not to say you cant make money from it. I personally know a lot of seriously wealthy Binary Traders pulling in £5k – £30k a week.
The plus side to Binary is you can compound and grow your account very quickly. If you were to place 3 five minute trades at £100 a trade and won them all, your profit would be £240 in 15 minutes. This kind of fast returns is what makes Binary so lucrative if you have mastered the skill of it. A Binary trader could literally load up their charts and make hundreds of pounds worth of profits with minutes, close their charts down and go enjoy the rest of their day.
Now you understand how to place a Binary trade and profit from it. Lets look at the money management side of It now.
