How do binary options work?
Binary options are simple in principle — you essentially place a trade on whether a market will be higher than a specific price, at a specific time. If it is, you ‘win’, and will be awarded profit. If it isn’t, you will lose your initial investment.
Hence, the name, ‘binary option’ — you either win or lose.
Technically, when you place a binary option order, you are not investing directly, or purchasing, a specific stock. You are instead, like CFDs, creating a contract with the broker based on the uplift, or downward trend, of a specific stock price.
But, let’s take a look, in a little more detail, about how binary options work. This can be broken down into three key elements:
- The market you choose to trade in — these can include stock indices, events or commodities.
- The strike price — this is the price you open the trade at, and central to the whole binary option process. You must at this point place a trade on whether you think the price will be lower, or higher, than it is right at this very moment.
- The expiration date. This is how long you hold the trade for — which can be five minutes, or even up to a week.
There are four markets one can place a binary option order on:
- Events
- Indices
- Forex
- Commodities
The great thing about binary options is that you can place trades day or night — depending on the platform. If you’re a night owl, make sure you find a platform which allows you to trade in the evening.
Wait? Binary options are basically a game of ‘higher or lower’?
Yes. That’s pretty much it. All you’re doing is asking the simple question: will the price of the market you’re investing into be higher or lower by a specific time.
Generally, options are priced between $0 and $100 — but some brokers will allow you to place higher stakes.
If your stake is successful, you will be paid any profits plus your $100 back — but if you are unsuccessful, you will lose your initial stake.
You can close a trade early by placing another trade on the same market — allowing you to lock in the profits.
Top Choices for Binary Options in 2022
So, now you’ve got a bit more info on how binary options work, you’re probably thinking ‘where can I find the best broker for binary trading in 2022’?
But before we go ahead, let’s take a look at what makes a good broker.
- Low minimum deposits: First and foremost, if you don’t have a big budget, a broker with a small budget is ideal. This way, you can get a taste of what binary options are all about before hitting the big leagues. Brokers such as Pocket Options are well-known for their low minimum deposits.
- Easy withdrawal: Next up — getting your heard-earned profits. Some brokers make withdrawing easier than others. Ideally you’re looking for a broker that offers a minimum withdrawal of $50 or less — with, again, Pocket Options offering does.
- Binary Option providers that offer educational support: Binary options aren’t the easiest things to trade and it does take some time to get in the flow of things. Many binary option providers will offer you educational guides on how to get started — well, good ones anyway.
- Brokers that offer demo accounts: Always check if a broker offers a demo account. It’s a great way to check how a broker works, and whether it works for you, until you’re ready to deposit.
As long as you keep the above four things in mind when choosing a binary options broker, you should be fine. But how about some specific examples of good binary option brokers?
Binomo — A Comprehensive Binary Options Broker
Operating across 133 countries, it’s safe to say that Binomo is an international broker with a great reputation. Generally, Binomo is popular with traders in Turkey, Indonesia, Vietnam, India and Brazil — but can be accessed from many other regions.
Furthermore, having been established in 2014, Binomo has been around for nearly a decade. Having been in the market for so long, they’ve had the time to develop a reputation — a good one, of course.
Their trading platform is super simple. It’s also proprietary, which means you’re not getting involved in some whitelable option — further adding to the positive reputation of Binomo. You can trade with just a single click, without the impediment of confirmations, keeping your trading sleek and efficient.
Finally, Binomo is licensed by the IFC (the International Financial Commission) and has been a category A member since 2018. Overall, we’re confident that Binomo is a safe and trusted broker.
Pocket Options — One of the Leading Binary Options Brokers
Pocket Options has been around since 2017 and is arguably one of the most reputable brokers on the market. It’s possible to trade on over 100 available assets, with high/low options, across a number of markets — providing you with fantastic variety. But what’s great about Pocket Options is that they offer 60 second options — meaning that if you’re savvy, in just a minute, you can turn your investment into genuine profit.
Pocket Options do offer a 50% bonus on your first deposit – allowing you to boost your investment kitty almost immediately. From there, you can put your extra cash to work, allowing yourself to feel a bit easier about placing your first few trades. And what else? You can trade on the go with Pocket Trade’s mobile app. This allows you to make investments on the go, wherever you are, whenever you want. Their app is available in iOS and Android.
Final thoughts on trading Binary Options
So now you know how binary options work, the common things to look out for when trading binary options and finally a few solid brokers out there, we’re pretty sure you’ll have a solid start to your foray into binary options trading.
Just remember — only invest what you can afford to lose and remember to have fun!
