How Do You Choose A Binary Options Broker
About Thomas Hughes
I have been trading, commenting and writing about the stock market and trading for over 7 years. I was introduced to binary options trading last year and have since grown to love it. I began as a stock and options trader, utilizing technical and fundamental analysis to speculate major world markets. I moved into currency and commodity trading through my use of technical analysis and have since entered into the world of binary options. I trade binaries using Anyoption.com's trading platform.
Trading Binary Options On Your Computer
Trading binary options is a growing industry. When I was first asked about them I thought they were talking about forex or European options but boy was I wrong. In a sense both of those assumptions were correct but in reality both barely scratch the surface of the industry. Binary options have been around a long time but have only very recently gained widespread usage. The concept is simple; binary options have two outcomes. You either win or lose.
Because of the internet binary options are easier than ever to access. Binary options brokers are springing up left and right but how do you choose the right one. Not all brokers are the same and not all offer the same things. The differences don't make one better than the other, just better for different types of traders. Knowing the difference between features is the key to choosing the right broker for you.
The Best Binary Options Virtual Trading
Binary Options Trading Fosters International Communities
On line binary options trading has opened a new avenue for international communities. Because the platforms are not associated with the major US exchanges they are open to people of all nationalities. This is good for the binary options brokers because they have a wider customer base but it is also good for us, the binary options community. Because of my work in the field I work on a daily basis with traders in South Africa, The UK, Germany, and Thailand. And that's just naming a few. Trader forums are a great place to meet some of these people. There are quite of few of them out there like the one at Binaryoptionsthatsuck.com.
Types Of Binary Options
Binary options is a very simple way to trade the international stock, currency and commodity markets. Because of the easy risk/reward structure binary is a great way for beginning traders to practice there technical analysis. The idea is simple; if you buy a call and the stock moves up you win. If you buy a call and the stock moves down you lose. The same is true in reverse for a put. What many traders don't know is that there is a variety of ways that the binary trade can be set up. It is important to know what you are trading in order to use it effectively.
- Binary Options - This is the basic binary trade. The strike is set when you hit the buy button. If you buy call and price goes up you win, if you buy a put and price goes down you win. This is the method I suggest anyone start with in order to get the feel of the trading. Most binary trades will return anywhere from 65-80% on average, depending on the broker.
- One Touch - This is a more advanced trade. It assumes that price will touch a certain price point at least once in a given time period. The expirations are usually short, a week or a day, and the strikes are usually far away from current price. These trades carry more risk but come with a bigger reward, usually over 100%.
- Option Builder - This feature is only available on a few platforms at this time but may spread. It allows users to pick and choose between risk/reward profiles and to set their own expirations. There are some limits to the tool but it does offer some flexibility other trades do not.
- Early Out- Some brokers offer an early out feature. This allows you to take profits early or protect capital if the trade turns against you. The downside is that if you take profits early they will be less than the binary payout if held to expiration. The upside is that if you protect capital you will get back more than 0%, or whatever amount your broker refunds.
My Top Binary Options Broker, Non US
How Do You Choose A Binary Options Broker
Choosing the right binary options broker is very important. The industry has received a lot of criticism due to scams, the unfortunate truth is that there are scams out there. However, there are quite a few out there that are getting good reviews, I have even used a couple of them. In my searching and reviewing of these brokers I have learned a few things that it is important to look for. By following these steps you can be sure that you have done your homework and have picked a broker that is right for you.
- Binary trading is not allowed in all countries. Be sure to check and make sure that it is legal for you to do so. Binary trading may be considered gambling in some areas or regulated by the SEC, FINRA or other governing body. I have found that I can not trade forex and commodities on some platforms due to regulations in the US. I can't fault either the platform or the regulations.
- Check the asset list. Binary brokers are not all the same. The brokers I have seen all have about 2-3 dozen stocks, a handful of currency pairs and a dozen commodities as possible trading vehicles. It is not like the real stock market, not all stocks are available and not all brokers offer the same stocks. Make sure that the index, stock or currency you want to trade is available.
- Expirations - Not all brokers offer the same types of expirations. Binary options expire differently than standard options and those expirations are set by the broker. Expirations can be hourly, expiring on the hour, or 60, expiring one hour from purchase. They can also be as short as 1 minute or as long as the end of the month, which could be 30 days or 1 day or 1 minute depending on when you buy it. Be sure that the broker offers time frames that fit your trading style.
- Minimum deposit - All brokers have a minimum deposit. It is usually pretty low, like $200-$500. Some brokers offer a bonus for first time accounts. The biggest I have seen was 150% of deposit. I have also seen a lot of stories of how these are traps and scams. I have not used and account with a bonus program yet but there are some that get good reviews.
- Withdrawals - Not all binary brokers allow withdrawal in the same way. Be sure to check with your broker first and make sure what the restrictions, if any, are. Most of the scam reports that I have seen were about brokers who didn't pay if you were a winner or who held back payment in a way that made withdrawing money a real pain in the ass.
- Check The Reviews - The internet is great because it allows average people like myself to tell what we really think about things like scammy binary options brokers or liars like Lance Armstrong (I was watching the Oprah Interview when I wrote this). Be sure and check the reviews and see what others say about your broker.
Binary Options Market Analysis
- Binary Market Analysis And Options Trader
Educations, Information and Technical Market Analysis For Binary Options Traders
Binary Options Trading Community
Binary Options Trading Forums
A side industry has grown up with the rise of on line binary options trading. The need for education, news and community spawned a entire new field of investment service based on binary options. There are quite a few good sources of information out there but the one that I like the best is called Binary Options That Suck. Binaryoptionsthatsuck.com is a web site totally focused on informing new and experienced binary options traders about brokers, strategies, tools and trading tips. The site features articles, reviews and tips from seasoned industry professionals who have taken up binary trading. Two writers I especially like are Richard Cox and Michael Hodges. These two guys have differing views on the markets and trade with different styles. Their commentaries and trading tips have helped me hone my own style. Recently, Binaryoptionsthatsuck released its forum where traders of all types and from all countries can meet and discuss their ideas.
TMHughes (author) from Asheville, NC on November 16, 2013:
You're absolutely right which is why I recommended nadex binary... U should check them out.
Thomas from Germany on November 16, 2013:
Sorry, but NO ONE should EVER trade binary options, and I can tell you why:
As a trader you will only make money in the long run when your potential reward is bigger as the risk you take with any given trade (reward/risk ratio). Your potential reward should always be at least double the amount/size of your risk. The opposite is true with binary options: you always risk 100 % of your money (no matter whether 10$ or 100$) but will only win 75% or 80% of your bet. The latter sounds great ("75% return"!), but calculate by yourself: when you have a win rate of 50% (which would be very good!) you would win 5 trades out of 10 and earn - for example - 5 times 7,5 $ (=37,50 $). But with the 5 losing trades you will lose 5 times 10$ (=50 $). In other words: Only when you have a success rate of 60% (6x7,50$ = 45$) versus 40% losers (4x10$=40 $) your gains will be bigger than your losses. But it is very unlikely to reach such a success rate, especially for beginners!