If you have an interest in trading stocks, Forex or commodities, chances are you have come across some sort of advertisement for binary options trading. You might have seen it on google or Facebook, and wondered if they are legit or worthy investments.
The purpose of this article is to share my knowledge of Binary options with you, I hope that by reading this article you can make use of the knowledge and research that I have gathered. I am doing this because it is a passion. Secondly I look at stocks and options as a form of digital asset, one that I can trade, and I put a lot of energy and research into it. After all, I am the CEO of a modern trade company.
The Big Secret of Binary Options Trading
I will open up by revealing a secret, one that a lot of people actively trading in the binary market seem to overlook. Firstly, this form of trading is not new, Binary options as we know it started in 2004 but actually it is perhaps as old as the stock market itself. The name for this type of trading used at the time was different, but the change is not just in the name, that much have changed in terms of trading technology, platform, and regulation of this type of trading, as a result you as a trader can feel relatively safe putting your hard-earned money down for an opportunity to earn quick and sizable returns.
For those who do not have any knowledge on Binary options trading, and that this is the first article you read let me congratulate you, because I am going to try to offer you some of the most important knowledge about Binary trade, and now let me quickly fill you in.
Binary trade is a type of stock, commodity or currency trade that you do with a firm that provides this type of investment. You typically trades in options that the firm has to offers. As a Binary option trader you need to understand that you are not trading on any of the real assets, instead your deals are strictly between you and the Binary firm. You are however participating on real-time movements of real assets. As a binary trader you are the super day trader, one that pulls a trigger and gets result within minutes.
Binary option trading is also very simple, in a given amount of time you predict whether the trend is bull or bear. When you are right you get a handsome return usually 60-90% of your first investment, depending on the firm or asset. So you call $1000. A few intervals later your prediction came true. You will make 60-90% to the dollar depending on the asset or the firm. So you take back $1600 – 1900 dollars in as quickly as a few minutes. However, if you predict wrong your investments are wiped.
Sounds like a simple system right? however there are many methodologies and strategies on stock or currency trading that applies to Binary as well, because after all you are in fact making calls on the real market and the market is always volatile.
Now that you have an idea of how to trade Binary Options, let’s get back to the big secret I promised you, and the big secret is that Binary options trading is not new at all!! In fact it is actually quite old, older than most of us Way back when in the late 19th century to early 20th century there exists a form of trade houses called bucket shops.
A bucket shop is a place where you can go and put a few bucks down on stocks, if it goes up by a certain points you gain and if it goes down you are wiped. You are also not actually buying assets, so your gain and loss is strictly between you and the shop. Sounds familiar now doesn’t it?
Binary options trading in essence is the 21st century edition of bucket shops, just quicker, better, and presumably more comfortable, since now you can trade from your desk or sofa and in your own comfortable place.
Back in the bucket shop days if the owner refuses to pay, there is not much you could do, but shops being a business seldom does that, reputation is important. Today’s Binaries are much regulated and watched, so reputation aside they are also legally bound. Still do your research before signing up with them anyway. Back in the bucket shop days just like modern binary options most people probably come out loss or barely break even.
That being said, in the past there were exceptions, when a particular person, aka “the boy plunger”, or “the great bear of wall street” Jesse Livermore consistently beat these shops by making significant and accurate predictions on the stock he could clean the stores. So being beat at their own game the bucket shop owners started to refuse his business, but they did still pay him nevertheless. They just won’t take his business anymore.
Jesse Livermore or his pseudonym Lawrence Livingstone in the popular and famous stock book Reminiscence of a stock operator by Edwin Lefevre shared insight on how he was able to predict a stock movement accurately and how he was constantly beating the bucket shops at their own game, that is until all the bucket shops decided to ban him. Which left him no choice but to embark on his great journey on wall street, whom later become one of the legendary stock traders of his time.
If you have an interest in the life a Jesse Livermore and want to gain insight on how he was able to gain success in the bucket shops, then I highly recommend Reminiscence of a stock operator. A great book for anyone interested in trading stocks. It’s quite an entertaining read. If you don’t have the time to read, try the audible version.
Anyway, now that the big secret is out, and you know what Binary options trading really is congratulations to you. You are already one step ahead of those who don’t know what they are really up against. After all, you cannot execute properly when you don’t know what you are facing.
Binary Options – Investment, Gamble or a Game
Now that you have an idea of how binary options trading work, and have revealed its true form under the veil it is time to really consider whether this is a form of investment that you can do.
When reading this article you probably noticed that I discuss binary options as an investment. I do not want to misguide you, I am a trader by…trade. Any activity that involves using capital to generate more capital is an investment for me. By that definition however, you could also say to me that gambling and some game that deploys capital to make more capital is also an investment. You’d be right to say that, no argument here.
However, there are good investment, bad investment, and worse of all the illusion of a good investment. There are investments that set you up for success and others failure. The difference is in the intricate detail of understanding the fundamental differences.
The real reason I look at Binary options as a form of investment is because you are actually a real market participant. Even though you do not actually trade assets and that your action does not directly influence the asset you are trading, you are nevertheless participating on their movements minute by minute at a time. So you benefit just like anyone else that are trading actual assets.
In other words, if you treat Binary options as an investment you sure should act like it. Do the research on the asset, learn chart reading skills, practice your prediction, tame your hunch and intuition. Learn about yourself as an investor. Then you will not sway by the heat of the moment, by the momentum of others, and finally make sound investment judgement.
When you do all or more of that I mentioned above, then without a shadow of doubt Binary options trading can be a type of investment for you as well. It is a super quick investment that yields result in minutes.
Due to the nature of the execution on each trade, and how frequent you can act on an execution, Binary options has a very thin line that one could very easily cross into the territory of gambling; quick action, quick reward.
The reason why I say that is because if you neglect all the principles behind each trade, and simply guess up or down, and treat every open and close position like roulette with a 50 50 chance then I have to tell you that you are simply gambling. I find myself at the lack of a better word when you leave it all to luck.
This however is not exclusive to binary options trading, lots of people gamble on the stock market too! They buy or sell on impulse instead of knowledge derived decisions. What is even worse is that the risk is usually bigger.
What about treating binary options like a game? It is quite fun I must admit, especially if you are a student learning how to read stock charts. Here is another secret, although limited, binary trades are live! It is incredibly exciting to watch that chart move up down or sideways before you.
It is a great tool to learn stock charts because most binary options allow you to go into minute by minute of a stock. If you are learning any charting techniques this ability is amazing. Imagine seeing each candle sticks form by the second!
You will start to get to know a stock intimately, and you will be on your way to becoming a great technical investor. Just like Jesse Livermore, whom learned his tape (chart) reading skills in the bucket shops, he who later became one of the greatest stock trader of his time. You too could master your chart reading skills the same way.
As long as you can control your impulse and budget then I see no loss in treating binary options like a game. You might even come out on top as you progress. Nothing is more rewarding than being paid for having fun learning. A warning for those prone or with a past of uncontrollable gambling, if your intention is not genuinely to learn the ways of an investor, then stay clear, because I’ll be blunt, it won’t take long for you to go from gaming to gambling.
So here is my verdict, like every investment, trading binary options diligently and intelligently you are no doubt an investor, but if you mess with it, then it could be a game, if you do nothing but indulge then there is no wrong calling it gambling either. What you make of it, is entirely up to you.
Is Binary Options Trading Right for you
If I was to get paid a million dollars to answer a question it would be this one, because it is impossible to give a straight forward answer that works for everyone. I don’t know if you are an investor, a gambler or a gamer. So I cannot tell you if Binary options are right for you. I am not going to discuss the gambling or the gaming crowd from this point on, I made my point in the previous section so I’m leaving you with that judgement.
Lets look binary options strictly from an investor’s point view, and by investor I mean financial investors, stock, commodity or Forex. In stocks, there are predominantly two schools of investors, the value investor that pays the most attention to an intrinsic value of a stock and the technical analysts who dances with the charts and graphs. There are also hybrid investors whom pays attention to both, but it is very hard due to conflicting interest in the two styles, such as sometimes the ticker says sell but the intrinsic value says hold.
If you are a value investor like Warren buffet or his teacher Benjamin Graham then you will most likely not treat binary options as a serious investment, because although the stocks that you are trading on binary is a value stock with great intrinsic value like google or apple, but the Binary options does not pay more attention to it more than its hour to hour trend. Making applying intrinsic value pretty much useless. Sure you can make bang on prediction that a certain stock will be bullish for the next few month but it does no good for you calling it minute by minute. Which is why the school of technical analysis dominates today’s market, especially the action packed binary market.
If you are on the technical side of investing stocks, and have adequate knowledge on charting techniques and patterns, then you should feel at home with binary option trading. It is just like the regular stock market for you, but more action packed. Think of it like stock market on ecstasy, never a dull moment.
For the future stock traders out there it is important to pick a school, because the right style will dictate how you check a stock, or if Binary options is worth the while. For example, it was difficult to argue that Warren Buffet is not one of the most successful investors of our time, people don’t call him the oracle of Omaha for being mediocre. He is perhaps the epitome of a value investor that makes sound investment decisions through careful studies of the intrinsic value of a stock.
I mentioned earlier that paying a lot of attention on intrinsic value of a stock doesn’t really help much in Binary options trading, however it is important to understand a stock that you are making calls on, especially for those that have no earlier trading knowledge at all. A good book to get you started with value investing is Buffett: The Making of an American Capitalist by Roger Lowenstein. It’s a very enjoyable read that provides much insight to Buffet and his journey to success, but If you really want to get in on value investing, pitch patience and time for great reward then you must read the book that Warren Buffet himself have studied, The Intelligent Investor by Benjamin Graham.
Warning: In comparison The Intelligent Investor is not a light read, and as an avid reader myself, I cannot say that it is an enjoyable read either, a little dreary at times even, because it is almost like a text-book, actually, I think it is still being used as a text-book in many business schools.
I know at this point I have drifted a bit on the topic, forgive me because like I said the question we set out to answer is not an easy one, I feel that the best way I can do is offer you the reader as much information relevant to the topic as I can and decide from there.
So if you are a value investor whom practices excellent patience and fortitude, one that can select the right investment and hold on to it until the best moment of return then Binary options trading maybe against everything you practice, and the readily moving charts are nothing but a distraction to you.
On the other hand, if you want to become an aspiring day trader, or a technical legend like Jesse Livermore then there are no better place to get your beak wet than the many Binary Options Trading out there.
Binary options also cost less to take part, a lot less than buying stocks actual stocks. To trade stocks or commodities or Forex, you need to have some cold money that you can put aside as an investment. Even the lowest amount a typical brokerage firm need their client to have to trade stocks is at least $2,000, and with that amount you don’t really have a lot of options to trade good stocks, or to even cover the brokerage fees.
Which is why many people ended up trading penny stocks or pink sheets. Without going into too much detail, or drift further from the topic either of those are very risky investments, they are not very well-regulated and are scam prone. My advise is just stay away from those and buy yourself some good reads with that money instead.
To invest on the market properly you will need tens of thousands or even millions of dollars, some of you may have that, but for the most especially students learning the trade, that is almost a barrier to entry that is impossible to breach.
Thank you for reading up to this point, I know that this is probably one of the longer articles online on this subject, but like I said I am passionate about it and I hope to give you as much information as I can.
In summary if you seek quick action and quick return and have limited resources, then Binary Options might be your calling to the trading world. However you must take it seriously and diligently.
Capital needed for Binary Options and Can You Succeed
Lets address the easier question first, how much money do you need to take part in Binary Options Trading. The short answer is not much, you could start with as low as $20. This criteria alone is very attractive to many people who want to get a taste of the market but not really willing or capable of coming up with tens of thousands or even millions of dollars required for the market.
many binary firms will even give you bonuses, I’ve seen some offering promotions that will double your first deposit. Do your research on the kind of rewards and bonuses different firms offer. Below I have listed some low starting deposit firms.
Low Investment Binary Options Trade Firms
Can you succeed in binary options trading is something else entirely. I have moderate success, I am on top most of the time, but I make each $1 call like it is a million dollar deal. First of all, yes you can make $1 calls, and depend on the return you get 60 to 90 cents to the dollar. Which from an investment return point of view is great. However, when I predict wrong, I lose my dollar, which again from an investment point of view is a 100% loss, now you see why I treat each trade like it’s the deal of century.
To me it is mainly to get intimate with the charts, after watching it go up, down and sideways for a while I start to develop a special relationship with a particular asset, and that have helped me make investment decisions outside of binary market, sometimes I was able to spot an opportunities on a particular asset because the second by second movement of Binary was just more intimate. Not to mention making a few hundred bucks on Binary out of a 3 minutes trade feels darn good at times.
I mentioned earlier that if you treat binary options trading diligently like you should with any investment then you start to act and think like an investor, and the goal of every investor is to make more money.
That being said I must also be frank, all investments have risk, never use the money you can’t spare, or worst the money you don’t have. Know when to stop and bow out is key, when a trade that you are so sure about goes the other way, shrug it off and learn from your mistake.
There are many successful binary option traders out there that do great. These are professionals as I call them. People that has done it for years. What I like is that most Binary option trading firms has a leader board, that shows you what they did, don’t just look at what they earned study what they trade and how they trade is more important.
Below are some screen shots of great trades of the day from some different firms that I took at the time of writing. These leader boards update in real-time, there is always some exciting trades going down in the world of binary options trading. Remember I said binary option trade is like market on ecstasy?
I must tell you that there are much going on in a 3 minutes of trade in Binary than the gain and losses in the end. Knowing when and what to call is what separate an investor from everyone else. There are some essential skills that you should have to trade successfully in the binary options market.
I mentioned in my previous section that a thorough study and understanding of the intrinsic value of a stock, commodity or currency does not help with Binary trading and that emphasize is placed more on technical analysis. The school of technical analysis is a wide one as well, one that requires knowledge and practice. Good news is there is no better place to practice your chart reading skills than Binary options trading. Remember Jesse Livermore and his days in the bucket shops.
When it comes to chart reading there are many types of stock charts, the most popular and well-known ones are line, bar and candlesticks. Personally I enjoy candlesticks more, I think there is no science behind a person’s preference, it really is what make sense to you. I can get very intimate with a stock through candlesticks you might not, it is a journey of discovery. It pays to know how to read more than one type of chart, but at least knowing one will separate you from the guessing crowd.
There are many resources on the web that teaches you the fundamentals of chart reading, most binary trading firms offer free courses on these subject as well, it is also worth mentioning that most binary options trading platforms will also offer computer analysis tools such as MA or Bollinger Bands. If you are going to learn a chart reading skill I recommend candlesticks; Japanese Candlestick Charting: A Contemporary Guide to the Ancient Techniques of the Far East by Steve Nison. However, do your own research before committing to a book, Candlesticks makes sense to me it might not to you.
Regardless of what chart reading skill you learn they all offer the same fundamental idea, that is to understand the asset through its movements. When an asset move, regardless of being a stock, commodity or currency pair, it moves because people are buying and selling, and chart give you that sign of momentum, being able to see the momentum allows you to make sound judgement call.
So yes, you can succeed in Binary options trading just like you could succeed in any other market with adequate knowledge, patience, willpower and fortitude.
What Can You Trade In Binary Options
Now that you know what Binary options trading is and have an idea on how to be successful, now let’s look at what can you trade in the Binary market.
In short, Binary options allow you to trade stocks, commodities and Forex. Stock is evident, you call in the stock of a company, each binary firm may offer different stocks, many offer blue chip stocks such as IBM, Google, Apple, Tesla and from other reputable companies. It is fun trading these because once you get very intimate with them through Binary you start to see a particular stock better than other people, and that itself opens new opportunities, or at least you can start calling your positions more accurately and start making some real money from your positions.
Popular commodity trades are gold, silver and oil, and currencies are such as USD:CAD or USD:EUR. The fundamental are the same as stocks, however, due to different market you will soon realized that the ticker moves and reacts differently. On Binary options it really doesn’t matter which one you trade in, what is important is that you find the one you understand.
I often watch several assets at the same time, but if you are starting out look at one first. This will help you build a rapport with an asset first then go from there.
Firms to Trade Binary Options
There are many different firms that offers Binary options trading, since now you know what this type of trading entails, picking a trade firm to do business with is actually very simple. My rule of thumb is trade with whoever you feel like it. Whatever the criteria that makes you comfortable go with that. Whether it’s the country of operation, or the business behind the firms, length in business, or maybe the CEO. It doesn’t matter, what matters is that these firms are in business and they pay what you make. If you read a review on a firm that owes people money or is on the verge of bankruptcy you don’t need me to tell you to stay way.
I mentioned earlier that different firms offers bonuses, at first this maybe of interest to you since you are just experimenting and is not willing to invest more until you feel comfortable. However, if you have the money to invest take the bigger bonus.
Below is a list of Binary Option Trading firms that I have poked my nose in at one point of another, they are reputable when I wrote this article, I don’t see why they would not stay reputable, and they all offer some sorts of investment bonuses as well.
There are certain criteria that are important to me when reviewing a Binary firm that are not for you. So I recommend you take a look for yourself. Signing up with a firm is not a big deal, unlike the stock market where you have to deposit tens of thousands of dollars before you can even trade. Binary is different, since you are trading on the market and not in it you can start with a 10 or 20 bucks if you really just want to test the water, better yet get the demo account, most firms offers it, zero risk there.
Binary Firm and Deposit Bonus
Grand Capital – up to 200% bonust
Iqoption – up to 200% bonus
Nord FX – up to 150% bonus
Utrader – up to 150% bonus
Additional Reading Materials
If you want to explore more on the market; stocks, commodities, currencies or Binary options then I made a list of books that you may enjoy reading. If you found information in this article that you didn’t find anywhere else on the web it is because I got it from a book. I have mentioned some titles throughout the article that helped me drive to the conclusions the way I did, you may not. So for the truly curious and the learning mind these materials may offer new insights, things that I overlooked, or perhaps plainly misunderstood. In which case I’m more than happy to discuss with you in the comment section below.
At this point I want to thank you for reading this quite lengthy article of my understanding on Binary Options Trading. I hope that I have provided new information and useful materials that can aid you on your journey of becoming a success in this type of trade.
Like anything else in life, practice and dedication is required to prevail but never guaranteed. I think part of the journey that is exciting is when we discover new things and knowledge. Perhaps you never knew what a bucket shop was prior to reading this article, and maybe you didn’t know that Warren Buffet and myself (self-appointed, since I was not born at the time.) are students of Benjamin Graham. My point is, knowledge is very powerful and sexy, and knowing where to look for the right information may just give you that edge you been looking for, or to the least learning something new.
I am not a professional writer, I’m a business man, a modern trader making a living on the real and digital silk road. My profession takes me to new frontier of technology, production, retail, distribution and innovation. I do much of what I do because I am deeply in love with it. Sadly, you don’t see a 30 years old trader like me very often. In a day and age where young people are just eager to jump into the valley or wall street, It is simply not a profession that people of this information technology era have much interest in. Many people even assume that this profession is on its last breath due to the rapid advancement in communication technology, after all who needs a middle man right?
Well think about it, communication technology has always been rapidly advancing, from homing pigeons, mail carrier, to the telegraph, the telephone and the internet. Who knows what else is coming, quantum teleportation I heard. Through these changes, the profession that I am deeply in love with continued to thrive. So this article and many like it is an archive of what I do, and is a way of me sharing with the world my interest, my journey, and my experience as a trader. I hope you have enjoyed this article and I look forward to discussions with you in the comment section below.
All the best and I wish you the most success in Binary Options Trading.