Binary Options are a popular trading alternative today.
The simplicity in transacting these adds to its charm.
Moreover, the associated high return expectation makes them traders’ favorite.
However, actual gain from these binary options a still a debatable matter.
Most studies indicate that the actual profit is much lesser than the hypothetical expectation.
According to most researches, only 30-35% of retail investors actually experience profitability.
That is exactly why a huge question mark is being raised on their actual mettle.
Many traders now wonder if you can actually make money using binary options.
Binary Options per se are great investment options.
However, consistent returns don’t happen overnight; you need time and perseverance.
The fundamental aspect here is to first of all grasp the nuances of binary trading.
That alone can help deliver meaningful returns over the longer term.
Profitability from Binary options is closely related to perseverance and objectivity.
You have to undertake trade with absolute precision.
Only then, you can hope to derive meaningful advantage from this arrangement.
But before that, you have to understand how to trade binary options.
This is another fundamental problem with this trade.
A lot of the trading issues are because of limited understanding of the basics.
Beginners especially tend to falter as a result and take rash decisions.
Inadequate understanding of this trading methodology can also result in appropriate allocation.
That also can be a major challenge for many hoping for instant and huge returns.
So let’s go through a quick lowdown on what’s binary option and how to trade it.
Understanding Binary Options
A binary option is a unique option.
In this case, either you get a fixed amount once the option expires or nothing at all.
Especially if the option expires out of money, there is no monetary gain.
So there is no halfway in case of a binary options.
It is either profit or complete loss, more or less a yes-no arrangement.
Now I am sure; now you understand why the name, Binary.
In this case, you cannot buy or sell the underlying asset just because you have the Option.
Given the uncomplicated procedure, it is a big hit among investors.
There is no risk of multiple possibilities.
It is one simple solution, a definite possibility.
Let’s say I own shares of a company, ‘A’.
My binary option is rather simple.
I have bet that the price will rise above $50 by expiry.
Let’s the Option rose to $53 at the designated time.
So the option gets exercised on its own, and I get the pre-decided amount.
So then the question is how it is different from a regular option?
Well, most importantly the Binary Options have some special features.
Another striking difference is the ability to sell underlying assets.
You cannot sell or even buy them in case of Binary assets.
But you can do so when you are dealing with plain vanilla options.
The holder has the right to buy or sell the underlying asset at a specific rate.
Another point of difference is the trading platform for these options.
Your plain vanilla options are largely traded on regulated platforms.
However, in comparison, Binary Options operate in regulated platforms only occasionally.
They are mostly traded over the internet.
As a result, investors run the risk of fraud to a larger extent in this case.
How to Make Money with Binary Options
Investors typically have to make a certain amount of deposits.
This is deposited with the trading platform to buy the options.
In case, there is an out of the money settlement; the investor will lose the entire deposit.
Once the trade goes wrong, you cannot expect any refund.
The entire money is completely lost.
Let’s take an example to completely understand this aspect.
Let’s assume I have bought a Binary Option for S&P 500.
The expectation is that the price will rise to a specific level by expiry.
Supposing the bet is for a $100 gain if there is a specific rise in value.
The Future actually rises to that levels and closes above it.
I may have bought the Binary Option for $50.
So then technically my profit will be $100-$50= $50.
Therefore the whole gain here is based on my overall call on the Binary Option.
The core fact is if I can make the right call, I will make a desired level of profit.
But at the same time, if I am not able to, I should be ready for the loss as well.
There is a distinct level of transparency in this transaction.
Risk-Reward Ratio in Binary Options
This is perhaps why it is a good idea to understand the risk-reward ratio in Binary Options.
This is basically an exercise to help you understand the extent of risk involved.
In fact, the risk –reward ratio is the biggest element that most critics point out when referring to these.
While the prospects of receiving high returns are as much as 91%, it also highlights the risk.
So if a trader undertakes a $100 trade, they can gain over 90%.
But this also means that the losses can be almost 100%.
So the risk, in this case, is significantly higher than the profit.
This is also the reason why many traders reject binary trading options.
They consider this type of option trading almost like a gamble.
It is often referred to as a gambling derivative too.
However, let’s understand that this is only one part of the story.
You get the opportunity to bag huge profits.
The turnaround time is also extremely low
This means the rate of return is invariably higher.
So the difference between the strike price and the asset price is also crucial.
So the overall profit percentage is determined by this difference too.
Needless to mention that Binary Options also give you relatively higher leverage options.
Traders can often leverage as much as 30x their investment.
This is primarily possible because of the relative difference in asset price and strike price.
So, if you analyze the risk-reward ratio, the risk is always distinctly higher.
But this is almost always about how well you can place your risks too.
That is what gives you the leverage to take the chance and wait for the profit to ring in.
That is what enhances the reward element in this type of trade.
Diversify Your Trade
This is true about investing across asset classes and trading instruments.
When you are trading in Binary Options or stocks, diversification is essential.
You have to understand that if you are interested in making serious money, you have to diversify.
Like the old saying goes, you cannot put all the eggs in one basket.
You have to be very careful about how much you put and where.
That alone will make sure you can derive sustainable gains over a fixed period.
Moreover, this is one of the simplest ways to make money through binary trade.
It adds depth to your trade and also cushions your assets against sudden price jumps.
So choose various types of binary options.
It is never wise to concentrate on just one type of binary options.
Neither should you look at binary options in only one type of asset class.
You have to look at ways to spread out the risk in a meaningful manner.
That alone will make sure that the relative reward is also significant.
It also helps to hedge the risk in a constructive manner.
Needless to mention that this improves the overall profitability to a large extent.
Investors can look at diversifying on the basis of the time period too.
You can take a position in long-term contracts and short-term options as well.
The time difference also helps you gain traction from a range of price point.
Moreover, assets respond differently on the basis of the investment duration.
This diversification then helps you take advantage of the time factor too.
There are some kinds of weekend trading options that deliver whopping returns.
But instead of risking your entire investment, you can easily distribute the risk.
This helps you take advantage of the price difference without compromising overall safety.
The Choice of Asset Is Crucial
When you want to make consistent profit trading binary options, choose assets correctly.
The binary options are available in different variation under these formats.
Choosing the most profitable option from the overall gamut is never simple.
It is often a combination of both good sense and foresight.
Overall there are over 150 different types of financial assets in binary option.
These variants include the likes of stocks, commodities, forex and a lot of others.
The liquidity and the relative volatility of the assets determine gains.
Different assets like currency and oil also derive their worth from the difference in pricing.
Just choosing the assets is never sufficient.
Traders will also have to make the right investment call at the right time.
That alone will make sure that investments yield sufficient return.
Different assets trade differently in markets across the world.
A profitable binary options trade necessitates identification of these factors.
That alone will make sure that the investment call is balanced.
Moreover, the appropriate amount of asset allocation is also crucial.
That again comes from understanding what factors impact what assets.
So the overall choice of assets comprises of a very important factor in this trade.
News Trading Concepts
Reducing the risks in your trade remains a crucial element.
This is true in the context of Binary options as well.
The question is how can you continuously balance the risk element?
One simple approach is by simply incorporating all relevant news developments.
By simply aligning your trading strategies with the news developments, you can cut down risk.
Needless to mention that this also increases profitability to a large extent.
Economic data release is one of the biggest catalysts for price movement.
The Binary Options are impacted in many ways by the economic data.
The huge variants of trading assets further highlight the susceptibility.
For every economic data release, there is, of course, one set of binary options that are affected.
So when the trader tracks these news elements closely, trade is a lot more pointed.
They also have the benefit of anticipating a certain spike or fall in prices.
On an average, these economic data releases are pre-planned and pre-decided.
You have a complete economic calendar tracking the same.
So, an intelligent binary options trader designs their trade around this calendar.
From taking up new positions to liquidating existing ones, he follows it with precision.
What is particularly interesting is that you don’t have to buy these economic calendars.
They are available for free across the net.
All you need is a bit of focused search on the type of data you are looking for.
If you are not sure of a particular asset, you can avoid trade too.
Many times, investors may not be able to speculate on the potential price impact.
But if they know the tentative time when the data is announced, they can even avoid the trade.
Like they say, sometimes no action can also be the best investment decision.
Preserve Your Capital
When you are looking at ways to make money via binary options, capital preservation is crucial.
So by this, I mean that you must not lose focus on your investment objective.
Profitability in any investment is always incidental.
Your primary goal has to be capital preservation.
That will make sure that your profitability is not compromised at any point.
So while amateur traders look at booking profit, professional only focus on managing risk.
Risk management is often considered the best way to deliver consistent returns.
In this case, your returns stop being dependent on your investment.
The way you manage your investment, the returns simply keep flowing in.
Well, that is often the crux of quality trading in binary options.
In this context, it is very important to create thresholds.
For example, make sure how much you want to allocate in each trade.
For example, I always ensure that I do not risk more than 5% of the capital in any trade.
So I am limiting my risk exposure at 5%.
Well, this number can be different for you depending on your risk profile.
But at the same time, it is imperative to sync it with the trading opportunities.
In this context, as a resourceful binary options trader, you must also consider a variety of innovation.
That will help you derive sustainable value from the overall investment.
This is, however, a tricky balance for even seasoned traders.
You have to spread out your binary options.
Make sure that you cut down only risk and not profitability at any point.
You may want to book profit in existing trades or even certain losses.
The idea is to always keep the long-term profitability intact.
That alone can help you derive sustainable value.
This also helps in managing risk constructively.
Benefit of Binary Signals
If you want to make serious money in Binary Options, don’t ignore binary signals.
Binary signals are a unique combination of investment signals.
They give you notification for both the best times to initiate and close a trade.
As a result, they can help you remain on top of the game at all times.
Even for investors who are perpetually on the go, these signals can prove beneficial.
They help you time the investments appropriate and derive maximum value.
In other words, these signals help you identify every opportunity to book profit.
The best part is this is a useful arrangement for all types of investors.
Whether you are a beginner in binary options or a seasoned player, these signals help.
It helps to make your investments more dynamic.
You can sync them to the news elements too in a comprehensive way.
Most importantly, these signals help you preserve capital constructively.
Binary Options Make Money
So, a simple answer to whether binary options make money is yes.
But the truth is it is never as simple as it seems.
Trading in binary options is complex and needs a comprehensive perspective.
But with little precision and perseverance, you can make this trade profitable.
You can look at earning meaningful and consistent returns from trading in binary options.
However, constructive risk management is the key to long-term profits in binary options.