Binary options have become a popular way of trading financial assets online because of their simplicity and high returns. Nonetheless, various researches still show that only less than 30% of retail traders achieve profitability trading this market. For this reason, most investors often question whether it is possible to really make money trading binary options. The short answer is yes, but the long answer is that it requires hard work, commitment and dedication to consistently churn out profits from the binary options market.
Most critics of the legitimacy of binary options trading usually cite the risk/reward ratio that traders are exposed to when trading binaries. Usually traders can receive returns of up to 90% on trades they place in the market, which means that if a trader places a $100 trade he gains $91 if the trade is successful; if he is wrong, he will lose $100. His risk is essentially greater than his potential reward and this is the reason most critics dismiss binary options as a derivative of gambling.
However, what the critics fail to acknowledge is the ease of trading binary options as well as the potential to return profits within a quick turnaround time. In binary options, traders will book definite profits if the asset price closes higher or lower (even fractionally) than the strike price. In other market such as forex, the amount of profits will depend on how far away the asset price moves from the strike price, which implies that traders need to perform more thorough and in depth analysis than in binary options.
In binary options, traders have the opportunity of returning profits quicker than in other markets; this gives traders the chance to make money within a quick turnaround time. Making huge returns within such a short time is not possible in other markets.
How to Make Money with Binary Options
Choose the Right Asset to Trade
The first decision a trader has to make before placing a trade in the market is selecting an asset. This is not an easy task because the binary options market allows traders to speculate on prices of over 150 financial assets that include stocks, forex pairs, commodities and indices. It is important that traders select assets that have sufficient liquidity and volatility because money in binary options is made from price movement.
News Trading Strategy
Incorporating a news trading strategy as part of their trading plan can help traders minimize their trading risks and boost their profitability. This is because economic data is one of the major catalysts for price movement in financial markets. Due to the wide range of tradable assets in binary options, there is usually at least one high impact economic data release daily that will significantly impact price movement in the markets.
A trader who tracks economic data releases will have the opportunity to profit by anticipating such movements. Tracking economic data can also help traders reduce their trading risks as traders can avoid trading assets that are likely to be impacted by scheduled economic data release if they are unsure of the effect such data will have on the prices of the underlying assets.
Diversify your Trades
It is important to sign up with a broker that will allow you to trade different types of binary options contracts. There are various ways traders can trade the price movement of their favorite assets. Diversifying your trades will help boost your profitability in the market. For instance, traders can trade contracts such as short term options, long term options, Call/Put options, while other trade contracts available in the industry includes, Pairs, No Touch options, One Touch options, Ladder options and weekend options. In contracts such as weekend options, traders can make returns of up to 500% on a single transaction.
Protect Your Capital
Managing risk is the proven way of achieving consistent success in the financial markets. While amateur traders usually focus on making money, professional traders mostly focus on risk management.
The rule of thumb is that no more than 5% of the capital is put in a single trade. There are many trading opportunities in the market and no trade is better than the other.
Having a sound binary option trading strategy is by far the most important factor: you might have the best assortment of binaries, the best and most complete source of information for news and economic data release and the best but if you don’t have a proven and statistically winning trading strategy you will not have a lot of satisfaction in binary option trading.
To conclude, it is possible to make consistent profits trading financial assets in the binary options market but traders need to work hard and to strictly follow a sound trading plan that will reduce their trading risks while enhancing their potential profitability in the market.