Have you ever come across the word ‘Binary Options?’ Did you wonder what it means? Some bells may have rung in your mind that it is related to investments and trading. But what is it? Should you invest in it? These questions are what we are going to answer here.
Here’s everything that you need to know about Binary Options.
What is Binary Option?
Imagine you get paid for every right prediction you make. Binary Options are exactly it. You make a financial option about an underlying asset; if the option is correct, you have won the bid. It may be one of the easiest trading types but making money out of Binary Options is not that easy.
Traders put themselves at a greater risk as these financial options come with only two outcomes: you win or lose all the money you invested. They are known as Binary Options because no other settlement is possible.
Before trading in Binary Options, you must know the functioning of the financial markets, time frames, and how they work. Having incomplete knowledge may lead you to incur losses.
In totality, Binary Options work in this way:
- Predict whether the underlying asset’s price will go up or down.
- Next, choose the time when the trade ends. Usually, it ranges from 60 seconds to 4 hours.
- Invest the amount you want to.
- Wait for the time to expire.
| Good to know! |
| The structure of Binary Options trades is different in the US and outside the US. A notable difference between the two structures is that Non-US binary traders get fixed payouts and risks. Furthermore, individual brokers determine payout rates, unlike in the USA, where the exchange offers it. |
Our recommendation: Pick the best broker for binary trading!
Broker: | Review: | Advantages: | Sign up: |
1. Quotex  |
| Live account from $ 10 (Risk warning: Your capital can be at risk) | |
2. IQ Option  |
| Live account from $ 10 (Risk warning: Your capital can be at risk) | |
3. Pocket Option  |
| Live account from $ 10 (Risk warning: Your capital can be at risk) |
Binary Options market share in the financial market
There’s no specific study that tells the total market share of Binary Options in the financial market. However, its market size has grown exponentially in the last few years.
There are various reasons for this growth of Binary Options. Some of them are as follows:
- There are no hidden costs, meaning you know the risk ahead of time.
- The risk cap is limited to the initial investment.
- It saves the traders’ time as they can select the expiry time as low as 60 seconds.
Many other factors have made Binary Options one of the most popular trading types. Anyone can trade Binary Options because the minimum trade amount is just $1.
Do you really earn profits with Binary Options?
Even though the premise behind Binary Option is risky, people still indulge in it due to the high payout ratio. It even leads to people questioning if traders earn profits from Binary Options.
We must look at the winning to losing accounts ratio to answer their questions. Luckily, Binary Options regulations in Japan have made it mandatory for brokers to publish their payout ratio and percentage of losing accounts.
The below table gives the information about various brokers in Japan and their payout ratio and losing accounts:
| Payout Ratio | Losing Accounts | |
| Quotex | 98.10% | 69.20% |
| Pocket Option | 99.75% | 69.84% |
| Hirose FX | 95.60% | 71.40% |
| CyberAgent FX | 88.83% | 76.34% |
| FX Trade | 94.00% | 76.80% |
| FX Prime | 98.80% | 77.20% |
| Traders Securities | 94.78% | 77.91% |
| *Average | 95.69% | 74.10% |
Key Takeaways:
- Out of 100 accounts trading in Binary Options, 26 made profits. It means that every one in 4 traders makes money from Binary Options.
- The average payout percentage in Japan is about 95%.
Compared to Forex trading, Binary options provide much better results for Japanese brokers. For many brokers, Binary Options reap 10x the revenue Forex would with similar-sized deposits.
(Risk warning: your capital can be at risk)
How many Binary Options brokers exist?
In the world of trading, unlimited brokers exist. Just search up on Google “Brokers near me,” and you will find an endless list. But are all of them worth your trust? Not certainly because there have been numerous cases of scams and frauds.
However, many of them provide excellent services to their clients. Some of the best Binary Options brokers include the following:
- IQ Option
- Pocket Option
- Quotex.io
- Nadex
- 99Binary
- Ayrex, etc
All reliable brokers have a body that regulates and regularly checks them. You know a broker is credible if a reputed authority regulates them. Below is all you should know about Binary Options regulations and regulating authorities.
Binary Options regulations:
As mentioned, the risk with Binary Options is high. In addition, all trading activities and transactions happen online. There is a high probability of a trader getting fraud. Therefore, it is necessary to regulate Binary Options and save the clients from losing their money.
Several regulating bodies have been set up worldwide to check the brokers’ functioning. These authorities determine the rules and how the brokers will operate. If a reputed authority regulates your trading software, you know you can trust them with your money.
Some central regulating authorities are:
- Commodity Futures Trading Commission (CFTC)
- US SEC (Securities and Exchange Commission)
- British Financial Conduct Authority (FCA)
- Australian Securities and Investments Commissions (ASIC)
- Financial Markets Authority (FMA)
- Cyprus Securities and Exchanges Commission (CySEC)
- Financial Services Agency (FSA)
As you may have noticed, some countries have their own regulatory body. On the other hand, authorities like CySEC control brokers providing services in over 30 countries.
Some regulations that these authorities may impose upon the brokers are:
- It should maintain a certain sum to meet the clients’ obligations.
- Brokers have to provide clear and transparent information to the clients.
- They must have a physical location and staff to provide services
- And many more.
You can check the rules of each regulating authority from their website. A broker has to follow these regulations. Otherwise, their license can get canceled.
| Quick Tip! |
| Always choose a broker regulated by a reputed authority. Choosing a broker without a regulatory body may increase the risk of losing your money to scams and frauds. |
(Risk warning: your capital can be at risk)
How many traders trade Binary Options?
The current times may have seen the highest number of active traders. Many diverge towards Binary Options because of their simplicity and high payouts.
For instance, IQ Option has about 40 million registered traders with 1 million daily transactions. It clearly shows how popular trading has become. All other major brokers also have these numbers in millions.
What is the overall trading volume on Binary Options?
In those 1 million transactions, shares are continuously bought and sold. The number of shares bought or sold during the active hours on a day is what we call trade volume. It helps us measure a market’s activity and liquidity during a specific time frame.
Let us take IQ Option as an example to give you an idea of the overall trading volume. Their official website says their trade volume is about $290 million daily.
| Good to Know! |
| The trade volume is the highest when the market opens and closes. Similarly, you see a spike in trading volume at the start and end of the week. |
Binary Options banned countries:
Now we know almost everything about Binary Options. Still, it all ends with if it is available in your country or not. The simple answer is that these financial options are legal in almost every developed and developing country. You can trade these exotic financial options whether you live in the USA or the UK.
Note: Binary Options are not sold for retail clients in Europe (only for professional traders).
Binary Options are banned in (the status might change):
- Israel
- New Zealand
- Australia
- North Korea
- Puerto Rico
- Singapore
- Indonesia
- Iran
- Yemen
- United Kingdom
- Canada
However, it would be good if you found out whether a broker provides their services in your country or not.
For instance:
- CySEC-regulated brokers such as IQ Option allows traders only from Europe and countries friendly to its regulations. It means traders from the USA, Australia, Canada, and others cannot open their accounts with CySEC brokers.
- Nadex is the primary exchange for Binary Options in the USA. It also allows applications from over 40 countries listed on its official website.
Similarly, each broker provides a list of countries where they provide their services. Be sure to check it before selecting your broker.
(Risk warning: your capital can be at risk)
Key Binary Options stats:
With Binary Options, you can invest in various assets such as stock indices, Forex, commodities, and even macroeconomic events. However, to make profits, you need to take the help of the key Binary Options stats that help you double your chance of winning the trade.
Since investment is all about prediction, calculating probability becomes a necessary task for traders. During your calculations, you must consider these factors:
- Volatility (what is the rate at which the price of an asset changes?)
- The direction of the price move
- Timing
All reliable indicators incorporate the above factors to get the most accurate predictions. Therefore, here are the essential indicators for a Binary Options trader:
Wilder’s DMI (ADX):
Wilder’s ADX has a primary objective to tell you the strength of an identified trend. This method consists of three lines: ADX, DI+, and DI-. The table below shows how to interpret trends using this indicator.
| Position | Momentum | ADX Value > 25 | ADX Value < 25 |
| DI+ above DI- | Indicates Uptrend | Strong Uptrend | Weak, Unsustainable Uptrend |
| DI- above DI+ | Indicates Downtrend | Strong Downtrend | Weak, Unsustainable Downtrend |
Based on the trend and its momentum, you should be able to determine whether the price will go up or down.
Pivot points:
The Pivot analysis is another statistic that helps find the trends and the direction the price will move. An added benefit to this indicator is that you can use it for any time frame. This flexibility allows the traders to invest in Binary Options, especially in highly liquid major currencies.
| Good to Know! |
| If you lose a trade, you can never lose more than your initial investment. It is because your maximum loss is collateral by you, meaning that you never lose more than the invested amount. |
Commodity channel index (CCI):
The commodity channel index (CCI) lets you determine the current price level of the asset corresponding to its average price level at any given time frame. This indicator allows the trader freedom in choosing the trade’s expiry time. It is very useful to determine new trends and overbought/oversold asset conditions in the market.
The formula given below will help you calculate CCI:
CCI=Price-MA0.015 ×D
Here,
- MA = Moving average of the asset price
- Price = asset’s current price
- D = Normal Deviation from MA.
After the calculations, if you get values above 100, it indicates the start of a strong uptrend.
On the contrary, values below -100 indicate that a strong downtrend is about to begin.
(Risk warning: your capital can be at risk)
Stochastic oscillator:
Dr. George Lane founded this indicator that follows the momentum of the price. According to him, the momentum of the price starts to change before the actual price does.
This indicator lets us identify extreme cases of overbuying and overselling. Hence, traders can recognize and develop reversals for bearish and bullish phases. Traders can use the following formula to use a stochastic oscillator.
%K=100 ×C-L14H14-L14
%D=3 period moving average of %K
Where
- C = Most recent closing price
- L14 = Low point of 14 previous trading session
- H14 = Highest price in the same 14-day period
The crossover of %K and %D values indicates trade entry signals.
| Good to know! |
| The 14-day period is the standard value for calculation. A trader can alter the timeframe and use it as desired. |
The above indicators will help you a lot in your trading journey. With them, you can make informed decisions, therefore, earning profits. Now, let us look to know more about Binary Options.
The bottom line:
Binary Options can become a great addition to your portfolio. Learning to make profits with Binary Options will help you become a skilled trader. Even if it seems simple, there are certain risks that you cannot avoid.
You must sign up for an account with a licensed broker to start your trading journey. With Binary Options, you can achieve what you desire!
(Risk warning: your capital can be at risk)
