Binary or ‘digital’ options have been around for decades. Originally though, it was only large institutions and the fabulously wealthy that had access. However certain regulatory changes made them to suddenly become really popular and accessible to the average investor.
Put simply, binary options are a derivative that can be traded on any instrument or market. They appeal because they are straightforward. You know precisely how much you could win, or lose before you make the trade. No complex maths and calculator is required. This is why they are also known as ‘all or nothing’ trades. If you anticipate news announcements, quarterly reviews, or global trends, then you may be able to make an accurate determination as to whether the price is going to increase or decline at a certain point in the future, turning a profit.
There is a whole host of derivatives to choose between. You can trade binary options on commodity value, such as aluminium and crude oil. You can opt for a stock price, such as Amazon and Facebook. There are foreign exchange rate options, including all the major and minor pairs. Even cryptocurrencies such as Bitcoin, Ethereum, and Litecoin are on the menu.
The internet and technology have since given the whole world access to these ‘digital’ options. As it stands, with low barriers to entry for savvy day traders and a simple to understand preposition, the demand for these digital trades will only increase.
Despite the somewhat negative reputation, the reality is binary options are legal. The majority of companies operate fairly. Opinions have been split because there are some out there that operate scams.
Regulation in certain regions has meant binaries have been withdrawn from the retail market. Meanwhile, the product range has been widened or reinvented. No matter where in the world you are, traders should make sure they use a reputable broker, and read our section below on avoiding scams.
| Brokers | Minimum Deposit | Minimum Investment | Maximum Returns | Trade |
 IQoption Review | Minimum Despoit$10 | Minimum Investment$1 | Maximum Retursnup to 95% | Get Free Account |
 Deriv.com Review | Minimum Despoit$5 | Minimum Investment$5 | Maximum Retursnup to 95% | Get Free Account |
 Binary.com Review | Minimum Despoit$5 | Minimum Investment$5 | Maximum Retursnup to 95% | Get Free Account |
 OlympTrade Review | Minimum Despoit$10 | Minimum Investment$1 | Maximum Retursnup to 95% | Get Free Account |
Also known as digital options or fixed-return options, binary options is a special type of options trading in which the payoff is either a fixed predetermined amount or nothing at all.
For the common Call or Put binary option, the trader enters a BUY or CALL trade if he thinks the price of the underlying asset will go up above the current market price; otherwise if he thinks the underlying asset price will go down, then he will go for a SELL or PUT option. If his assessment is correct, he will receive a payout. Otherwise, he loses the initial investment
As binary options have fixed returns, it doesn’t matter how high or how low the price of the underlying has moved past the strike price. The payout is also fixed and known prior to entering the trade. Also important to note is the fact that the payout for a successful binary trade is usually only about 70% to 80% of the investment put into the trade. Binary options also typically have very short expiration times ranging from as fast as 60 seconds to just a few weeks.
Still on the issue of comparing CFDs and Binary Options Trading, in binary options trading, even though you are still investing without owning the asset in question, the gain and loss rate is fixed. With a call option, it doesn’t matter if the price rockets, you retain the same percentage as if it rose by just a couple of pips.
Likewise, if the price sinks to zero, you’ll only lose what you put in. So, to define the difference – with binary options you get fixed risk. Having said that, just as if it was binary options versus forex trading, you are restrained in your profit potential.
If you want to profit trading binary options, you need to first understand both their pros and cons. You need to make sure binary options will suit your trading style, risk tolerance, and capital requirements.
There is a whole host of attractive benefits to trading with binary options.
The greatest advantages have been outlined below.
Because you are making a determination on only one factor, direction, your bet is straightforward. The price can only go up or down. You also don’t need to concern yourself with when the trade will end, the expiry time takes care of that. Whereas in other markets, you may need a system to limit your losses, such as a stop-loss.
Trade stocks, gold, and crude oil and you’ve got a vast number of factors to contend with, from slippage and margin to news events and price re-quotes. With binaries, your risk is kept to a minimum with far fewer parameters.
Because you know what you may make or lose before you enter the trade, you have greater control from the start. Trade in stocks, for example, and you have no guarantee that your trade will make the entry price.
Compared to other trading, the returns in binaries are extremely attractive. Some brokerages promise payouts of up to 90% on a single trade. If you’re looking to make simple trades with large profit potential, binaries could well be worth a look in.
Rather than being constrained to a specific market, e.g. cryptocurrency or stocks, binary options gift traders the opportunity to trade instruments across virtually all markets, allowing you start currency, indices, and bonds trading if you so wish.
In the binary options game, it’s always the best trading hours somewhere on the globe. So, you can login at night, or on the weekends and join the groups of avid traders attempting to turn daily profits. Real-time charts are available for every market so if you’ve got the time you can invest 24 hours a day.
Whilst there are plenty of reasons to delve into trading on binary options, there remain several downsides worth highlighting:
Whilst you can benefit from trades that offer in excess of 80% payouts, these are often when the expiry date is some time away from the trade date. If the odds of your binary trade succeeding are extremely high you may have to make do with reduced payout odds.
Whilst most brokerages offer advanced charting and analysis capabilities, trading tools for binary traders often fall short of the mark. Fortunately, there are other online sources for these graphs and tools, plus brokers are working swiftly to increase their offerings.
Your odds are tilted in favour of losing trades. Approximately for every 70% profit, the corresponding loss of the same trade would result in an 85% loss. This means you need a win percentage of at least 55% to break-even.
Unlike other markets, brokers often set a trading floor, with minimum accounts a trader needs to enter the market. This means losing capital can happen with ease. Whilst a stocks broker may permit you to open an account with $250, trading micro-lots, most binary brokers won’t allow $50 trades. So, even with $250 in your account, just five trades that don’t go your way could see you sink into the red.
Binary options trading hinges on a simple question – will the underlying asset be above or below a certain price at a specified time? If so, you can make substantial profits with one of the most straightforward financial instruments to trade.
For the common Call or Put binary option, the trader enters a BUY or CALL trade if he thinks the price of the underlying asset will go up above the current market price; otherwise if he thinks the underlying asset price will go down, then he will go for a SELL or PUT option. If his assessment is correct, he will receive a payout. Otherwise, he loses the initial investment
As binary options have fixed returns, it doesn’t matter how high or how low the price of the underlying has moved past the strike price. The payout is also fixed and known prior to entering the trade. Also important to note is the fact that the payout for a successful binary trade is usually only about 70% to 80% of the investment put into the trade.
There are a number of different option types to choose from. The most popular types are listed in the brief glossary below.
The most simple and prevalent binary option. Will the price be higher or lower than the current price when the expiry time comes?
Here, a high and low figure will be set. You are then making a determination as to whether the price will finish within or outside of these boundaries.
Levels will be set that are either higher or lower than the current price. You then enter a position as to whether the price will ‘touch’ these levels between the time of trade and expiry. Payout will come as soon as the touch takes place.
These are similar to up/down trades. However, instead of using the current price, the ladder will have pre-determined levels that are staggered up or down. These normally demand a substantial price move. The flip side of this is returns will frequently exceed 100%. Although it is worth noting, both sides of a trade are not always available.
You can trade binaries in pretty much everything, including stocks, forex, indices, and commodities. You can bet on anything from the price of natural gas, to the stock price of Google. Opt for an asset you have a good understanding of, that offers promising returns.
Another important component of binary options is expiry times. This is when the trade will end and the point that determines whether you have won or lost. These times can range from 30 seconds and 1 minute (turbos) to a full day (end of day), and even up to a whole year.
As an intraday trader though, you will be more concerned with trading 5 and 30-minute binary options. Opt for binaries with 1 minute expiry times though and you have the ability to make a high number of trades in a single day.
In the binary options game, size does matter. The greater your investment the greater the possible profit. On the flip side, remember the entirety of your investment is on the line. You need an effective money management system that will enable you to make sufficient trades whilst still protecting you from blowing all your capital.
Binary Options is not a separate market in itself; it is merely a method of trading and profiting from the major markets.
Many of the most popular financial instruments such as currency pairs, equities and commodities are available to trade using binary options.
Here, we examine each market.
1) Forex
The currency market is the biggest financial market in the world and is open 24 hours a day from Monday to Friday. As such, it is the most popular market for binary options traders.
Most major and minor currency pairs like the EUR/USD and EUR/GBP are available to trade using binary options.
Many binary options traders were formerly currency traders and I believe that binary options trading itself is an natural evolution from the highly popular retail fx trading in today’s world where almost everyone has a mobile phone or tablet with high speed internet access. Trading currencies using binary options is much more convenient when using a mobile phone than it is to trade currency futures.
2) Commodities
Oil and gold are perhaps the most popular commodities traded on the major binary option trading Platforms.
Other popular commodities available for trading include: Coffee, Corn, Silver, Platinum, Sugar and Wheat.
3) Equities & Indices
When it comes to equities, only the most popular and most liquid stocks are available for trading in most major binary option brokerages. You will be able to trade binary options on large capitalization stocks such as Amazon, Google and Facebook.
Likewise, the major stock indices like the S&P 500, Dow Jones and Nasdaq-100 are also available for binary options trading.
4) Cryptocurrencies
Some Binary Options brokers even offer binary options trading for cryptocurrencies but the payouts are extremely low due to the reduced liquidity of the bitcoin market.
Another factor for this is the ultra high volatility that Cryptocurrencies have. Typically, cryptos can move high percentages in a single day.
Popular crypto coins that are tradable include Bitcoin, Ethereum, Litecoin and Ripple.
Many people think it is another form of gambling, especially considering the fact that it has some similarities with the traditional gambling system. For instance, it works on the up or down system just like Gambling works on the win-or-lose system. Also, it has a fixed payout and an expiry period.
But binary options trading is not gambling. It is based on speculating on the movements of prices of financial assets.
In order to trade binary options, you will have to register at a binary options broker. Some traders might not necessarily be that tech-savvy and might not always know what steps will have to be taken in order to register at such a broker.
Binary options brokers have somewhat long sign up processes on the web. This is because legal binary options brokers are forced by the law to gather certain information regarding traders’ identity. This is actually in order to protect traders in case of potential abuse.
Before you register you must choose the type of account that you will be registering for.
There are two types of binary options accounts offered by brokers. One is the real money account that will require traders to make a real money deposit. Using this account type, traders will have the possibility to win real money by trading financial assets.
However, brokers also offer demo accounts that allow traders to trade with “play money” without making a real money deposit. Naturally, this way, traders won’t be able to win real money but they will be able to test all the features and tools offered by brokers.
Before registering at a broker, traders will have to choose one of the two account types. The rule is that if you choose a real money account you won’t be able to create a demo account later on. However, if you create a demo account first, then you’ll be able to upgrade this to a real money account later on.
We recommend that you follow this route of first creating a demo account first, after which you now upgrade much later.
When you create your account, the broker will ask you to submit your personal details such as name, address, and similar. It’s extremely important to only submit real personal information. This is because legitimate binary options brokers are forced by the law to verify traders’ identities.
This verification process will involve traders having to scan either their ID cards or one of their utility bills and submitting it to the broker. The main purpose of all of this is to verify if the name and address submitted by traders coincide with the ones shown on their ID cards and/or utility bills.
In the end, the aim of the broker is to protect you. After completing this registration process, you can then go on to sign up.
This is one of the most common questions asked by traders, especially those new to binary options trading.
Done correctly, you can become rich from trading binary options. There is no question of the profit potential you can gain from binary options, this is evidenced by the countless numbers of binary options millionaires that we have out there. To get there though, you’ll need the right broker, an effective strategy, and you’ll need to invest your time, energy, efforts and resources in quality trading education.
There are countless numbers of successful binary traders all over the world, and especially in Kenya. However, most of them choose to live silent lives and make their profits. Thus, you may not get to know them.
However what is important is not the history of them becoming binary millionaires, but the strategies they employed to get to that status.
Be Professionally Minded in Your Trading. You may have all the experience, knowledge, and tools to be a professional at binary options trading, but without the right mindset, you will not get very far. What separates a professional from an amateur apart from skills is his mindset. Even professional traders face losses. But what differentiates them from you is that they take their losses as a lesson and move forward. Do not try to make up losses. Instead of that, you need to adopt a mindset. Some of the traits that a successful professional trader possesses are:
Proper Trading Education. It cannot be stressed enough that adequate knowledge is the key to success in any form of trading. In binary options, you have to completely familiarize yourself with concepts, such as in the money, at the money, out the money, expiry time, strike price, etc. These are the very basics of binary trading. Jumping straight into trading without education and research is exactly like driving a car without knowing how to do so. You will eventually crash and face the consequences.
Practise Proper Money Management Strategies. It is an understatement to state that Binary Options Trading is risky. There is a tendency and high chance for you to lose a great amount of your capital or even all of it. But you can greatly reduce the chances of this by properly managing risk. Trade small amounts of your capital (1 or 2 %) in each trade. Never aim to make big returns on each trade. Oftentimes, you end up hurting yourself real big.
Never overtrade. Although trading binary options trading is available 24×7, its not wise to trade 24×7. Trade only when there is good volatility in the market and technical analysis gives good predictions.
Develop a Trading Plan. “He who fails to plan, plans to fail” is the common adage. And it is quite true in the binary options trading world. If you dabble into trading without a properly developed plan as to how to go about it, you may end up losing most of your money.
Despite the somewhat negative reputation that binary options have had, the reality is that binary options trading is completely legal; there is no crime involved in it. The majority of brokers in the industry to operate fairly. Opinions have been split because there are some out there that operate scams.
Regulation in certain regions has meant that binary options trading have been taken away from the purvey of retail traders. For instance, in the US. But professional traders can still use them.
In a few other regions where binary options trading has not been outrightly banned, its Trading had been subject to very strict regulations.
There are various reasons why governments and regulators have taken such hard stance on binary options trading, some of them are listed below:
The binary reputation has suffered from dishonest marketing and cybercrime. Too many unregulated brokers promise quick cash, whilst operating frauds. As a result, regulators may feel that this is the case with all brokers that are operating in the industry. This we say some years ago when tech giants Google and Apple (owners of the Android and iOS operating systems, respectively) banned almost binary options trading and related apps on their Platforms – the Play Store and App Store.
Binary options trading itself perfectly legitimate, but steer clear of ‘instant money promises, brokers that cold call, and celebrity endorsements, plus any claims that you can start trading binary options for free. So it isn’t a question of whether binary options trading is good or bad, it’s simply a question of being alert to the dangers and knowing what to look out for. If you’re unsure about a broker, ask questions in trading chat rooms and forums to check they’re properly regulated. Check on trusted blogs; visit their apps on the App Stores.
This way you will be able to know which is real and which is not. Trading binary options involve some great degree of risk, at least when you compare to other forms of trading and speculating in the financial markets.
With binary options, you have the tendency to lose significant amounts of your capital. There are binary options traders who burn the entirety of their trading accounts. As such, some regulators and government policymakers felt that they should outrightly ban or heavily regulate binary options trading so that their citizens can be prevented from losing huge sums of their money.
Scams in binary options manifest in a myriad of ways, but we will share a few here:
It is not too tough for someone to set up an online binary options broker and start accepting traders’ funds. Many such fake brokerages disappear suddenly with their traders’ hard-earned capital and then re-open under another name to scam again. Be sure to only trade with regulated binary option brokerages that have been in operation for at least a few years.
Once you start winning consistently, some unscrupulous brokerages may actually begin to reduce the payout percentage to you. If you trade regularly, make sure to open trading accounts with multiple brokers so you can compare their payouts.
There are many online reviews, endorsements and success stories about people getting tremendously rich easily by trading binary options. These reviews and testimonials are mostly fake and are often paid for by the binary options brokerages themselves and their affiliates. While there are indeed people who made a lot of money trading binary options, they are merely the exceptions rather than the norm and the path to success is anything but easy.
Be cautious of high-pressure sales tactics used by representatives of binary options providers. They often call traders and pester them to deposit large sums of money by luring them in with big deposit bonuses. Often, it is necessary to trade 30 to 50 times the bonus amount in order to qualify for it but the sales people will always fail to mention this fact upfront. In the end, most novice traders will often bust their accounts long before they qualify for the bonus.
Many scam brokers make it extremely difficult for you to withdraw your money from your account. They will ask you for all sorts of documents for verification before letting you withdraw any money.
Thus, always make test withdrawals before depositing larger sums of money. With regulated brokerages, it should not take more than a few days to withdraw money from your account.
Sporting legends or team sponsorship is usually fine – and verifiable. Where this backing should worry rookie investors, is where the name of a mega rich billionaire or credible source is ‘pushed’ as a selling point. Warren Buffet, Richard Branson and Martin Lewis have all been presented as backing certain propositions when they actually have zero involvement – other than to sue the perpetrators for damages via a lawsuit.
