Although binary options have existed for some time, they were not commonly known until a few years ago, and were often part of a more complex ‘exotic’ trade. However, after the global crash of 2008, many investors wanted a simpler way to trade. In 2008, the American Stock Exchange opened the way for exchange-traded European options (trades which either return cash or nothing at a set expiry date). This new trading format paved the way for a whole wave of binary options online trading sites.
Top UK Binary Options Brokers
If you are interested in trading binary options, then there are few things to consider before picking one of the binary options brokers. When trading with a new broker, we highly recommend that you make sure it’s regulated by a financial authority, such as the FCA here in the UK, or the European CySec in Cyprus. We have created a top list of the most trusted binary options brokers, alongside in-depth reviews of each brand and its strengths and weaknesses.
When reviewing a binary options broker, the team has looked at the following items: software, customer support, deposit methods, available assets, withdrawal time, licensing and security. Based on the reviews our editor team has created top list below. Furthermore, for more information about each brand, kindly have a look at the in-depth reviews for each brand.
Understanding Broker Features
In order to make sure that you are signing up with a broker that will best serve your needs, it is important to understand that there are many features and different types of binary options offered by various brokers.
The first and most important features to look at when selecting a binary broker are the risk management features that are offered by that broker. Binary options can be a risky investment, but it is possible to reduce the risk by making use of a couple of key management tools.
The first risk management feature you will want to look for if you are concerned about the risk of trading binary options is a one-touch trading option. In a one-touch trade, a binary option only has to hit the target price one time before the hour of expiry, as opposed to being at or past that price when the expiry hour arrives.
The other common risk management tool offered by binary brokers is the ability to select from different risk levels in the trade itself. Using this kind of risk selection tool, a trader can opt for lower potential profit from a trade that finishes in the money in exchange for receiving a larger rebate if that trade finishes out of the money.
There are also many different types of binary options trading that are offered by some, but not all, brokers. One of the most popular of these is the ability to trade what are known as turbo options, which are binary options with expiry times of five minutes or less. This type of binary option allows a trader to execute more trades in a given period of time, thus increasing the potential for profit (but also loss, use with diligence!).
Another very popular feature that is particularly beneficial for new traders is social trading. Social trading is a system whereby a trader can copy the trades of another trader who has proven to be successful in the past. Social trading is a great way for beginners to learn without the monetary risk of their own trial and error. Not all brokers offer turbo options or social trading, so be sure to select carefully if you want to take advantage of these features.
The Importance of Binary Broker Regulation
Sadly, binary options have gotten something of a bad reputation because of the unethical actions of a small handful of unregulated brokers. For this reason, it is very important to check any broker’s legal information to find out where and how it is regulated. One thing that is important to understand, however, is regulation under the Cyprus Securities and Exchange Commission, commonly abbreviated CySEC. Prior to 2013, Cyprus financial law did not include binary options brokers, meaning that the island attracted some of the unregulated brokers that ended up tarnishing the legitimacy of binary options trading in the public eye. Since 2013, however, CySEC has required all binary options brokers in Cyprus to submit to full regulation conforming to EU financial standards. This means that any broker regulated under CySEC is a fully licensed and thoroughly regulated financial entity, despite the earlier bad reputation that Cyprus-based brokers had received.
Other Factors to Consider
When you are selecting the broker with which you plan to execute your first trades as a binary options trader, there are a few other things to keep in mind. One aspect of a broker that should be carefully considered is the level of customer service and guidance that it offers. Some brokerage firms offer around the clock customer support and will even have trained brokers on staff to advise you in your trading, while others will offer only basic customer service. You should also review the educational tools offered by any brokerage that you are considering. If you are a new trader, there will be a certain learning curve in binary trading, particularly when it comes to analyzing graphic price data in order to determine future movements. Many brokers offer e-books, video training and even periodic live webinars to help traders learn and develop their skills in order to become more profitable. These educational tools can be critical to your success as a beginning trader, so be sure to find out what is available before registering.
How Binary Options Work
Binary options are a very simple way to invest in shares, commodities, indices or currencies over a short term period. You can choose to Call a share, which means you expect the price to go up, or Put, which means you expect it to fall. You also decide the time frame for the trade, which can vary from minutes to weeks.
It’s advisable not to trade in any timeframe less than an hour, without good reason, as it’s very difficult to predict what will happen in such a short period of time. The money invested is either lost at the end of the trade or a percentage profit is returned. The potential profit (Return on Investment) is predetermined at the time of the trade, and generally ranges between 78 and 89%.
Advantages of Binary Trading
The big advantage of binary trading is that the basic requirement is you need to determine which way the price will go, i.e. down or up. You don’t have to guess the volume of the change; as long as you guess the right direction you get paid in full. Furthermore, if you concentrate on a particular portfolio of markets, you can develop great understanding of these and be able to predict the movement better than a mere casual investor in these markets.
Binary Options therefore hold a broad appeal; they offer the advantage of quick simplified trades which benefit both experienced traders and new traders alike. The simplified format is also an ideal start for those new to the world of trading by offering the easiest way to get started in investing online in shares and other commodities.
A Simple but Powerful Method
When people purchase traditional investments, their profit or loss is determined by the increase or decrease in the value of their investment. If they sell the asset when its value has increased, they make a profit. If they sell it when its value has decreased, they have a loss. Binary options are different. An investor can attempt to predict the increase of the asset, and this is referred to as a “Call” option. When an investor attempts to predict the decrease in the value of an asset, it is called a “Put” option. This provide investors with a way to utilize a number of financial assets over a variety of markets. Trading with binary options is popular. It provides greater profits within a shorter time when compared to traditional investing.
Investors can trade binary options online with only a minimal amount of money. It is possible for a person to only risk an amount that is comfortable for their budget. In many cases, an investor is aware of the amount they can win or lose before making an investment. An investor can determine their risk before making an investment. This is not possible with other forms of traditional trading.
Potentially High Profits and Quick Returns
The expiration time for trading with binary options is less than with traditional financial trading. It can be as short as fifteen minutes (shorter is possible, but not necessarily advisable) or as long as a week. Traditional assets may need to be held for months or years before a positive return is possible. Trading with binary options provides investors a chance to experience a possible return rate of over 80 percent. With a few fast and successful trades, an investor can obtain a substantial return.
Easy Trading Process
Brokers have designed binary options trading to be as easy as possible. This was done to make the investing process very fast from initial deposit to actual trading. An investor only needs to choose the financial asset they want to trade and then choose the amount of money they want to use for the trade. It must be determined which direction the asset price will go. The last step is to choose an expiration time and then wait for it. The entire process may only takes a few clicks of a computer mouse.
Market Fluctuation Profits
With a traditional type of financial trading, an investor will only make money with the value of their investment increases. With binary options trading, it is possible for an investor to also make a profit when their chosen investments decreases in value. This widens an investor’s available trading strategy possibilities. A profit can be realized during any market fluctuation.
Online Trading Platform
Binary options trading platforms have been made to be as accessible as possible. Many of the best brokers are offering free accounts. Investors have access to web based trading that can be done on a computer or mobile phone. Investors can make trades and regularly check the results at any time and in any place. When investors want to participate in international trading, these platforms make it possible to trade binary options every hour of any day.
What Assets Can be Traded as Binary Options?
One of the greatest advantages of binary options trading is that there are many different types of assets that may be traded on as binary options. This offers the binary trader not only the ability to specialize in one asset class and learn how to predict the movements of the individual assets within that class, but also a range of possible asset classes that can be traded in when a particular market is in a volatile state. Among these asset classes are Forex currency pairs, commodities, stocks and indices. Some binary brokers also offer binary options related to the price of Bitcoin or other cryptocurrencies, but this is not as common as the four previously mentioned.
As a general rule, beginning binary traders will start out by specializing in either Forex pairs or commodities, as these are generally the easiest assets to make predictions about based on past data. Stocks can be very profitable as binary options, but they tend to take more time to learn to trade, as investor perception has at least as much to do with the movement of a stock as the actual action of the company that stock is tied to. Once you have mastered one category of assets, however, it is always advisable to branch out into others. Market upsets are always a possibility, and it can be very beneficial to be able to trade competently in different markets during uncertain times.
Learning to Trade with Binary Options
Like any financial trading method, binary options trading requires some education before you will be able to make money consistently. The first step to learning to successfully trade binary options is to learn about the class of assets you plan to start out with. If, for example, you plan to start out trading on commodities, you might begin learning about the relationship between stock market volatility and the price of gold or other such common affecting factors. Once you have gained a fairly good grasp of what makes the asset class you have chosen go up or down in value, you can begin putting your knowledge into practice in binary trading.
Many binary brokers offer free practice accounts that can be used to execute theoretical trades with no money being risked. If you are new to binary options trading and have signed up with a brokerage that offers this feature, it is highly recommended that you make use of it. Even if you are confident that you are ready to begin trading, test your skills on a practice account before putting real capital into binary options trading.
Selecting a Reliable Broker
When selecting any brokerage site, whether for binary options or for any other trading method, you should always be careful and thorough. Keep in mind that the firm you decide to trade with may end up holding large amounts of capital for you for long periods of time, so you want to be sure that you pick a trustworthy brokerage. We at Investing.co.uk have compiled reviews of some of the top binary options and Forex brokerage firms to help readers make educated decisions about the brokerage firms that they select. When picking a brokerage, it is also important to determine where and how that brokerage is regulated, as unregulated brokerages have been responsible for unethical behaviors in the past. Any legitimate broker’s website will include legal information and certification numbers that will help you to determine that you are doing business with a credible brokerage.
Beginning Your Trading Career
Once you have signed up with a broker and funded your account, it’s time to begin executing trades. When starting out, it is best to execute only low-volume trades. Most brokers have a minimum trade amount of between £10 and £25. If you’re just starting out with trading and don’t have a large amount of initial capital to invest, it is best to begin by executing trades at this minimum value level. Of course, if you are coming to binary options trading from a career in more traditional financial trading or if you have a large amount of capital to invest, this guideline may not apply to you.
When you begin trading, it is important to remember that you are going to lose on some positions. If you suffer a few setbacks, don’t get discouraged. Successful trading is all about consistency and learning what makes markets move in the ways that they do. If you stick with it and keep learning, you’ll find yourself becoming gradually more successful as time goes on.
5 Tips for Successful Binary Trading
Binary options trading has become one of the most popular methods of trading financial assets for profit. Its easy trading style and accessibility to investors without large amounts of capital have allowed it to very quickly come to the forefront of the online investing world. However, even though it is a very simple method of executing trades, there is still a great deal of analysis and strategy involved in trading for the highest possible return rate. Here are 5 easy to implement tips and strategies for trading binary options successfully.
Specialize in a Handful of Assets
This piece of advice is most relevant in the beginning of a binary options trader’s career. Some binary brokers offer dozens or even hundreds of assets that may be traded as binary options. While this diversity plays well to more experienced traders, it is best for those who are just starting out to focus on just 4 or 5 assets. This is because every asset will have its own set of trends and factors that affect its value. Learning a few assets inside and out will allow traders to be more profitable than trying to trade every asset immediately. Of course, it is beneficial to branch out once you have become good at trading your selected assets, but it is best to start off with just a few.
Keep up to Date on Market News
While binary options do not involve the actual ownership of an asset, they are affected by the real world marketplace just as much as traditional assets. For this reason, it is important that binary options traders keep abreast of current financial news and events. For example, an astute trader seeing a potential for the euro to weaken against the dollar when the Federal Reserve raises interest rates can use that information to trade the EUR/USD currency pair profitably in that time frame. Knowing what the market is doing and why is critical to success in any trading medium.
Keep Your Trades Low
This may seem counterintuitive when it comes to making larger profits, but keeping your trade amounts low will help you to manage your risk level, resulting in less loss on options that finish out of the money. No trader, no matter how experienced, can trade to finish in the money 100% of the time. With that said, it is important to make sure that no one loss can seriously impact the amount of capital available in your trading account. A good rule of thumb is never to risk more than 10% of your capital investment on any single trade.
Learn to Trade Turbo Binary Options
Many binary brokers now offer what are commonly referred to as turbo binary options. These are options with expiry times between 60 seconds and five minutes. Analysing price trends in such a small time window is, of course, much more difficult than finding long term trends. However, traders who are willing to learn the analytical techniques that apply to turbo options stand to make substantially greater profits by doing so. The reason is that trading in short expiry windows allows a much greater volume of trades to be placed in a given time frame. For example, if a trader is executing turbo trades times at five minutes, he or she can execute six trades for every one that would be executed using a 30 minute expiry time. Traders who successfully trade turbo options can therefore greatly increase their returns in a given time frame.
Take Advantage of the Resources Your Broker Offers
Nearly all binary brokers provide a good deal of free market analysis, learning resources and even trading recommendations to their customers. Many binary traders are missing out on these valuable resources by overlooking them, instead using the broker’s website only to execute trades. This is a mistake, as binary brokers employ highly experienced traders to do their educational analysis. In additional to weekly or daily analysis and tips, many brokers offer periodic webinars or other learning events designed to help traders learn and become more successful. Take advantage of free education whenever it is available.
Trading binary options successfully can involve a great deal of time, patience and research. By following these simple tips, however, traders can improve their chances for profitable returns. Binary options trading is one of the easiest and most profitable methods of trading available today, and it is an opportunity that should not be missed out on.
When first learning about trading binary options, it is easy to be confused by the terminology that is sometimes employed. Like most specific areas of finance, there are terms found in regards to binary options that are not commonly used anywhere else. To help those who are trying to learn their way around the world of binary options trading, here is a list of some of the more common pieces of binary jargon and what they mean.
Binary Option: A type of trade that involves predicting whether the value of a given asset will go up or down. This type of trade, which has only two possible outcomes, is the basis of binary trading.
Call Option: A call option is essentially a prediction that the value of a particular asset will go up. When a trader believes that the value of an asset will increase, a call option is placed that will profit the trader if and only if the value of the asset does, in fact, increase.
Put Option: A put option is the exact opposite of a call option. It is the choice that is selected in binary options trading if the trader believes that the value of the asset in question is likely to decrease rather than increase.
Expiry Time: The expiry time of a binary option trade is the amount of time that will pass before the trade is completed and profit or loss is determined. Different brokers will have different options available for expiry times, but as a general rule they will range between five minutes and 24 hours. The expiry time is selected by the trader at the time that a trade is placed.
Open Position: Any binary options trade that has not yet reached its expiry time. An open position is a trade that is active.
Broker: A binary options broker is any company or website that provides a platform on which binary options trades may be executed. Different brokers will offer different platforms and options for traders.
In the Money: A binary options trade that finishes in the money is one that, at the time of expiry, has moved according to the trader’s prediction. When an option finishes in the money, a trader makes a return on his or her investment.
Out of the Money: The opposite of a trade that finishes in the money. A trade which finishes out of the money is one that moves against the prediction made by the trader by the time of expiry. When a trade finishes out of the money, the trader will lose part or all of the money that he or she has invested.
Turbo Binary Options: Turbo binary options, sometimes referred to simply as turbo options, are binary options with extremely short expiry times. These options will have an expiry time ranging from 60 seconds to five minutes. They are preferred by some binary traders as a way to execute more trades in a given space of time, but are also more difficult to predict according to the analysis of larger trends.
Underlying Asset: An underlying asset is any individual asset that may be traded as a binary option. Underlying assets fall under different asset categories such as commodities, stocks, indices and Forex. For example, the AUD/JPY currency pair is an underlying asset of the Forex market.
Social Trading: Social trading is a type of trading that relies on the wisdom of the crowd to make trading decisions. It is not unique to binary options, but is widely used by some binary options brokers. Social trading also commonly offers traders the option of automatically copying the trades of already successful individual traders.
Hedging: A trading strategy that involves playing off two opposing positions on a binary trade that are calculated to ensure a profit in the case of either outcome. This strategy is used to reduce risk and to turn small profits on trades that otherwise would result in a complete loss.
One Touch Option: Like turbo options, one touch options are a specialized type of binary options. One touch options require the value of an asset to reach a selected point at least once before the hour of expiry. So long as this occurs, the trade finishes in the money. Much like turbo options, not all binary brokers offer one touch options to their traders.
These are the major and common terms that are used in binary options trading. There are, of course,others which are used less frequently, but this list will help those new to the binary options world get a grasp of what is being said and taught to them. If you are looking for a binary options brokers, then we advice you take look at our list of regulated binary options brokers.