High/Low Binary Options: A Beginner’s Guide & Best Brokers

Author

Michael MacKenzie

Michael is a UK-based investment writer with over 10 years of experience in the journalism industry. Michael has critically evaluated many of the largest investment brokers in the UK.

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Editor

Tobias Robinson

Tobias is a UK director and partner at Investing.co.uk. He provides commentary on the financial markets in the UK and supports the testing team with first-hand observations from over two decades of active trading.

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A successful binary options high/low strategy earns traders a profit by predicting whether the price of an underlying asset will rise or fall. With a correct prediction, traders can earn a percentage of their stake even from insignificant price movements in a contract lasting a minute or less. But while the payouts can be large, the risks are also high – traders can lose their entire stake.

This beginner’s guide explains how to develop a binary options high/low strategy, covering chart setups and risk management tips. Also dig into our pick of the best brokers for this type of binary product.

How Investing.co.uk Chose The Best High/Low Binary Options Brokers

We focused on brokers that provide straightforward high/low (up/down) binary options, the most common contract type in the industry. Our team tested each platform to evaluate ease of use, payout consistency, and trading experience.

We then ranked the brokers by overall ratings, combining our hands-on experience with verified data points such as underlying markets and contract terms, to highlight the best choices for trading high/low binaries.

What To Look For In A High/Low Binary Broker

After extensive testing, our experts have identified these as the most important criteria in a great broker for high/low binary trading:

Trust

Binary options has been barred by the Financial Conduct Authority (FCA) and many other international regulators, so traders need to be vigilant when choosing a broker.

Always do your own research before you sign up with a provider. Over years of trading with and testing binary brokers, we’ve found these to be important starting points when choosing a firm to trade with:

• Time in the industry: How long has the broker been in operation? We’ve found that firms that scam traders often fold quickly as their reputation catches up with them, so it’s a good sign if the broker has been working for 5+ years.
• Number of clients: As with many businesses, a large customer base is usually a good sign for a high/low binary options broker.

Platforms

The trading platform that you choose is another major part of high/low binary options trading. A good platform is going to allow you to conduct quality technical analysis and place trades efficiently and effectively, which is essential.

We’ve found that proprietary platforms can be a great option for the simple and fast-paced high/low binary options, as they allow traders to instantly access markets on an intuitive platform directly through their web browser.

Pocket Option has an intuitive platform for placing up/down binary trades

Expiry Times

Binary options contract lengths range from a few seconds to weeks or even longer, so you should choose a broker with expiry times that suit your trading style.

Turbo contracts of under a minute are as exciting and risky as they are fast paced, and the short time frame can often defy attempts at analysis.

Longer contracts can revolve around events such as central bank decisions or company reports.

Like many traders I really enjoy rapid-fire turbo contracts, but I’ve found I have more success with longer time frames.

Keep a record of your trades and monitor which contract lengths you have the best luck with – you may be surprised.

Michael MacKenzie

Author

Payouts

The amount of payout on a binary options contract is arguably the deciding factor on whether you will make a profit in the long run, so you need to factor this in when you choose a broker.

Binary options are often referred to as ‘all or nothing’ trading vehicles, because you usually lose your entire stake in a losing trade.

But in fact, you will rarely double your stake in a winning trade, as the broker makes its money by reducing the payout.

Competitive brokers will usually pay 80% or more for popular instruments, though some brokers have payouts of 95% or more. Essentially, look for binary brokers with the highest payouts.

Funding Options

Account options are often overlooked, but these make a huge difference when choosing a broker as they can directly impact your success at trading and ability to profit.

For instance, you should choose a broker that offers a binary demo account. By making paper trades without any real money at risk, you can test your strategies and trading system while also getting used to the broker’s trading platform.

You should also look out for hidden fees, such as deposit and withdrawal charges. These will chip away at your trading capital, and they add an unnecessary hurdle to profit.

Finally, we recommend binary brokers with low minimum deposits because these let you start trading without a large capital outlay.

What Is A High/Low Binary Option?

High/low binaries are the trading product that made binary options popular due to their ease of use. A trader simply places a bet on whether the price of an underlying asset, such as gold, will be higher or lower than a predetermined price at the time the contract expires.

The stake, strike price, contract length and payout are all predetermined, meaning that the amount the asset’s price moves will not have an effect on the level of profit or loss.

If the trader is correct about the price movement, they will make a profit, but if they are wrong then they will lose their entire stake.

This is an attractive prospect to binary traders who are familiar with the asset they are trading and its price movements, but it can be risky as even the best binary options high/low strategy can come undone when luck turns against you.

Example Trade

Let’s say you have a firm hunch that Apple (AAPL)’s share price will increase over the course of a trading day, so you go to a binary options broker that provides access to NASDAQ stocks to buy a contract.

You decide to open a long position with a four-hour call contract. The market price of AAPL is just shy of 147.200 when you open the $1000 contract, and the broker offers a highest payout of 77% if the stock price rises.

High/low binary options trade – Pocket Option

Four hours after you open the contract, AAPL has risen to 147.400.

The contract pays out, and you receive your $1000 stake back plus $770 in profit.

Challenges

The unpredictable nature of price movements when trading high/low binary options means you will have to accept some losses.

Since a losing trade wipes out the trader’s entire stake and a winning trade only earns a portion of the stake, you will need a competitive win rate to earn a worthwhile profit.

For example, someone trading high/low binary options with a 70% payout will need to have at least a 59% success rate to begin making a profit, before any additional fees are considered.

In other words, even though there are only two outcomes, a high/low binary options contract is by no means a simple coin toss, and the majority of traders lose money on this derivative.

However, there are distinct advantages to this product, as well as proven binary options high/low strategies and systems used by traders to turn a profit.

Contract Lengths

One of the key factors that will influence your binary options high/low strategy is the expiry time. These can range from turbo contracts of a few seconds to longer-term contracts that could expire after weeks.

• Turbo: Turbo binary contracts commonly run between 30 seconds and 2 minutes, though some brokers may offer even shorter expiry times. Traders need to tailor their high/low binary options strategies to such a short contract, as prices can quickly fluctuate even if the momentum is moving the price in one direction.
• Standard: While there is no “regular” high/low binary options contract length, expiry times ranging from 15 minutes to several hours are extremely popular. Traders can benefit from many well-known technical analysis methods when investing in high/low binaries over this period.
• Long-term: Longer high/low binary options contracts of days or weeks require a different strategy. Since you are looking at the long-term performance of an asset, you will need to carefully research the trade to make an informed decision on which way the price will go. Your bet may be based on market conditions or an upcoming event/announcement for a specific company, but remember that the longer the contract length is, the more chance there is of an unforeseen event that could scupper your plans.

Pros Of High/Low Binary Options

High Earning Potential

One of the key reasons traders use high/low binary options is because they provide earning potential. This is because you can make a sizable return even on minuscule price movements, and with turbo contracts available you can make many trades per day.

Easy To Understand

High/low binary options are attractive because of how easy they are to learn and use. Traders know all of the terms of the trade before they enter into it, including the expiration time and the payout, so all they have to do is make a prediction about which way the market will move.

Highly Accessible

High/low binary options contracts are the most common and widely accessible. This means they will be available from most binary options brokers online, and therefore traders can choose a brokerage and trading platform that fits their needs.

Flexible Timeframes

The expiry times for high/low binary options are flexible. Brokers may offer contracts with expiry times ranging from 30 seconds to months. This covers a large range of trading styles and strategies, making high/low contracts flexible.

Large Range Of Assets Available

It is possible to deploy a high/low binary options strategy contracts on a wide range of assets, including forex, stocks, indices, commodities, and cryptocurrencies.

Cons Of High/Low Binary Options

High Risk

High/low binary options are risky since a trader gives up their entire stake in a losing trade. This means traders need to have a good knowledge of the market and practice a sound binary options high/low strategy with discipline. Otherwise, a lot of capital can be lost quickly.

Limits To Payout

Payouts from high/low binary options are quite competitive, but they will almost always be less than the value of your stake.

The profits from some other products, such as classic options and contracts for difference, scale with the price movements and can benefit from leverage, making it possible to earn many times your stake in one winning trade.

Scams

Not only is binary option trading risky because of the possibility of losing trades, but your funds could also be put at risk by fraudulent brokers. For this reason, it is essential to choose a broker with a good reputation and positive user reviews and ratings. We have tested and ranked the top binary options high/low brokers.

Binary Options High/Low Strategies

News

Many successful binary traders use news events to assess how the market is going to move and make successful high/low binary options trades.

Traders may look to capitalise on an upcoming event, such as a company’s quarterly profit and loss statement, in which case they can set up trades based on their prediction of how that event will go.

Or, they can use the news to stay informed about global issues and challenges and use this knowledge to inform their guesses on the general movement of prices.

Technical Analysis

High/low binary options traders use various technical analysis techniques to help them plan and execute trades.

They may use techniques such as Bollinger Bands to gauge volatility and get an idea of high and low resistance levels, allowing them to time their entry into a position.

Likewise, indicators such as the Stochastic Oscillator can give an idea of when to expect a reversal by gauging the momentum of a price movement.

There are many methods of technical analysis to master and getting a firm grounding in this will provide advantages to traders who wish to hone their high/low binary options strategies.

Signals

Some companies provide information on a particular trade or market through a messaging service known as binary options signals. These can be a useful way to stay informed, but traders should be aware there are different types of signals before they integrate them into their high/low binary options system.

While free signalling software is available, the services that provide this will need to make money somehow, and they may require users to sign up with a specific broker to access the service. Traders can avoid signing up to a substandard broker by paying for their signal service.

Risk Management

One of the most important aspects of a successful strategy is binary options risk management. Traders need a high win rate to turn a profit, so minimising the risk of each trade is a necessity.

This also involves setting stringent rules and sticking to them, to avoid losing your profits in an unwise, emotional trade. A common risk management method is to limit the amount of money staked on one trade to 1%-2% of your total capital.

High/low binary traders should also ensure they take profits regularly, stay abreast of news events to get advance warnings of volatile periods, and avoid making trades unless they are confident they can predict price movements with a high degree of accuracy.

Bots

Many traders use automated programmes known as binary bots which make high/low trades on their behalf according to user-set parameters.

This allows traders to continue making money while they are otherwise occupied, and it can also remove the dangerous emotional element from trading.

However, high/low binary options traders must still monitor their bots to ensure they are working correctly, and they must be confident in their trading system and strategy before turning it over to bots.

Bottom Line

It is important that you use a tried and tested trading strategy for high/low binary options rather than trading sporadically or based on a hunch. Gambling with any kind of trading is risky, but with the ‘all-or-nothing’ style of high/low binary options, you can easily lose large sums if you don’t take a disciplined, informed approach and practice risk management.

It is also important that you choose your broker and platform carefully so that you can make the most of your trading experience.

To get started, turn to our list of the best high/low binary options brokers.

FAQ

Should Beginners Start Trading High/Low Binary Options?

High/low binary options appeal to beginners because they are easy to understand and simple to use, but they are also risky. For this reason, we suggest that all beginner traders use a demo account to practice strategies before risking real funds.

Is High/Low Binary Options Trading Profitable?

It is possible to make money from high/low binary options trading but it’s also a risky process where poorly researched or emotional trades can lead to large losses.

This means it’s important to acquire knowledge of high/low binary options trading beforehand to ensure you are making educated decisions.