Basically, a binary option is a bet on price movement. You can bet that a certain financial asset will become more expensive or cheaper in a few minutes. If a trader bets on an increase in value and at the end of the time interval the cost will be higher, the trader will earn, if it costs less, the trader's rate will be burned out.
There are special brokers, with their help traders buy binary options. The broker plays the role of exchange for its clients, it is similar to the purchase of futures, where traders buy contracts or other financial assets from each other through the mediation of the platform itself or brokers.
Let's give a simple example of how brokers and traders make money on binary options - where do high-interest rates and money for this come from.
Two traders invest in CALL and PUT contracts (UP and DOWN). The yield on the contract is, let's say, 75%. One trader makes money on the contract, while the other loses money. As a result, one trader gets 75% and the broker takes 25%. The trader, whose prediction turned out to be wrong, gets nothing. All regulated companies are required to have insurance capital to cover such situations. In addition, binary options brokers, like Forex dealers, have their own liquidity providers.
What conclusions can be drawn from everything written above? First of all, before making money on binary options, you should only find a reliable and licensed broker who will allow you to withdraw profits without any problems. Such a broker uses not only his own capital but also works with liquidity providers. If a broker is not regulated by anyone, most often he works at his own peril and risk. In addition, it is very difficult to call such a broker reliable. Most likely, in any difficult situation, such a company would prefer to engage in fraud. There are a lot of cases when unregulated brokers cheated their clients. Therefore, if you do not want to become a victim of the next crooks, choose a company carefully.
How to make money on binary options for a beginner?
If you are interested in binary options, one of the main points that you pay attention to is how to make money. Immediately, we note that this requires consistency. Without it, you will not be able to make a stable profit in the financial markets.
What does consistency mean by itself? First, it is about a trading strategy. It is needed in order to receive signals from the market and act on them. There are different strategies - simple and complex, indicator and non-indicator, fundamental and technical. Basically, a strategy is a specific sequence of actions that you just have to repeat constantly, for example, if the CCI and RSI indicators simultaneously enter the overbought zone - you buy an option with a forecast of a decline (DOWN).
How to make money on binary options without a strategy? Of course, you can make money once or twice without a strategy. Nevertheless, if you want to have a stable income for your trading account, this is impossible without a strategy.
How to determine where the price will go?
In order to determine whether the price will rise or fall at the time of the completion of the transaction, you need to analyze the asset. You can use a ready-made strategy, for example, indicators, or you can also analyze the asset by yourself according to other criteria. For example, Amazon has published a report that shows sales growth, stable dividend payments, and growth plans for the next half year. Do you think stocks will go up after such publications? Sure. On the day the report is published, you can safely buy an option with a forecast of a rise in the share price.
In addition, there is one more factor on which we constantly earn - Making money on binary options is the launch of a new product of the company. This was often the case with the release of new iPhones and MacBooks, or, for example, a new Tesla model. If we take the example of Apple, then on the day of the start of sales of the new iPhone, people stand in huge queues, in the world it is always a very desirable and expected product, on this day the company collects huge revenue, and do you think the company's value is growing on this day? Sure! Such events are covered in all the news and provide great opportunities for those who are looking for how to make money on binary options.
Risk management in order not to lose money
What else do you need to make a stable profit? In addition to the strategy, you should take care of minimizing risks and competent money management. In fact, it sounds rather menacing and seems difficult, but in practice, it is not entirely true.
Your budget is the size of your deposit.
Your expenses are the number of funds that are invested in transactions.
You need to calculate how much money you have and correlate the amount with the number of transactions that you can open. This is the easiest way. If you have, for example, $ 500, and the broker offers a minimum investment of $ 25, then you can open 20 transactions, and this is better if you invest $ 100 and can open only 5 transactions. Of course, this does not mean that they need to be opened immediately at the same time, but this is an indicator of your security, if your trade turns out to be unprofitable, you will have an even larger margin in order to gain profit without reducing the trading volume. Please note that the dynamics of the deposit will be constant. Therefore, you need to recalculate.
How to make money on binary options without investment?
Strange, but many people ask such a question - how to make money without investments. Alas, this is a financial market and without money, you simply cannot get here. To make a profit, you need to invest something. Binary options are not a virtual market, but a real one, and in financial markets money is made not out of thin air, but out of money.
Be careful
In different countries, the attitude towards this financial instrument is ambiguous.
In Russia, binary options trading is prohibited for professional stock market participants, and in most cases falls under the definition of a casino.
In the USA, Australia and England, binary options activities are not gambling. There they are an investment one. However, since the beginning of the circulation of binary options, the situation in the United States has changed dramatically. All this is due to the fact that there have been many complaints of fraud. The state decided to take care of the affected citizens and severely restricted trade in this instrument. For example, since 2013, a complete ban on online trading has been introduced. And then there is a special Commodity Futures Trading Commission (CFTC) that issues licenses to anyone who provides binary options. Currently, such licenses are held by the CX Futures Exchange, the Chicago Mercantile Exchange and the North American Derivatives Exchange. The issue was approached quite strictly in Israel. Trading in binary options is prohibited there. The situation is similar, for example, in Belgium. On the other hand, in Cyprus and Malta, exotic options are classified as ordinary investments.
Check the conditions of your country in advance! Have a nice trade!