Is it possible to make money trading binary options Answered!

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker!
    Perfect Choice For Beginners and Middle-Level Traders!
    Free Demo Account! Free Education!

  • Binomo
    Binomo

    Honest broker!

Can A Beginner Make Money With Binary Options?

But wait! First we have to see if binary option trading is legal in your country.

Binary Options Trading in your Country

Depending on your country, here are the brokers available to you in April, 2020:

Country Binary Options Available? Broker Info Best Broker
NO Trade stocks, indices, currencies. eToro (visit site)
YES Regulated US Binary Broker Nadex (visit site)
YES Regulated AU Binary Broker HighLow (visit site)
NO Trade stocks, indices, currencies. n/a
Mostly YES Binary Broker for non-EU/US/AU/CA traders IQ Option (visit site)

*Other countries: Binary options is still available to most non-EU/US/AU/CA traders however there may be some exceptions.

  • EU Traders are banned from binary options trading. The best alternative is eToro.
  • US Traders should go to our US Welcome Brokers page.
  • Australian Traders have a great choice available: Highlow.
  • All other traders (if you are not from the US, EU and AU) can sign up with IQ Option.

Beginners think that all a trader needs to do is go on one hot streak!

New traders often say to themselves: “just ten wins in a row and all of a sudden I will be a new trading mogul”. People looking for quick money think, that they can quit while they are ahead on a hot streak and go home richer than they could possibly imagine.

The truth is that you need a strategy and discipline to make successful trades on the long term. You should start by picking a legit broker first.

If you are just starting out with trading, then this is the perfect guide for you to start making money with binary options trading.

Here is our #1 Rated Broker

IQ Option – Best Trading Platform

IQ Option is a trading platfrom that is regulated by CYSEC. It is the best trading binary options broker on our website. It’s a perfect pick for new traders.

  • Trusted CYSEC Regulated Broker
  • Minimum Deposit: $10 (Lowest In The Industry)
  • Free Demo Account

How To Get Started With Binary Options Trading

Unfortunately binary options trading was banned in most countries but there are many more assets that you can trade: stocks, commodities, bitcoin, indices and more. There are many safe and regulated brokers.

You can start with a trading signals provider, especially if you are a beginner. FX Atom Pro looks really promissing.

  1. Step1: Sign up with 24Option
  2. Step2: Make a first deposit
  3. Step3: Start trading using trading signals

Alternatively you can choose a reliable broker like IQ Option that offers free demo accounts.
IQ Option is the most trusted trading platform at the moment. They are regulated by CYSEC and they have a stellar reputation in the industry. The minimum deposit is only $10 which is perfect for beginners.

Forex Trading – The Best Alternative To Binary Trading

Binary options trading may be too risky for you. Or maybe you heard too many horror stories about binary trading? We recommend you to try out Forex trading instead.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker!
    Perfect Choice For Beginners and Middle-Level Traders!
    Free Demo Account! Free Education!

  • Binomo
    Binomo

    Honest broker!

Forex brokers offer CFD and even Cryptocurrency trading. Most Forex brokers are regulated and have been around for many years. Here is the best Forex brokers:

Rank Broker Min. Deposit Regulated Features Review
$100 YES + CRYPTO TRADING TRADE NOW
$200 YES + ASIC LICENSE TRADE NOW
$200 YES + COPY TRADING TRADE NOW

Common Mistakes of Beginners- And How To Fix Them

When a beginner goes in unprepared trading binary options, the broker will feast on them. New traders often make mistakes such as taking way to big a position for one trade, taking a bad loss, and then staying way to small the next 5 times.

They may even experience winning easily on small trades, but they never make back the big loss. New traders take way too many trades, let emotions control their trading, and don’t have the self control to stay out of low percentage trades that they know have small chance of making them money.

After knowing all the pitfalls, why would a new trader ever decide to open a binary options account and become a trader? Well, they do it because they have the power to win systematically if they have some intelligence and a plan on their side.

A new trader needs to understand the most common pitfalls, otherwise they may not even know that they are making a mistake while they do it! With that in mind, here are the most common mistakes new traders make, with what they should do instead.

  1. Not taking every trade with a purpose. Beginners often find themselves taking trades based on a feeling, or out of boredom. This is a surefire way to make a broker rich. Never enter into a trade without a defined thesis as to why you are doing it. Think the trade over rationally before entering. Is your thesis really valid? Is it strong? What do you estimate the probability of winning given your experience? Are you hoping for the best outcome or considering the most likely outcome? Make every trade count.
  2. Letting emotion influence – when a trade is entered into, or how big the size of the trade becomes. Never let emotion influence your trading. Good or bad it will never help you. Trading is for cool rational thought, striving to systematically take profits.
  3. Taking way too big sized trades: Understand that you are going to have losses along the way. Even the best professionals do. Never let one trade significantly affect your account balance in a way that would affect your future trading. A good rule of thumb is never to take on a trade bigger than 1/15 of your total account value. With binary options I would recommend 1/20.
  4. Not learning from mistakes and repeating them over and over: Keep a trading journal as we have recommended before. Jot down a quick sentence or two whenever you learn something new. Do whatever you need to do to prevent yourself from repeating mistakes.
  5. Becoming frustrated and quitting right before you get good: The difference between making a lot of money systematically and losing money can be very narrow. Don’t let frustration keep you from realizing your ultimate goal. Understand that there will be lumps along the way, but there will also be victories, and the lumps make the victories feel so much sweeter.

How Beginners Can Make Money

Even with so many ways to mess up, beginners to binary option trading can make money if they work hard and follow a system. The key to binary options trading is to control risk. As a result, a trader can never lose too much money on any particular trade. Hypothetically, a trader has a 50% chance of being correct on any trade whether they buy a call or a put option. To make money, a trader only needs to be correct on about 60% of trades of the trades that they take. This means that of the trades that a beginner with absolutely no edge (an edge is something giving a trader a better than random chance to make money) would take, they need to figure out how to turn about 20% of them into winning trades.

Binary Options – How Much Can You Make?: This is not a simple question. There are certainly traders who make a living with binary options. You could make thousands of dollars every month. However the best is if you start with lower expectations. Making hundreds of dollars steadily is a good way to start.

Here are possible ways that any beginner can easily do this:

  1. Use a signalling service. While most are not are not going to give a trader a significantly better than random chance of making money, they still should tilt the odds into the trader’s favor. This is all any trader can ask for. There are paid services out there such as elite trader, but even a free service from a site like barchart can give you the edge you need.
  2. Learn to use technical indicators. Technical trading involves using strictly price action (price charts) to predict future movements. There are a lot of indicators out there, but some of the most common ones involve using moving averages. Examples of popular indicators are MACD, relative strength index, and bollinger bands. If you can find an indicator that works well for the security you are trading you can gain the edge you need in order to turn some of your would be losing trades into winners.
  3. Trade stocks before trading binary options. Stock trading is less volatile for a trader’s account than binary option trading as long as the trader does not use leverage and sticks to securities priced over $5. If you can figure out how to be correct on more than 50% of your stock trades, you can take what you learn and apply it to binary options to multiply your earnings power.
  4. Track your performance in each binary option security. Most people will be better at trading some stocks or commodities or currency pair than they are at others. The simplified reason for this is that each particular symbol will move differently than the others because each one has its own characteristics and traders involved in moving the price. If you find a handful of option trades that you are consistently profitable in, stick with what works and increase your size. You don’t need to waste your time and money on unprofitable trading.
  5. Buy the right option length for your trading style. Some trading styles will work better over very short term trades, and some will work better over trades held for a long time. Know your style and the appropriate length option you should buy. A value investor for instance would not be sensitive to price changes over a 1 minute option, but may be correct on a super high percentage of trades over a 6 month period.

Binary Option Trading Is Not Easy For Beginners

The problem with this dream is, how often does this really happen? Let’s just say a lot of brokers would never be in business if it happened very often that beginners made money.

Above all, beginners have dreams of being smarter, better, and luckier than everyone else who has every done something, but the harsh reality is that trading in any form is not easy.

Especially when it comes to making money from trading, it takes hard work, dedication, and a commitment to learning. And when I say learning I don’t mean just reading a couple articles, I mean actually learning from your wins, from your losses, from hard earned experience. As a result never take a trade and learn nothing from it, especially as a new trader.

What Our Readers Asked

The short answer is yes, you can make a lot of money trading binary options. However it will be very hard to do so if your initial deposit is low. Always keep in mind that binary options is risky and you could also lose money.

A binary options broker makes money when you lose your trade. This is the main reason why there are not fees when trading.

Yes, many traders have success with binary options trading. You can even follow some of these traders. In order to do so, pick a broker that offers social trading. This way you can pick your favorite trader and copy their actions.

Do We Recommend New Traders Even Try Binary Options?

Of course! Every successful trader was new at some point. Just because a lot of traders go into trading without educating themselves or having realistic expectations doesn’t mean you will as a new trader. In fact, since you are reading this article you almost decidedly will not. At How We Trade our job is to prepare new traders for success. So move forward knowing you have a strong ally in us!

Interested in opening an account? Check out our homepage for the best trading platforms, along with our top rated binary options brokers.

IQ Option – Best Trading Platform

IQ Option is a trading platfrom that is regulated by CYSEC. It is the best trading binary options broker on our website. It’s a perfect pick for new traders.

  • Trusted CYSEC Regulated Broker
  • Minimum Deposit: $10 (Lowest In The Industry)
  • Free Demo Account

Is It Possible To Make Money Trading Binary Options?

Trading binary options online has become possible in 2008. It was a new way to make fast profits online for financial speculators. Trading binary option is open and available to anybody over 18 (one should check local government regulation before trading BO).

Binary options allows the user to speculate and place trades, which are essentially bets, on the direction of financial assets from a basket of currencies, stocks, commodities and indices. In binary options your losses can never exceed your deposits and your return is clearly defined at entry.

It is no secret that trading on the world’s financial markets by buying and selling positions has made many millionaires. It is also a fact that the markets bankrupted many more. The line between winning and losing can be very subtle. While trading may not be for everyone, the unprecedented ease of access to financial trading online has certainly made a lot of people happy about new possibilities.

Is it really possible to make money? If so, how much?

The big question is can you really make money trading binary options? Short answer is yes, but it’s not that simple. Whether you make money or lose money really depends on a number of factors including your risk management, trading strategy, the options that you choose when you enter the trades, your broker fees, your trading psychology, etc. There are simply too many factors to consider but of course it is possible to win and make money, but it’s not as easy as binary options advertising has us believe.

Brokers will often entice people with all types of bonuses and ads that suggest making money trading binary options is very easy. Although the actual act of trading binary options is easier than Forex it is not easier to win and make money consistently in binary options.

Here is a mathematical formula to calculate break even ratio in binary options:

  • B – Break even ratio – (shows how many times you need to win to break even)
  • I – In the money ratio – (shows broker payout for winning trades)
  • Ot – Out of the money ratio – (shows your losses for losing trades)

Using the above formula you can calculate the break even ratio assuming a set of fixed parameters. Assume your broker pays you 90% for wins and takes 100% for losses.

B = 100% / 90% (in the money) + 100% (out of money)
B = 100 / 190
B = 0.5263

What this means is that in the case of a payout rate of 90% and 0% rebates on losses you will have to accurately predict 52.63% of your investments in order not to break even. This break even calculation can change quite significantly with different options. A 90% payout is very generous and rarely seen in binary options.

Let’s look at the numbers and for the purpose of further illustration let’s assume that we are dealing with a trader who has a trading strategy with 75% of wins. (There are numerous signal providers that achieve those levels.) 75% of wins is quite high for most standards. He also uses a binary options broker who offers only 70% of profit on each winning trade.

In one month he takes 52 trades and on each trade he puts $100. His total investment will be $5200. It averages out to about 2 trades per trading day. Let’s also assume that each trade has a payout of 70% and a return of 0%, as is the case with many binary brokers.

When we divide the total sum of his investment of $5200 between the 75% of winning and 25% of losing trades we split the working capital between $3900 which was spent on the winning trades and $1300 spent on the losing trades. Now let’s take the $3900, the 75% of his total trading capital, and add 70% of return payout on the winning trades which will produce $2730 of profit. His losing trades, the 25% of total trading capital, cost him $1300.

*The end result is wrong, it is $6630 which makes it 27.5% increase

So now that we know how much profit was made, let’s take those numbers and put them into the mentioned breakeven ratio formula to see how many times he actually needed to win in order not to lose any money at all.

This financial calculation is quite modest because it assumes a return of only 70% on wins where many brokers offer payouts over 80% and some brokers also offer returns on losses, only about 5-10%, but this will change the numbers significantly.

In addition, there are a few binary options signal providers who consistently achieve higher percentage of wins than 75%, which would also drastically improve profits as well.

So, only for the purpose of further illustration of what would happen if the overall wins were 80% and the return payout also 80% we’ll continue with our calculation. In this case $4160 is our winning capital, namely the 80%, and the remaining $1040, the 20%, is the losing capital. The winning capital of $4160 generates $3328 of profit (80% of payout for wining trades) and the losing capital of $1040 is simply lost, we’ll also use 0 return for losses in this calculation. So, out of 52 trades for $100 each the profit is $3328 and loss of $1040. Remember, that’s only in one month of trading.

As you can see the difference in earnings is huge between the first and the second example. A 24 percent per month as opposed to 2.5 percent per month is a world of difference. This is why it is so important to understand your risk exposure in binary options. Let’s see how many times he needed to win to break even:

Professional traders understand that and seek options and ways to keep the odds in their favor. For example trading with brokers that offer 85%-95% on wins and some return on losses. In addition there are ways to trade binary options to receive even higher payouts, as high as 200%.

Of course were profits can be made in a such a quick way there is inevitably going to be more risks involved. You can make money trading binary options online, there is no doubt about that, but you can also lose money. Following a reliable binary options signals or strategy or a professional trader in live sessions can really help you succeed in trading binary options online. It could be the difference between winning and losing.

How To Make Money Trading Binary Options

Now that we have a basic idea on how binary option trades work, let’s take a look at a simple example.

Let’s say, you decide to trade EUR/USD with the assumption that price will rise.

You then look at your trading platform and see that the broker’s payout is 79% on a one hour option contract with a target strike of 1.3000.

After much deliberation, you finally decide to buy a “call” (or “up”) option and risk a $100.00 premium.

You could say it’s similar to going “long” on EUR/USD on the spot forex market.

Ending Scenarios After Entering a CALL Option Gain/Loss
Expiry price is above the strike price
(in-the-money)
$100.00 x 79% = $79
$100.00 + $79.00 = $179.00
You gain $179.00 on your account.
Expiry price is equal to or below the strike price
(out-of-the-money)
You lose your stake and your account declines by $100.00.

As you can see from the calculations above, the risk you take is limited to the premium paid on the option.

Payouts in Binary Options

Now that we’ve looked at the mechanics of a simple binary trade, we think it’s high time for you to learn how payouts are calculated.

More often than not, the payout will be determined by the size of your capital at risk per trade, whether you’re in- or out-of-the-money when the trade is closed, the type of option trade, and your broker’s commission rate.

In the example given above, you bet $100 that EUR/USD will close above 1.3000 after an hour with your broker offering a 79% payout rate. Let’s say that your analysis was spot on and your trade ends up being in-the-money. You would then get a payout of $179.

$100 (your initial investment) + $79 (79% of your initial capital) = $179

Easy peasy, right? Don’t get too excited just yet! You should know that there’s no one-size-fits-all formula for calculating payouts. There are a few other factors that affect them.

Factors in Payout Calculations

Each broker has its own payout rate. For starters, Forex Ninja’s intel shows that most brokers offer somewhere between 70% and 75% for the most basic option plays while there are those who offer as low at 65%.

Various factors come into play when determining the percentage payout.

The underlying asset traded and the time to expiration are a couple of big components to the equation.

Next, the broker’s “commission” is also factored into the payout rate. After all, brokers are providing a service for you, the trader, to play out your ideas in the market so they should be compensated for it.

The commission rate does vary widely among brokers, but since there are so many binary options brokers out there (and more coming along), the rates should become increasingly competitive over time.

When a Binary Option Trade is Closed

As mentioned before, binary options are typically “all-or-nothing” trading instruments in that the payout or loss is only given at contract expiration, but there are a few brokers that allow you to close a binary option trade ahead of expiration.

This usually depends on the type of option, and usually it’s only available within a certain timeframe (e.g., available 5 minutes after an option trade opens, up until 5 minutes before an option expiration).

When trading with a binary option broker that allows early closure of an option trade, the value of the option tends to move along with the value of the underlying asset.

For example, with a “put” (or “down”) option play, the value of the option contract increases as the market moves below the target (strike) price.

This means that, depending on how far it has moved passed the strike, the closing value of the option may be more than the risk premium paid (but never greater than the agreed maximum payout).

Conversely, if the underlying market moved higher, further out-of-the-money, the value of the option contract decreases and the option buyer would be returned much less than the premium paid if he/she closed early.

Of course, in both cases, the broker commission is factored into the payout of an option trade when closed early.

So before you decide to jump head first into trading binary options, make sure you do your research and find out what your broker’s payout rates and conditions are!

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker!
    Perfect Choice For Beginners and Middle-Level Traders!
    Free Demo Account! Free Education!

  • Binomo
    Binomo

    Honest broker!

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