This page is for new traders looking for education and a guide to trading binary options. We have a multitude of articles covering a wide range of topics and also videos for those who prefer that. Further down the page you will find a beginner’s guide that introduces the core concepts in a simple way. Please also watch this video:
Picking a Broker
- Learn how to choose a broker on the binary options brokers page
- Binary Options Bonus
- Halal Binary Options Brokers
- Binary Options Scams – avoid these brokers, robots or services!
Guides and Simple Strategies
- Goals for New Binary Traders
- Binary Options Jargon You Should Know
- Trading times
- Simple Strategies for Newbies
- The After Hours Trading Strategy
- The Simple Balanced System
- Trader Beware! Is That A Tool Or A Strategy?
- Introduction to trends and timeframes
- Trend analysis for short term traders
- Three Tools All Traders Should Know
- How To Trade Butterfly Patterns
- How to Become a Binary Options Millionaire
- What should you look for when searching for a strategy, system or service?
- Even Good SSP’s Aren’t Worth Your Time
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Ready to start trading? Start with a binary options broker with a low minimum deposit requirement.
Guide to Binary Options for Beginners
If you are totally new to the trading scene then watch this great video by Professor Shiller of Yale University who introduces the main ideas of options:
Binary Options Lessons for Beginners:
- Lesson 1: Best Time to Trade Binary Options
- Lesson 2: Tools for Trading Binary Options
- Lesson 3: Trading Breakouts using Pivot Points
- Lesson 4: How to Use the Fibonacci Tool
- Lesson 5: Risk Management
- Lesson 6: Becoming a Binary Options Millionaire!
- Lesson 7: Variable Binary Options
- Lesson 8: How to Postpone Binary Options Expiration Times
- Lesson 9: When Not to Trade Binary Options
- Lesson 10: Going Mobile with Binary Options
- Lesson 11: Using the FX Helpers System
- Lesson 12: Using the FX Turbo Marksman Indicator
- Lesson 13: Analysing a Trade
Types of Trades
How to Set Up a Trade
The ability to trade the different types of binary options can be achieved by understanding certain concepts such as strike price or price barrier, and expiration date. All binary option trades have dates at which the trades expire.
When the trade expires, the behaviour of the price action according to the trade type selected will determine if the trade is in profit (in the money) or in a loss position (out-of-the-money). In addition, the price targets are key levels that the trader sets as benchmarks to determine trade outcomes. We will see the application of price targets when we explain the different trade types.
There are three types of binary options trades. Each of these has different variations. These are:
1) High/Low trade
3) Touch/No Touch
Let us take them one after the other.
Also called the Up/Down binary trade, the essence of this trade is to predict if the market price of the asset being traded will end up higher or lower than the strike price (target price the trader has selected) before the expiration of the trade. If the trader expects the price to go up (the “Up” or “High” trade), he purchases a call option. If he expects the price to head downwards (“Low” or “Down”), he purchases a put option. Expiry times can be as low as 5 minutes.
Please note: some brokers classify Up/Down as a different trade type where a trader purchases a call option if he expects the price to rise beyond the current price, or purchases a put option if he expects the price to fall below current prices. You may see this as a Rise/Fall trade type on some trading platforms.
The In/Out binary trade type, also called the tunnel trade or the boundary trade, is used to trade price consolidations (“in”) and breakouts (“out”). How does it work? First, the trader sets two price targets to form a price range. He then purchases an option to predict if the price will stay within the price range/within the price tunnel/within the two price boundaries until expiration (In) or if the price will breakout of the price range in either direction (Out).
The best way to trade the tunnel binaries is to use the pivot points of the asset to be traded. If you are familiar with pivot points in forex, then you should be able to trade this binary option type.
This set of binary options is predicated on the price action touching a price barrier or not. A “Touch” binary option is a trade type where the trader purchases a contract that will deliver profit if the market price of the asset purchased touches the set target price at least once before the expiry of the date. If the price action does not touch the price target (the strike price) before expiry, the trade will end up as a loss and the trader loses the money invested in that trade.
A “No Touch” trade is the exact opposite of the Touch trade. Here the trader is betting on the price action of the underlying asset not touching the strike price before the expiration of the trade. If this trade plays out as the trader wishes, the trade ends up in the money and the trader smiles home with a profit.
There are variations of this trade where we have the Double Touch and Double No Touch. Here the trader can set two price targets and purchase a contract that bets on the price touching both targets before expiration (Double Touch) or not touching both targets before expiration (Double No Touch). Usually, binary options traders employ the Double Touch trade when there is intense market volatility and prices are expected to take out several price levels.
Some brokers offer traders all three types of trades. Some offer two, and there are those that offer only one binary options trade variety. In addition, some brokers also put restrictions on how expiration dates are set. In order to get the best of the different types of trades, traders are advised to shop around for brokers who will give them maximum flexibility in terms of trade types and expiration times that can be set.