Guidance for Binary Options Trading

Your capital may be at risk. This material is not investment advice.

Binary options are a type of financial security that operates on a fixed payoff and expiration deadline. The investor places a trade on a prediction of whether or not the specified price of an asset will go up or down by a predetermined time in the future. Binary options are unique in this way because the investor knows the risk and reward even before placing a trade.

Two main forms of these binary options exist. The first is the cash-or-nothing option. Where the investor receives a fixed cash payment if the option closes in-the-money. The second type is an asset-or-nothing option, where the investor is paid the cost of the base security. Asset-or-nothing binary options are also referred to as the fixed return option (FROs), digital options, or all-or-nothing options.

How Binary Trading Works

Trading in binary options is a great way for beginners to dip their toe in stocks and commodities trading. They are a low-risk form of investment that can culminate in only two possible ways. This type of trading is based on a yes or no proposition.

The investor wagers on whether or not the price of an asset will be above or below a certain predetermined level during a particular time frame. If they predict that the asset price will be higher, they purchase the binary option; if they predict a lower price, they sell the option.

If an investor’s prediction is right, they receive a payout equivalent to approximately 1,000 South African Rands. If not, the investor receives zero payouts and loses the initial amount invested.

If an investor is just starting out, the binary options trading process could be quite confusing and difficult to understand. Below, we’ll discuss the top 5 binary options beginner tips.

Binary Options Trading in South Africa

Binary trading is currently legal in South Africa, but not regulated. This means that, although duly registered South African firms cannot become binary options brokers, foreign firms are allowed to work with South African traders.

No South African law regulates online trading. However, investors can safely and legally deposit money and withdraw profits from online trading accounts.

To avoid getting scammed, traders and investors should only work with firms that have a valid license and operate within a jurisdiction with a good reputation. Right now, the best firms are found in Europe, mainly because they have the most strict online trading regulations.

Top 5 Binary Options Beginner Tips

Traders and investors must recognise that just because an online broker is legally licensed and registered, does not mean it offers quality service.

Here are the top 5 tips a new trader should follow to find a quality broker to work with:

1.    Determine if they have assets in South Africa

South African traders and investors would prefer to engage in trades involving assets. Naturally, a larger asset portfolio can help create more efficient investing strategies. So including brokers that offer trades in foreign stocks, currencies, commodities and indices could also be a plus.

2.    Diversity in the types of options
Focus on brokers that offer multiple types of trading contracts. These should include boundary, one touch and 60-second contracts at the minimum.

3.    High payouts
Compare the rates that different brokers offer for payouts and register with one that provides a rate of 85 percent or more. This will help you as a trader and investor in receiving more money from winning offers.

4.    Payment methods
Beginners should register with brokers who offer legal and secure means of depositing and withdrawing cash.

5.    Bonuses
Some brokers offer bonuses as cash rewards to newly registered traders. Most bonuses offered are 25 percent.

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The financial products offered by the company carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose.