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Binary Options for beginners – Free guide with trading tips- and strategies

Your capital may be at risk. This material is not investment advice.
Matthew O'Connor
Written by trading expert:Professional Day Trader
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Short resume:
  • Author of the book Options Trading for beginners
  • Worked in finance in 12 years
  • Got a MBA in Finance, BA, International Business Administration And Marketing
  • Built a solid record of achievements through constantly developing financial markets
  • Traded on the most frequently utilized stock exchanges: TSE, LSE,NASDAQ, NYSE, Euronex Actively managed a 6-9 million dollar portfolio
  • Developed new and innovative trading systems and implemented them during trading hours
Matthew O'Connor is the author on the bestseller Option Trading for Beginners
Option Trading for Beginners - Written by Matthew O'Connor

Binary Options Trading involves the trade of securities, specifically in the options market. As a beginner in binary options, you are given the option to buy or sell the security at a specific price for a given period of time.

Binary Options trading can be very profitable, but it also comes with its own risks. However, some of the things that keep beginning traders from becoming profitable can be remedied by taking up good practices.

Throughout the internet, you will come across many strategies,  but most are complicated and hard to understand.  The strategies and tips we have found for the South African traders are relatively easy to accommodate, and if they are done correctly there is a good chance to make more profits.

We have used IQ option, South Africa, as the primary trading platform to try out our own strategy and tried out each and every one of the tips we will pass along to you. IQ Option is one of the best and biggest trading platforms, so this is the most natural choice for us to use.

In this guide with trading tips- and strategies, we shall take a close look at some things you can do to improve your trading experience

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.

What is binary option?

Binary options are online investments that give you fixed returns in a time period that is predetermined. The two possibilities to trading with binary options mostly used are the fall and rise of assets, also known as the ‘cal/put’ option, or the ‘high and low’ option. There are both long term and short term binary trading options too. Below are all the options given to traders by binary options brokers.

  • 60 seconds trading
  • High or low trading
  • One touch trading
  • Trading in pairs
  • Trading in ladder options

Binary options are a preference for most South African traders because of their simplicity. All they have to worry about when trading with binary options is the price movement direction of their asset and the expiry period of the trading session.

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.

Learning the basics of Binary Options

Binary options are a financial obligation whereby the expected appreciation value of an asset is projected on a future time. The term ‘binary’ implies that the investor has two choices when making a trade. That is simply “Higher” or “Lower”.

Binary Options are sold in what they call “contracts”, and with each one of these contracts there are represented 100 options.

To get profits for a call option: You have to place a higher expected stock price than the strike price.

To get profits for a put option: Place a lower expected stock price than the strike price.

Binary Options PUT: Puts increases in value as the stock price moves down.

Binary Options CALL: Calls increase in value as the stock price moves up.

If you want to make a simple calculation of the profits when making a trade, or in some cases the loss of, let’s say, a put option you can use this simple example:

Put Option Profit / Loss = Breakeven Point – Stock Price at the time of expiration.

Here are some of the benefits of trading binary options

Binary options have very many advantages over several other trading options:

  1. South African traders have total control over any of the trading risks they may come across than any other trading options.
  2. You can never lose more than their initial investment.
  3. Traders have the benefit of knowing earlier or beforehand of what to expect. This makes it very simple to calculate the risk ratio.
  4. The turnaround time for binary options trading is very fast. This means traders in binary option benefit faster from their investments than any other trading option.
  5. The returns can be high, usually ranging from 65% to 90%. This is very high compared to returns from other trading options.
  6. Binary options trading is very simple to use.
  7. There is a choice of instruments to trade-in. These are Commodities, Market indices, Currency pairs and Stocks.

 

Do extensive research

Gathering and analysing relevant information on a company’s product performance in the market and financial performance on the stock exchange provides clarity in decision making. It will also enable you to discover new commodities or currencies to diversify into for higher returns. Develop a habit of reading business newspapers because they provide in-depth, credible and current information on national, regional and global economic events.

Relying on comprehensive research findings will enable you to make accurate predictions of an asset’s future performance.  Thanks to research analysis, you will become more enlightened on how economic forces such as inflation, booms and busts alter market cycles that are significant determinants of the future value of an investment. Carrying out effective research will enable you to discern false information meant to dupe traders because you can analyse information using the bulk of collected facts and statistics.

Sign up for a demo account

A demo account is completely similar to an ordinary binary options trading account except the investor uses virtual currency as capital. Any returns earned from successful binary options trades are also converted to virtual currency.  Demo binary options accounts are quite affordable. Signing up for an online demo binary options account ensures you get a first-hand trading experience that’s unavailable on books and printed literature. It also enables you to implement strategies and witness real-life results compared to executing them theoretically. IQ Option offers as one of the leading trading platforms on the market a demo account for all South African traders with $10,000 to try out the tips- and strategies.

Some binary options traders have found their preferred trading commodities after trial and error encounters with different items in the market. Potential binary options traders can use the demo account experience to hone their confidence for as long as they need until they are ready to step into the real market.

 

Avoid making unnecessary risks

Binary options trading can offer high investment returns within a matter of weeks or days.  Devious financial analysts provide fake statistics with the intention of dumping binary options traders for illegal profits. The lure of fast returns shouldn’t blind an investor’s decision to making uninformed purchases that will likely lead to high losses. Sometimes unnecessary risking is triggered by huge unexpected losses. This unfortunate event drives a devastated investor into making uninformed and hasty trades in an effort to recoup the lost capital.

All assets traded in the binary options market are subject to the push and pull of national and global economic forces. Financial consultants in South Africa have a greater understanding of how market dynamics work, and their economic impact on your investments. Always consult your investment broker to help you understand financial trends and formulate the best strategy for maximising returns on investment in South Africa.

 

Take advantage of short trades

Market options with expiry durations that are less than 24 hours are more likely to yield expected returns compared to offers with longer expiry periods. An expiry in binary options trading is the duration an investor has to either increase or reverse his binary options’ purchases. However, caution should be exercised whenever coming across new offers.

Dubious financial analysts willingly build up hype about high expected returns on a particular asset, with the intention of tricking investors into purchasing the options. These hyped trades have usually long expiry periods. When unsuspecting binary options traders invest heavily in the commodity, the dubious analysts patiently wait for the strike price to fall below the predicted value. When it finally happens, the victims mourn their losses while the conniving financial experts rake in huge amounts in the form of commissions.

 

Be sure to choose the right platform, and get the knowledge and experiences from other traders.

We highly recommend using the IQ Option trading platforms as the only platforms. They have won multiple awards for their software and are proven to have a outstanding support.

One advantage of attending binary options seminars and workshops is they offer favourable opportunities to link with successful South African traders who may offer mentorship.

Look around on this website to get much more knowledge about online trading and binary options in general. You can also go look at the IQ Option official blog, where other traders have shared some of their impressions and experiences. This is worth a visit and can give you a better understanding of the full picture.

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.

Find 5 Tips on different trading methods, mainly tried out at IQ Option South Africa

  1. Trend lines

These are lines showing the upper and lower values of how an asset is trending. There is a line showing an upper trend and another line showing a decline in the trend. The upper line is known in trading as the resistance level of trading, and the lower or bottom line is known as the support line.

There are many IQ options methods that can help anyone trading in binary options, open new ways to get success without risking too much. Some of these methods are:

  1. The three black crows trading method

This is a method that focuses mostly on the reversal of the trading trend. Also known as the bearish and bullish trends, this is how the black crows method works.

Firstly, the South African trader identifies an asset which has candlesticks that display a certain direction price movement. Wait for that movement to move in reverse. You know this is happening when there is a fall in price on the candlesticks. When you see the trend reversing, this is a good time to start trading. The three black crows trend signals when the trading is weakening. It is shown by the uptrend and when it is impending, it is shown by the down trend.

  1. Rebound trading method

This method focuses mostly on trend lines and does not dwell so much on the price. The most important thing here is to be sure of the price below and above the upper and lower trend lines. If the asset’s price moves away from its line and does not break the trend, consider this as a signal and place PUT trade only if the asset price closes before its level of resistance. If South Africa trading price closes above the support level, you can place a CALL trade. The rebound method is important because it shows the trend and the direction of all future price movements. It also determines whether the trend is strong or not as well as defines the trading points of entry.

  1. Rainbow trading method

This is a method that uses more rapid averages. The trends of the averages are used with time periods that are different. The first row on the chart is marked in blue and has a period of 6 needs. The second row on the chart has 14 needs and is marked in yellow as for the last line with 26 needs, it is marked in red. This is how the lines are displayed when there is a fall in the price:

  • The blue line is displayed on top of the red and yellow lines
  • The red line is displayed at the bottom of the yellow and the blue lines
  • The yellow line is displayed right above the red line and right below the blue line

When the yellow and blue lines intersect, this is the most appropriate time to place the PUT trade.

The following illustrates how the lines are displayed when there is a rise in prices.

  • The blue line is at the bottom
  • The yellow line is in the middle
  • The blue line is above the red and blue lines

The best time to place a CALL trade is when there is an intersection of the blue and yellow lines.

  1. Demo account trading method

A demo account allows you to test all the aspects of the trading market with play money before trading with your real money. This will ensure that everything runs out smoothly without the fear of losing any real investments. It also gives you the chance to get a real account like you would if you were trading with real money. You also get the same brokers and all the binary trading options available in the market.

This IQ trading method will help you develop your trading skills, and you will not be at risk of losing anything. Until you are comfortable to trade with real money, the demo IQ account will give you the much-needed experience.

More about the trading methods

Any South African trader can use the above methods to maximise their profits in binary options trading. Get to know what IQ method works best with your trading options before you start trading.

It is also good to know about all the other methods in the market you can use for trading. Read intensively and talk to more experienced traders.

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.

Find a Trading Strategy That Works for You

To turn in profit trading options on a consistent basis, you should follow a methodical plan. Write it down in detail and ensure you always stick to it.

There are many platforms filled with current trading tips. There are even some designed for traders to discuss and advice one another. Though the idea for such platforms may be noble, it can do a lot more harm than good to your success.

When executing trades, avoid any discussions with other traders. Opinions that contradict your strategy will only cause you to second guess your strategy and make trading stressful.

This is the quickest route to losing money. Once you’ve set a plan, follow it even if a trader you respect plans to sell when yours says you should buy.

Ensure that you monitor and record every trade that you make. Take time to do thorough reviews weekly and monthly. After a month or so, you can make adjustments to your trading plan based on your observations.

The daily reviews should not be skipped as they are a way to see if you deviate from your strategy.

As a trader, failing to plan is indeed planning to fail. Develop your trading method and stick to it. The only changes you make to it should be prompted only by your experience executing it.

Get a Trading Referee

Having a trading strategy and sticking to it are two different things. You will need to have a lot of discipline to ensure you never deviate.

This is easier said than done. Even the most seasoned traders suffer from lapses in discipline.

It is therefore important that you find a trading referee that will keep you accountable for your trades. This will help keep the lapses and costly mistakes at a minimum.

The referee you choose should be someone who will demand the highest standards from you.

It could be a friend, relative, coach or your mentor. They do not have to be traders themselves, but you have to let them in on your trading interests.

Set a schedule for updating them of your progress. It should be daily if possible but not longer than a week.

This will ensure that any lapses in your discipline will not last too long. With the knowledge that you will have to report your trades to someone, you will be able to stick to your strategy.

Practice-Review-Adapt-Repeat

Having a trading strategy is the foundation of successful trading. However sound your trading plan is, you may not be able to execute it perfectly from the onset.

Though it dictates when you will trade, the market conditions you trade-in and how you enter trades, it may still prove to be difficult to execute perfectly.

Start by practising on the components of your strategy individually. Once you have mastered each, you can practice them all together. This is how you will instil habits required to sustain the discipline required for success.

Trading conditions change every day and with every trend. For you to be able to identify the suitable conditions for you on time will require a lot of practice. It is better to test your trading plan on a demo account until you master it.

As you get better, you can start making tweaks to improve your trading plan.

Seek Mental Clarity Before Starting a Trading Session

Ensure that your sole focus is on trading before you start any sessions. This is not the time to watch funny videos, check your email or social media accounts.

Eliminate all distractions and take a minute to clear your head to ensure that you are focused on the present.

Create your own pre-trading routine to help you become more mindful of your goals. Close your eyes and turn all your attention to your trading plan.

Visualize it and commit to not deviate from it. You can even summarize it with a list of affirmations that you can use as your trade.

Before you begin trading, make sure you check the economic calendar to find out any events that may affect the market. This will help you make more informed trading decisions and avoid surprises.

Make it a habit to follow your routine. These small steps may not seem like much but they will give you more control over your trading.

Set up Measures to Manage Risk in Option Trading

Risk is an unavoidable aspect of any investment. The key to becoming a successful trader, in the long run, is your ability to manage your risk exposure.

Having a trading plan and sticking to it is the first step, but it should be backed by a sound baseline for how much you can invest in any one trade.

You should always be comfortable with the level of risk that comes with any trade. Putting a huge chunk of your investment in one trade is not a sustainable approach.

Even the best traders have losing trades. If you put too much into one trade and lose you will end up with the pressure to recover your loses, which could lead to more losses.

Set up Measures to Manage Risk

Options trading has its own risks, but it can be very fruitful with the right approach. However, becoming a successful trader requires patience and commitment.

Keep in mind that the most profitable traders are not those with the most winning trades but those with the fewest losing trades.

Are you new to trading or an already established options trader in need of a platform designed to give you the best trading experience?

IQ option has a range of accounts, 24-hour support, and a range of tutorials to guide you. Contact us today, and we’ll set you up for success.

 

Triangle Strategy

The strategy is regarded to be among the best strategies that beginner traders can apply. Unlike similar previous strategies, this strategy is specifically for beginners. The strategy involves using the chart to get a triangle before trading. The triangle pattern displays an inevitable breakthrough price. Kinds of triangles are rising and falling, indicating price increase and decrease respectively. Traders can trade on a price increase and decrease after understanding the pattern.

The 15 minutes strategy

It is one of the best strategies for beginners in South Africa intending to make quick profits. When using the strategy, South African traders are guided by a 15minutes timeframe. Candlesticks charts are used in this strategy and you only need to find 3 candles of the same colour and wait for the rollback.

Diversification strategy

Among the 5 binary options trading strategies for beginners, this strategy relies on the market situation, the price of assets and market movements. South African traders can quickly get a good start if they use a good strategy. However, the traders of South Africa require a clear analysis and an organised approach. In all 5 binary option trading strategies for beginners, traders should know that all strategies can be applied in various moments and times. In addition, traders should mostly use the diversification strategy among the 5 binary options trading strategies for beginners as it enables them not to invest all their money at once. To avoid losing high amounts at once, traders should get sufficient options to invest small amounts per trade and make 10 investments. This strategy allows you to trade continuously when making an unprofitable trade.

 

Martingale Strategy

This method is less risky and excellent for traders who are interested in taking slow and secure steps. The strategy works on the basis of doubling investments when the previous one fails. Traders can use the strategy even after winning, but they need to ensure that they are not overtrading. To utilise the strategy efficiently, you should first get an asset moving either up or down. The strategy can be combined with varies tools provided by their broker, such as market indicators.

 

The 5-minute strategy

The method is considered to be the easiest and entirely important for beginners. You do not require an understanding of binary trading when using the strategy, and its rate of accuracy is also high. When used appropriately, traders will gain from this method that can be applied in any market, anytime. As the name suggests, the method allows getting a position 5 minutes before the expiration time. However, you need to get assets moving in a steady direction and determine the highest value of the assets as it is the point of the trend reversal.

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.
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future. In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.
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