The growing popularity of binary options trading is still continuing with its sheer simplicity being a big draw for many potential traders.
Essentially, there are just two types of options when it comes to binary option trading: traders will ‘call’ when they believe the price of an asset will increase, or ‘put’ if they think the price will fall.
This makes learning binary option trading very simple because there’s only one of two options to choose from.
However, it soon becomes apparent that trading in binary options is a high-risk way of trading.
Get the decision right, and the trader will see a profit of up to 85% returned to them but call it wrongly and they risk losing all of their money.
While many new binary option traders will plunge straight into trading, the best way is to take their time and learn the skills that are necessary for trading success.
This means they will need to understand the technical side, market sentiment and market data.
Begin trading in binary options
For many people, the best way to begin trading in binary options is to start with a demo trading account.
Many binary option broking websites will offer such accounts where those new to the markets can practice their trading skills in real time.
The best reason for following this advice is there’s no better experience than having to do real trading; there’s only so much you can learn from reading a book and the practice is often very different in reality.
The attraction for using a demo trading account is that you deal with fake money so you can afford to lose it.
However, the real attraction for using a demo trading account is that you will be using the same platform for when you decide to trade in binary options for real.
By choosing a suitable demo trading platform, a new binary options trader will effectively eliminate the learning curve in having to learn how the platform actually works.
Demo trading accounts vary greatly
As with many things in life, the demo trading accounts vary greatly between brokers and not every broker will offer a demo platform.
Many brokers do, however, and it’s this level of practice which could prove to be the secret to success in binary options trading.
One downside to using a demo platform is that some brokers will insist that the newbie has a short time period for use. Some are for as little as 72 hours.
However, once a newbie begins trading in binary options they will soon appreciate that the 72 hours grace period is, generally, long enough to work out how the systems work and how to make a profit.
It would be a good idea to have a trading strategy in mind before beginning the trial and appreciate that the new trader will not be making lots of money initially and they will need to still learn their trade.
This also means that when a trader comes to make their first binary options trade they cannot be unprepared. Failure in the first few hours will not only be off-putting but may cost all of the money a trader was prepared to risk.
Binary options trader needs a money management system
This means a binary options trader needs a money management system in place to ensure they are not risking too much, or indeed too little, while they learn the necessary skills.
It should be appreciated that it can sometimes take several months to develop a successful trading strategy and to find the markets or assets that the trader will be successful in.
Remember too that the asset a trader decides to specialise in does not need big movements in price to rack up a big profit.
Indeed, in some currencies a tiny movement of 1/10 of a pip will still generate cash.
The other issue that comes up with creating a binary options trading strategy is to decide how many trades a day will lead to success.
Some traders only make a handful of trades and make money while others trade more frequently. It’s important to remember that it’s not about the quantity of trades but about the quality of the decision-making behind the trade.
This also means that a binary options trading strategy really does need some financial goals behind it; setting a weekly profit target is a good idea because this will determine how many trades are needed to reach that goal.