Complete guide on signal trading in binary options
The concept of binary options signal trading originates from Forex. Forex traders were for a long time already able use this method. In forex trading this concept is known as mirror trading, where traders will either have the possibility to copy the actions performed by others or use software to aid them in analyzing charts.
How does it work?
Signals are developed by companies that are called binary options signal providers or platforms. These companies are specialized on building software applications that will analyze the value fluctuations of different assets.
One of the most common ways to making money in binary trading is that of using technical analysis to discover trends in developing. Trends are predetermined patterns that always behave in the same fashion.
For example, if the value of an asset has been steadily rising during a prolonged period of time but then it abruptly declines within just a few seconds, you can be sure that it will bounce back up shortly after. This is because once the drop happens, all the stock traders will decide to buy the asset, which will then bump the price back up again.
If you are an options trader and see the initial drop you can then make a prediction that the value of that asset will increase (make a “call”). This is one of the easiest and most common trading strategies.
The issue with the above strategy is that you will literally have to watch the movement of assets and charts for several hours straight to see such an event happening. You will have to keep several chart windows open on multiple assets.
Such trends don’t develop that often. If you sit 8 hours in front of your computer and have 10 chart windows open you might catch around 5-10 such trends per day. But you literally will have to watch charts all day long to achieve this. Not very exciting.
This is where mirror trading comes in. Catching such trends is not that complicated. For this reason, making a computer program that will sweep the charts all day long and then notify you when such a trend is developing is not that difficult.
So, in short, what automatic trading signals do is to analyze the charts to find and discover such trends as described above.
What do I have to do to use signals?
In order to use binary options signal platforms you will have to sign up at one of them. Above you will find a list of what I think are the best binary options signals. My personal favorite is Signals365.
Usually there is a fee associated with such a service, which most commonly is around $100. However, most services offer free trials of anything between 30 days to 90 days. Most also offer money-back guarantee of up to 60 days in case you are not satisfied. Some are even completely free.
After this, you will also have to sign up at a broker. Most commonly, the signals service will show you a list of recommended brokers. The reason why they do this is because most apps of this kind are optimized for specific brokers only, since different brokers offer different assets, charts and platforms.
If you sign up at a random broker it might turn out that the broker does not even have the asset that is being analyzed by your signal-trading app.
Also, a lot of apps of this kind offer automatic trading. This feature can only work if the signal app is interlinked with a broker’s API. This feature cannot work with any random broker, as it’s just technically not possible.
Automatic trading vs. manual trading
Once you’re registered and the signal platform and the broker you can begin trading. You can choose between automatic trading, manual trading and semi-manual trading.
In automatic trading mode you will allow the app to trade by itself anytime a trend is discovered. You will of course be allowed to adjust how much the app is allowed to invest per trade and in total.
In manual trading mode the only thing the app will do is sending you the trading instructions. You will have to execute the actual trade yourself. The disadvantage of this is that by the time you execute the trade the trend on which basis the signal was generated might already have passed.
I personally prefer automatic trading however I only activate this trading mode when I myself are online and can see what’s going on. When I’m offline I usually deactivate it.
How accurate are binary options trading signals?
It all depends on which ones you use. Like in any industry, there are ones that do work and others that are rubbish. The obvious bad ones are names such as Binary Matrix Pro and Option Bot (yes, despite the hype and all the positive “reviews”, Option Bot does not work).
There are also good ones such as Signals365 and John Anthony Signals. Both of these follow the strategies described above and were developed to actually work and deliver results. I have tested them myself and still use them from now and then when I’m tired of manual trading.
I decided to create the toplist you can see above in order to help others to distinguish between those apps that do actually work and those that do not. There already so many fake reviews out there so I’m hoping that this article can help others avoid paying money to a service that does not deliver results.
When I evaluate such services I always look out for the ones that deliver a winning rate of at least 70%. If a trading signal app can deliver at least this rate it will mean that you will make consistent profits.
How much money can I make with signals?
There’s a lot of hype out there according to which you can become a millionaire and what not if you use these tools. If a service claims this, then usually it is a scam. You most likely will not become a millionaire using signals (and financial trading itself).
However, you can definitely make nice money. If, for example, you start out with an initial deposit of $250 and limit yourself to daily 5-10 trades of $10-$25 each, you will be able to make around $2,000-$3,000 per month in pure profits.
You can then withdraw that money and keep $250 in your account to start again next month. Or you can keep all the money in your account and increase your daily $10-$25 trades to $50-$75 to further increase your revenues. I personally prefer the first strategy because it’s safer.
Don’t be greedy and fall for the “become-millionaire-today” schemes. Just use the tips recommended by me and the binary signal trading apps linked where and you will definitely be able to make consistent money. Be smart and you will make money or be greedy and lose it all.
I also invite you to read more about this form of trading in order to further increase your winning odds. Below you’ll see a list of articles that further elaborate on this topic. If you want to trade directly at a broker without the help of a signal then you can also check out my page about regular binary options brokers linked here.