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Updated on: 25 October 2017

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The trading industry is a war environment that is pretty ruthless to newcomers. With so many aspects, strategies and risks to take into account, it is imperative to have a good grasp of some the key binary options basics.

For beginners, stepping into the trading business is a nightmare, which makes the binary options type of trading the go-to option. Binary options are defined by the yes-no system, where you only get two extremes to bet on, with no other variations interfering. What this basically stands for is a 50/50 risk-reward chance, which is a higher point to work from, especially for a beginner.

How to trade binary options for beginners – The advantages

It is more likely for beginners to lose money during trading activities, because their limited knowledge, combined with the intricacies of the market itself, makes success a highly unlikely goal. This is why binary options are the way to go, because of the simplified procedure involved. The main advantage is that this trading sector doesn’t allow you to lose more than what you have invested.

They also allow you to calculate in advance what your profit is going to be, allowing you to make more educated decisions and decide on both the amount to invest, as well as the strategy you are going to follow. All in all, the most important advantages of trading in this sector include:

– A lower transaction risk, since the 50% win-lose chance is higher than a lot of the classic trading alternatives

– Higher return rate, going up to 70%-85% or even higher in some cases

– Faster turnaround rates than classic trading activities

– Easier to calculate the potential gain/loss, allowing you to adjust your future strategies accordingly

– Easier to understand and execute, which means you don’t need years of professing to have a good grasp of the essentials

If we were to mention certain distinct minuses, then we would have to mention the fact that the gains are limited, strictly dependent on the amount you invest and a specific threshold you cannot exceed. By comparison, forex trading has the potential of delivering higher gains, but also presents higher risks.

But in order to expand on the subject, we need to break down the binary options basics. In this regard, we have several aspects we need to focus on:

1. Understanding how binary options work

2. Understanding and applying the correct strategies

3. How to evolve in the right direction

4. Becoming a pro

Every binary options for dummies guide needs to encompass these 4 key points.

Understanding how binary options work

Before embarking on the trading business, there are several things that need to be kept in mind, in relation to binary options in particular:

– In case of loss, you will reach point 0, instead of falling down to negative values. Meaning that you will only lose what you invest, nothing more.

– No advanced knowledge about the trading process is required for you to win

– You only have 2 options to choose from – up or down, on one side or the other of a chosen parameter – in regards to the movements of a certain asset

– Your gains will remain the same, no matter how much the indicator jumps over or falls under the said parameter

– Some brokers will allow you to use the “early closure” feature, which will save your profit from dropping and minimize the losses. A useful feature in the case of volatile asset movements

– Leverage burns are non-existent

– The risks and gains are transparent even before engaging the trade

These specifications are extremely useful in defining what is binary options trading and how it works and in helping the trader understand what to focus on.

Understanding and applying the correct strategies

In this category, we have 2 aspects we need to focus on: the most useful tips to use when developing a specific trading strategy and the best trading strategies to adopt.

1. The most useful tips for putting a trading strategy in place

When we are talking about options trading for dummies, we talk about being aware of all the minor details that make up for an effective long-term winning strategy. Some of these refer to:

– Keep your risks low – Especially when you are at the beginning of your road, you need to do everything in your power to minimize the risks. This means only using money you can lose, nothing more. Adopt safe money management strategies as this is the first step towards increasing your gains substantially.

– Learn to make the difference – If a trade is not certain or if you cannot visualize the outcome, by a reasonable degree, it is better to just save your money and pass.

– Track your trading journey – Record your trades in a journal. It will be a great way of knowing what to improve and where your faults lie.

– Apply the 3-loss rule – Whenever you get caught in a losing streak, the best way to deal with it is to cut the losses and call it a day. It is this point that explains the “how to trade binary options for beginners” chapter with the help of one simple and effective concept.

– Set your emotions aside – Emotions never mix well with business. Getting discouraged or impulsive is the worst thing that can happen to you. Learn to disconnect and focus on the math, rather than falling into an emotional hellhole.

Once the table is set, time to move on to the next point.

2. Trading strategies to improve the effectiveness of binary options for beginners

In the first phases of becoming a trader, you will most likely resort to the easiest ways of trading. Not many strategies involved, just a lot of gut feelings and blind luck. But if you want to improve at what you are doing, you need to focus on specific approaches, meant to give you the upper-hand. In this regard, there are 3 main strategies you could use:

– The trending strategy – It is as simple as predicting where your potential asset selection will move; up or down. This depends on a number of factors, because markets are entangled with one another, which means one asset’s movement may influence another’s. Like oil prices going up, causing the costs of other assets or services to follow the same path. This is where predicting and calculating a trend comes in for the win.

– The ranging strategy – Resorting to trading options like “put” and “one-touch” allows you to work on a specific asset, whose price gets stuck within certain parameters for longer periods of time. These measures will allow you to increase your gains even when the price fluctuates within those parameters. Even when the movement is extremely low.

– The hedging strategy – A more advanced strategy, involving buying 2 assets, one of which is a “put” binary options, serving as a safety net in case the first one doesn’t follow the predicted path.

Other more advanced strategies include:

– The tactical rescue – Given that the initial option you have selected begins moving towards the losing area, you can reverse the trend bet using the CALL/PUT antagonistic options to save what you can out of the operation.

– The double investment – It is, in fact, a tactic of doubling your gain by multiplying your investment by a factor of 2, when the transaction is going in the right direction.

How fast you evolve will ultimately define how successful you are going to be.

How to evolve in the right direction

Unpacking binary options for beginners implies explaining the right mindset and the proper attitude you need as a future professional trader. This can be easily translated by:

– Constantly acquiring knowledge and remaining updated on the latest news and trading strategies

– Improving your approaches constantly

– Keeping track of your progress

– Make minor adjustments as you go along and learn how to adapt to changes more effectively

– Never get discouraged

As long as you get these right, there is no reason not to make it big in the trading industry.

Becoming a pro

Articles defining and explaining various options trading for dummies are now a thing of the past. You have become a professional and you have made it big, on your way of becoming great. This is not the time to chew on your wins.

The trading market is constantly evolving with new features, trading opportunities, financial swings and big and sudden surprises around every corner. The best way to stay in shape is not letting anything catch you on the wrong foot.

Being a pro is basically sticking to the same mentality that defined you as a beginner: leave no stone unturned and look for self-improvement with every step you make. Other than that, all you have left is a lot of hard-work and commitment.

Being a pro is hard, but becoming one isn’t too easy either.

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