How to Start Trading Binary Options

Binary options are quickly becoming the newest trend in consumer investing. If you’re not already familiar with binary options, the way they work is relatively simple. You can look at binary options as another way of trading on any given commodity, be it a stock, a currency, or a futures product. When you call or put (buy or sell) with a binary option, you’re entering a situation with a fixed level of risk. You will either receive a fixed amount of cash (or the value of the underlying financial instrument) or nothing; the price you pay for a win or a loss comes in the form of a spread. Since spreads on binary options are high, you do need to be consistently profitable in order to make money instead of lose money. How do you get into trading binary options?

Just as you can sign up with a broker to trade Forex or another financial instrument, you can also sign up with a broker to do options trading. A good broker will allow you to open a demo account with virtual funds to practice trading before you go live with real money. You should be able to practice indefinitely until you know what you’re doing before you risk real assets.

Before you can get started, you’re going to need a couple of things. The first thing you’ll need is a bankroll. Investing is a risky business, and with binary options you literally are betting that a certain value of a certain commodity is going to be above or below a certain level at a particular time. Since this is a bet, you need to have money you can afford to lose which you can invest. You will also need money to cover the spreads, which are more expensive than they would be with some other investing products.

The other thing you’ll need before you can trade binary options successfully is some kind of a method. Just as you wouldn’t dive into stocks, currencies, or another market without a method in place that you can use to produce consistent, reliable returns, you don’t want to trade binary options without a method either. Figure out which types of financial instruments you’re interested in trading, and then start back testing a system over historical data. Once you achieve some consistent profitability there, you can begin demo trading. Make sure you demo trade successfully for a few months before you start trading binary options live.

You also need the right mindset to trade binary options. You need to be willing to acknowledge that what you’re doing is risky and that there is no way to guarantee good results. At the same time, you cannot rely on luck to pay you consistently and profitably; if you want to trade binary options for a living, you’re going to have to turn to skill and discipline. Binary options are relatively easy to learn, but there are countless ways of trading them. So dive in and start learning all you can!