Many online trading platforms market binary options as a get-rich scheme that promises big profits in a short time frame. They fail to mention the amount of risk and luck involved in trading binary options. If we account for all the risks associated with trading binary options is it a profitable venture?
In this article, we will discuss whether you can be profitable by trading binary options and tips on how to make money with binary options and using more tools consistently.
How Much Risk Is Involved?
Risk is in the very nature of this part of the industry. You cannot escape risk. You can trade forex stocks or you can buy cryptocurrencies, there’s always a risk of losing your investment. But the amount of capital you lose depends on how much the value of the asset falls. It’s quite rare to lose a hundred percent of your investment.
However, when it comes to trading binary options you lose the whole portion of the money invested. It does not matter how big or small the changes in the value of an asset are, you will lose 100% of your investment. This is why binary options are called all-or-nothing trades.
But with such high degrees of risk comes a more significant opportunity to generate profit. The margin of profit varies from broker to broker but they typically lie in the range of 65%-90%.
Can Binary Options Be Profitable?
Technically yes, the returns you get from trading binary options are pretty good. As long as you keep winning on your predictions you can be profitable but in reality, the odds of winning a bet are close to fifty-fifty which means you won’t be making winning predictions all the time. This lessens the potential profit you make from binary options.
Realistically, you can expect to make a little amount of income from binary options trading. This amount of money won’t be able to sustain your lifestyle on its own and should supplement an existing job.
How to Make Money With Binary Options Consistently?
Choose the Right Asset to Trade
If you want to trade binary options successfully, you must focus on one market at a time. Hopping between different financial markets is not recommended in most cases since you’re not able to familiarize yourself with the markets.
Financial markets operate differently. A commodity market will not function the same way a currency will. If you can familiarize yourself with a single market, you build an understanding of how that market works. This helps you in making better predictions of the value of an asset.
Signals and Algorithms
A signal is a type of algorithm that notifies the trader of favorable market conditions to trade. Perfect for someone whos always busy, this tool can be used when you’re too busy to check the market trends on your own. You can find plenty of signal providers on the internet. The best signal providers for binary options trading are signal push, blue sky binary, and signal hive.
Another handy tool to have for a binary options trader is algorithms. Algorithms will trade binary options for you based on the conditions you set for them. You set the entry and exit points for the position and the algorithm handles the rest. You can learn about the tools that could be used in binary options here.
Implement Effective Trading Strategies
If you’re looking to up your trading game, incorporating trading strategies is the best way you can achieve this. Strategies are built on predefined rules and criteria used for making trading decisions. Strategies are an effective tool to use to improve your chances of success with binary options. A good binary options strategy considers risk, emotional control, and strike prices to be impactful. Examples of viable trading strategies are following trends, the candlestick approach, and the straddle strategy.
Risk management is also necessary when trading binary options. Due to the high risk involved when trading binary options, you must use risk management strategies to minimize risk.
Use a Demo Account to Practice
Many leading brokers will offer a demo account to try out for free. A demo account can be useful to familiarize yourself with the platform and practice strategies before stepping into the real market. You can identify any shortcomings under real-time market situations without having to risk any of your investment in the market. It’s extremely useful in understanding market dynamics and checking whether you’re ready to step into the real market.
Binary Options trading requires consistency and the right mindset to be fruitful. If you enter the market without any prior research about the risks associated with it you’re unlikely to make it far. You can reduce the element of risk with the tips mentioned above and make an income consistently. But you need to keep a realistic expectation around the amount of profit that you want to generate.