Binary options trading is an alternative way to trade stock indices, commodities, and currencies. These are all or nothing trades where you don’t take any ownership of the traded asset and instead, you are predicting if the asset will increase or decrease in value.
What makes binary trading attractive is that you will be able to see exactly how much you stand to lose at the time you make the trade, it is very fast paced, and there are trading opportunities in just about any market regardless of volatility.
If you are interested to read a little more about the strategies involved in trading options, here are our top 5 options trading strategies professional traders use. If you feel like you are ready to jump in and get your training from broker webinars and from your account manager, below are the binary options brokers we recommend you look into.
Binary Options Trading Brokers
The Best Binary Options Brokers For South African Traders
|1||Visit IQ Option||$50||IQ Option Review|
|2||Visit Binary.com||$20||Binary.com Review|
|3||Visit 24 Option||$250||24 Option Review|
Binary Options Trading in South Africa?
The South African market continues to open up, both to domestic and international investors. One of the reasons South Africa is becoming a more attractive market is the development of higher-level financial instruments trading and over the counter (OTC) markets that is being led by banks and brokerages.
How Binary Options work
Imagine you think the price of gold is going to rise higher than $1000 by noon the next day. You would simply buy a binary option that would pay out to you at noon the next day if the cost of gold did, in fact, rise above $1000. On the other hand, if you didn’t think the price was going to rise you could sell it before noon.
What sets binary trading apart from other types of trading is that you are not buying, for example, a gold futures contract at all, instead, you are making a prediction on the trading price level of gold futures at expiration.
The price range of binary trading is anywhere between $0 and $100. A price creeping up on the $100 mark would be a high probability trade for the person making the buy and a low probability one for the seller.
Taking our gold example one step further, if you assumed there was a 30% shot gold would indeed rise above $1000 you could buy options for $30. The counter-party would be buying the $70/70% worth of the contract. This means that in your $30 trade your maximum loss is $30 and your maximum profit would be $70.
If you look at the binary price as a probability, trade prices over 50 would mean that the buyer has a statistical advantage over the seller. But to gain this advantage the buyer has to put up more collateral compared to the seller.
The true risk/reward ration of each trade is dependent on this advantage/disadvantage at the time of trade execution.
How To Trade Binary Options Successfully
Whether you are learning about binary trading options in order to earn a little extra pocket money or you are looking for a full-time career, the first thing you need to do is learn the ropes.
Now that you have learned what binary trading options are, you are ready to learn some great tips to help you make the most out of every penny you invest.
Here are 5 essential tips that will change the way you trade for the better:
1. Make use of online/offline resources
There is no point to wasting time and money learning what not to do when others have already failed before you. Be smart and learn from others mistakes. If you are just getting into binary options trading you should read our article covering the top 5 strategies used by professional traders. These are essential points that everyone should know before they start. Another good place to start is making yourself familiar with the common terms in binary options trading so you can better understand signals and analysis.
We have also put together a great list of reputable brokers that you can invest with.
2. Read reviews of any broker you are considering
Sites like ours put a lot of effort into making sure you get the info you need in the simplest format possible. Our reviews tell you everything you need to know about the various trading platforms available to you in South Africa, and we try hard to identify the difference in the brokers so that you can easier make a choice on where you want to open a trading account.
3. Don’t overinvest
This can be a very tempting thing to do but resist! Controlling yourself and being happy with the smaller wins are how you are going to really end up ahead of the game. Binary trading is all about thinking and investing rationally, so don’t let your excitement run away with your wallet.
4. Understand the types of accounts offered
Different brokers offer different types of accounts and bonuses. Make sure you learn what these are to maximise your investment capabilities.
5. Take your time
The best way to make the wise investments is to do your homework. Take the time to study the markets and all the graphs you can get your hands on so you have a clear sense of which direction the market is going in, if the market is soft, and which asset to trade.
Use these top tips to help you invest in binary options trading the right way the first time.
Binary trading risks
Binary trading options have very precise profit and loss points. The value of these options are determined down to several decimal points and any one of those points could mean the difference between you seeing a profit or a loss.
Then there is the fact that these are not considered to be liquid types of investments. You cannot pull out whenever you want to with this type of trading. Instead, you have to wait for the expiration date to take your profits or losses.
Last but not least it should be pointed out that there is not a lot of regulation when it comes to this type of trading. While the majority of these trading platforms are on the up and up, with so little regulation you should be careful. On that note, always research your broker, and use the list above as a good starting place for your own research.