Binary options trading requires basic knowledge, patience and common sense. In this article we guide South African traders through all the steps necessary to place a successful trade in binary options.
As always, we recommend trading only with regulated and trusted brokers. Read more in our IQ Option review South Africa about added benefits such as a free binary options demo account, $10 minimum deposit and only $1 minimum investment. For more brokers, see our binary options brokers page. Let’s get started explaining more about trading binary options.
How Does Binary Options Trading Work?
Binary options are nothing else but a prediction of an asset’s price direction in a pre-specified amount of time. The price in binary options doesn’t have to go too high or too low for traders to make a profit. All they need to do is predict whether the closing price will go higher or lower than the opening price as shown in the figure above.
When you are engaged in trading binary options you must consider your binary investment trading as speculation. You are speculating in the direction of the market short term. You do not worry about Microsofts 10 year strategy and how they perform against the market in the general long term. You do not need to consider whether Tesla will actually take over the world as the current stock prices suggest that they will 20 years from now.
You have to come to the realisation that you are speculating and not investing in the traditional sense. The fact you bid on a positive trend of certain equity, commodity or forex pair doesn’t mean you want to put your life savings into it. You could be reading Q1 results for BMW and quickly realize that the Coronavirus didn’t in fact cause as much harm as the market in general believed. Therefore you can buy a CALL option END OF DAY in the belief that you read the results and market expectations better than the average person.
Binary Option Trade
Your binary options investment strategy has to be concise and fit your ability and time to follow the market news. If you see oil being traded for negative amounts as we saw during the COVID19 crisis you might buy an END OF MONTH call option in the beliefs that the market will recover during the given time period. You can also think it is only the start on something much worst and then buy a PUT option, which means you think the market price has to be even lower.
We on Binary Options South Africa are not investment advisors but only here to explain how trading binary options works technically. We believe that binary trading options are ideal to learn more about market movements, especially if you do not have the time and energy to make 10-20 years plans for your retirement funds and look for something short term with higher risk.
Binary Option Trade Types
You will first need to understand all of the many different types of Binary Option trade types that you are going to be able to place. This is even before you find a Broker with which you will register an account. Binary Options come in many shapes and forms such as:
- Digital Options – a type of contractual option that offers a fixed return if the underlying commodity or underlying asset reaches the predetermined value or end price. The opportunity of winning a payout is associated with the underlying price to exceed a pre-determined limit, which commonly is known as the strike price
- Call & Put Options – financial trading options that work on the principle of derivatives. The derivative is the price of the option based on the price of some other market asset. If the price of the underlying asset rises or falls the derivative follows the trend instantaneously and this change is totally market-driven.
- Forex Options – a type of derivative with the underlying currency pair. The term underlying refers to the currency pairs from which a particular forex option derives its price.
- High/Low Options – a financial instrument that returns some predetermined amount if the prediction about the price projection for some underlying asset, currency, or commodity turns out to be true. The trader predicts whether the current market price for the underlying asset or commodity will go up or down.
Deriv trading is one of the most popular forms of trading today.
When it comes to various Binary Option Trade types, here are just some of the most common ones:
- One-touch options – this is a type of option that pays out traders’ profit once the price of the underlying asset reaches a predetermined barrier. Once the aimed level has been reached, the trader will receive his payout.
- No-touch options – this binary option trade type works in the opposite fashion to one-touch options. Here you wager that the underlying asset will not reach a certain price level, above or below the spot (current) price, within the expiry time.
- Double one-touch options – even though this binary options trade type follows the same suit as one-touch, this type consists of 2 predetermined barriers, and the traders’ payout depends on the strike price of underlying asses reaching one of the barriers, regardless of which.
- Double no-touch options – double no-touch option works exactly the opposite from double one-touch options. The underlying assets price shouldn’t reach either one of the predefined strike prices within the expiration period. In case one of them is hit, the trader loses his investment.
- Paired options – paired options can be considered are bit more rare binary options trade type, and are offered only by some brokers. Paired options are based on the performance of one asset relative to another, meaning the aim is to predict which asset will outperform in the preselected timeframe.
By knowing the different types of trades available you will then be able to locate a Broker that is going to offer you the range and types of trades you are going to be interested in placing.
Choosing what Binary Option Trades to Place
Once you have an understanding of the range and Binary Option Trade types, you will then need to gain a full understanding of the types of trades which are going to appeal to you the most.
Whilst very experienced traders are always going to be prepared to place trades on anything that is likely to return a profit to them, as a beginner and an inexperienced trader you may be better off placing trades on companies or commodities that you have an interest in or are very familiar with.
To be able to place your first binary option trade, you can choose to register a demo or a practise account first, which will, for example, have a virtual trading balance that you can use to practice and fine-tune your newly acquired trading skills.
On the other hand, you can choose to place binary options trades based on signals. Signals are trading alerts that enable you to spot a trading opportunity. Signals can be created by expert traders or by complex algorithm-based robots that do the market scanning they are programmed to do. The recognition of a trade signal is always the starting point for the trade. It can be seen in the live chart of the underlying asset and is decisive for a trading strategy.
With every small step, you will swiftly see your knowledge and hopefully, your account balance grow. Slowly and steadily, you will learn how to utilize the economic calendar. In different times throughout the year, most developed countries of the world release financial data which is the most powerful indicator of how certain different markets and market sectors are performing. The economic calendar is there to enlighten you with a big array of different financial information. Once you get to know different markets well enough, you can use that knowledge to help you select what binary option trades to place.
What is Binary Trading?
Binary trading is named this way because the outcome is binary. There is only two options Up or Down. These binary options are called “Call” and “Put” when trading or “Higher” and “Lower”. If the price stays the same, then traders receive their investment back. If the trader predicts correctly, then the profit made can go up to 91% depending on the broker and the asset. On the other hand, if the prediction is wrong, then the trader loses the investment.
Binary Trading Broker
Registering with most binary options brokers takes only two minutes. All you need to do is fill in the boxes with your email and a password. You also have the option to continue with your Facebook or Google account or simply fill in your personal details like name and surname. Some traders also opt to trade with the best binary robots, however we have to alert you that IQ option robot is closed not because of a IQ option scam, but because the CySEC regulators did not want them to have a binary robot as part of their investment instruments.
Binary Trading Options Step Guide
Practice binary trading with a free demo account available to South Africans, before switching to a live account in order to get familiar with the binary trading platform. In this section, there is a detailed explanation on how to place a successful trade with the legendary Binary.com minimum deposit of $5. Once you feel ready you can switch to live binary trading which is done exactly in the same way as explained below.
1. Select Asset
To start with, traders need to select their asset from the drop-down menu as shown here. A large selection is available as always with IQ Option.
2. Set the Investment Amount
Then, set the investment amount as shown below by clicking on the amount box at the right-hand side of the trading platform. This can be as low as $1 so that novices can start trading with low investment capital.
3. Set the Expiry Time for the Binary Option
Once the investment amount is set, traders need to select the expiration time. There are binary options available from 60 seconds to the end of the month as shown below. You can even see that the profit percentage changes according to the expiration time. Longer expiration times will offer lower returns.
Once you choose the option’s expiration time then, you can place as many binary trades as you wish. It is usually possible to close a trade early however with a reduced win rate in case you are ITM (in the money).
4. Choose the direction (Higher or Lower)
This can be done by choosing the price direction, either by clicking on the higher button if you believe that the price will go higher than the opening price.
On the other hand, traders can click on the lower button if they believe that the closing price will be lower than the opening one as shown here.
5. Wait for the Binary Option to Expire
Finally, you wait until the expiration time comes and if you have won then, the amount will be shown in a green box as shown in the picture below.
How to Succeed in Binary Options Trading?
We believe that binary options trading is a fun way to enter the market without being required to deposit huge amounts like the banks typically require to start trading on the stock market. Making a small deposit even in South Africa is simple and require only a few minutes of your precious time to begin your binary options trading adventures. After you have made a binary options registration to a broker account, simply click on the green deposit button at the right top corner as shown above and follow the instructions. You are now soon ready to start trading binary options.
As fun and as simple as it is, it is very false, and often very costly to think that becoming a trader and succeeding in binary options trading in South Africa can be boiled down to registering with one of the brokers, depositing some amount and relying on luck. This “how to succeed in binary options trading” strategy is very far from making you a trader, let alone a successful one.
The path to success in Binary Options Trading lies with learning the basics and the right application of proven and successful practices.
The Technical (chart) analysis will teach you to understand the technical terms, indicators, upward and downward trends, and market volatility. Market volatility is a fact and cannot be demised, but you can learn how to place your trades in a way that will reduce the risk that stems from market fluctuations.
Risk management is crucial. Risk is an inevitable element of binary options trading and should not be overseen or ignored. Also, risk is factual, thus you need to learn the skills and have the knowledge that will help you manage it. What does it mean to manage risk? It means to acknowledge its existence and develop or embrace the instruments that will make its occurrence sparse or even scattered. Your trades, even those successful once, will never be risk-free. The success of a certain trade only proves that the combination of your knowledge, time of the trade and the strategy you applied on this trade, managed the risk it entailed perfectly, resulting in a positive outcome. Not only did you succeed in binary options trading, you succeed in risk management as well.
There is great power in the mistakes that other traders already learned from. No need to first pay for your own mistakes, when the connections you have and will establish in time, can bring great benefits to your trading skills and your trading balance. Join trading forums, groups on social networks, work, build and grow your knowledge that will ensure you do succeed in binary options trading.
Once you feel you have grown, you will need to find your own success binary options trading strategy. There is no magic wand to be waved with, but a wise and moderate combination of indicators, proven strategies and trials and errors. This is the key advice on how to succeed in binary options trading.
And last but not least, there is a psychological component of trading. Stability means that you can be victorious despite failure. And in your binary trading growth path, there will be a lot of failures. Only a proper attitude that prevails against all odds, persistence in growth, learning, picking up and trying again will help you succeed in binary options trading.
Making Binary Options Trading Profitable
To trade binary options in South Africa profitably, you must know of and apply profitable binary options trading strategies. A good strategy allows binary traders in South Africa to make profits regardless of the prices rising or falling.
Here are some of the most important strategies that can make your binary options trading profitable:
- Trend following strategy – if the price runs in one direction, the trader can follow this trend with binary options (not just one). For some years, a tool called “Ladder” (ladder) can be useful especially for buying in the trend direction.
- Volatility strategy – this strategy works well with Call and Put options and Touch options, on very unstable markets with large price swings
- Hedging strategy – it not broadly know, but hedging is possible in binary options trading as well. This strategy can be applied both with binary option against another asset and with binary options against each other. This strategy requires a lot of experience and good market knowledge.
Binary option traders in South Africa can profit from any market behaviour. Before you enter a transaction, you can see the direction of further price movement in the selected period. If there is no trend, then no trend-following strategy can be used obviously, but for this, you would need to deal with chart analysis first, which is , as mentioned before, one the fundamental skill your education and training should be focused on. To gain security for this, consider yourself a beginner for much longer than you will actually be one – do not let false confidence overwhelm you. Many traders tend to rush into trading, get discouraged by losses, which are not cause by the markets and brokers alone. The key to successful binary options trading is to invest in your knowledge and your trading skills before you invest in any trade.
As we already emphasized – technical (chart) analysis is one of the fundamental tools you need to grasp and takes precedence over everything else. Do not get carried away for the easy-to-use look and feel of many tools that are often offered by the brokers, like the Option Builder. Know that you need time to learn the fundamentals, time to exercise trading and the strategies that can make your binary options trading profitable.
Risk Warning: As always, we inform our readers that trading involves risk. Always invest funds that you can afford to lose. Our site is here to provide you with useful binary trading tips on how to trade binary options successfully and to avoid apparent and costly pitfalls such as Trevor Noah Bitcoin Investment.