How to Trade Forex Using Binary Options

Binary options are a new way to profit in a short time period in a variety of different financial assets, including forex. Most binary options sites allow you to trade the most popular currency pairs with the potential to make, on average, 80% in 30 minutes to an hour. This is possible because you are trading options essentially which is a leveraged security. This can help you amplify profits and losses as well.

The binary options work in the following way: once you have opened your broker’s trading platform and chosen a pair, lets use EUR/USD for example. After some basic analysis, you have concluded that this is upside pressure on the pair, which has led you to buy a “call” option. The easy way to explain it if you believe the pair you are looking at will rise, buy a call. If you believe the price is going to fall or in the case, the US dollar will rise, buy a put.

Once you have bought your call option, a countdown clock will begin from 30 minutes and your hope is that at the end of the 30 minutes, the price action is above where you bought it. If so, your option expires “in the money” and you receive a return around 80%. However, if your option expires below the price you paid for, your option expires “out of the money” and you lose around 85% of your investment.

As you can see, it is pretty important that you have some good research sources because if you are wrong, 85% of your investment is gone. Furthermore, since binary options take no time at all to get the hang of, it is imperative that they are not treated like a poker game. In other words, do not use binary options as a gambling tool! You will be sorry!

Prof. Binary’s Trading Tip:

Many novice traders don’t know which currency pair is best to start with in Forex trading. I absolutely recommend currency pairs that have high liquidity and low volatility. So, you don’t have to be afraid of slippage and sudden market spikes. In my opinion these reasons make the EURUSD the best currency pair to trade for beginners.

Binary Options are great to start in the Forex market. However, you might prefer to trade currencies directly: I recommend eToro for trading the Forex market directly. Please note that trading involves risk.

Maybe you are asking yourself right now why you would use binary options to trade forex instead of the traditional spot trading. For one thing, most binary option brokers allow you to open an account with as little as $100, possibly lower for some sites. Additionally, binary options are extremely simplified and take only a matter of minutes to figure out. Next, instead of worrying about pips, all you have to worry about is your currency pair closing above or below your purchasing price (depending on whether you bought a put or call). As long as your trade closes in the money, you receive 80% return, even if the expiration price is just above your purchasing. In traditional forex, a trade does not have a preset time limit and can not yield you over 80% return in about 30 minutes on a consistent basis.

Getting back to the trading method, I recommend using scalping methods for trading binary options. Since the time limit is extremely short, utilize short term charts to determine the best way to trade your pair. More specifically, if your option expires in 30 minutes, look at the 30 minute chart of that pair. There are no stops in binary options, once you place a trade the only way to get out with a return is the price action expiring above/below your purchasing price.

The bottom line here is that binary options can actually be a good way for a beginner to trade forex. Since you can risk as little as $10 per trade, it is a great way to learn the ropes before diving into a more traditional style of trading forex. For more serious traders, use scalping methods and short term charts to help give you a picture as to where the currency pair could be heading. However you decide to trade, remember that binary options are not meant for gambling so save yourself the hardship and use only as another way to trade.