Markus Heitkoetter
Rockwell Trading
Binary options are one of the most controversial trading instruments – for a reason:
On the one hand, they are super easy to trade and therefore perfect for beginners.
And they are perfect for traders with small accounts because you can open a binary options account with as little as $250.
But on the other hand, there are some binary options brokers out there that are simply a scam. Most of them are overseas, and when you wire money to them, you’ll never see it again.
So let’s take a closer look at Binary Options and see if they are legit and if you can really make money with binary options.
In this article, you’ll learn…
- How binary options work
- Can you really make money with binary options
- What are the best binary options brokers that are NOT a scam?
- Are binary options legit?
- Is binary options trading safe?
- And what is the best strategy for binary options?
Let’s get started…
How Binary Options Work
Binary options are super easy to understand.
You just need to make a decision if a certain market is above or below a certain price by a certain time.
Let me give you an example:
Let’s say you believe that Gold will close above $1,700 by the end of the day.
So you can place a Binary Options trade: The price of a binary option will be between $0 and $100. And that’s the amount that you need to put on the table to place this bet.
Let’s say the price of the binary option to bet on Gold being above $1,700 by the end of the day, is $40.
When placing the trade, the broker takes $40 out of your account.
If by the end of the day Gold closes above $1,700, you get $100 back. So you put $40 in and you get $100, i.e. your profit is $60.
If Gold closes below $1,700, then you get nothing back. And since the broker took $40 out of your account, and you get $0 back, your loss is $40.
Here’s the cool thing:
Binary options are available for a wide variety of underlying markets:
- Major indices like the Dow Jones, S&P 500, Nasdaq, …
- Major commodities like Crude Oil, Gold, Silver, …
- Major currencies like EUR/USD, USD/JPY, GBP/USD, …
… AND they expire daily or even hourly!
So if you don’t want to wait until the end of the day, you can trade a binary option that expires in the next hour.
All you need to do is decide whether a certain market is closing above or below a certain price within the next hour!
As you can see, the possibilities are (almost) endless.
So the next question is…
Can You Really Make Money with Binary Options?
IF you trade with a reputable broker: YES.
We will talk about the best binary options brokers that are NOT a scam in a few moments, but let’s talk about how to make money with Binary Options first:
Here are the 3 things you need to know:
- Is the market more likely to go up or down?
- Will a market close above or below a certain level?
- What’s the maximum price you’re willing to bet?
I will show you a simple trading strategy for Binary Options in the next article.
But before I show you the strategy, let’s first talk about…
Are Binary Options Legit?
As stated earlier, there are many unregulated brokers who just take the customer’s money and never return it. Most of these brokers are operating offshore in countries that have very few or no regulations.
In the US, brokers and exchanges are VERY regulated. As of the moment, NADEX is one of the few licensed companies in the U.S. that is allowed to offer Binary Options Trading.
Binary options are legal and available to trade in the US, but only on a CFTC-regulated United States exchange, which – again – is NADEX.
In a nutshell: As long as you trade Binary Options on NADEX, it’s legit and legal.
This leads us to the next question:
Is Binary Options Trading Safe?
We already talked about the regulations, so we don’t need to cover this again.
As a trading vehicle, Binary Options are very safe since they are not leveraged.
This means that you can not lose more money than you have in your account.
Here’s an example of how binary options work:
If you have $500 in your account, and you want to put on a trade in which you risk $50, NADEX will automatically reserve $50 from your funds.
When the order is filled, these $50 will automatically be deducted from your account. So your balance is now $450.
If you were right, NADEX will give you $100 back as soon as the markets close. In this case, your account balance will jump to $550, i.e. you made $50.
Because of this mechanism, it’s impossible for you to lose more money than you have in your account.
As you can see, trading Binary Options is safe.
What Is The Best Strategy For Binary Options?
The best strategy for Binary Options is a strategy that makes it easy for you to pick the direction of the market.
After all, in order to make money with Binary Options, you need to know…
- Is the market more likely to go up or down?
- Will a market close above or below a certain level?
- What’s the maximum price you’re willing to bet?
Actually, since this article is getting pretty long, I’ll stop right here and will write another article on a trading strategy for Binary Options.
Trading Futures, options on futures and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. The lower the day trade margin, the higher the leverage and riskier the trade. Leverage can work for you as well as against you; it magnifies gains as well as losses. Past performance is not necessarily indicative of future results.
Editors’ Picks
EUR/USD runs past 1.1730 after tepid US macroeconomic figures
EUR/USD extends its gains and trades above 1.1730 in the American session on Thursday. The US Dollar resumed its decline, following much weaker-than-expected Initial Jobless Claims. Market players bet for additional rate cuts despite a mildly hawkish Fed.
GBP/USD ticks north beyond 1.3400 after US employment data
GBP/USD ticks beyond 1.3400 in the American session on Thursday, as the US Dollar is back on the losing side, following worse-than-anticipated US employment-related figures. The US Federal Reserve delivered a rate cut at its December meeting, in line with the market’s expectations.
Japanese Yen extends intraday slide; USD/JPY retakes 156.00 amid modest USD recovery
The Japanese Yen extends its steady intraday descent against a broadly rebounding US Dollar and slides to a fresh daily low heading into the European session on Thursday. Exacerbated concerns about Japan's public finances on the back of expanded fiscal spending under Prime Minister Sanae Takaichi’s administration turn out to be a key factor acting as a headwind for the JPY.
Editors’ Picks
EUR/USD runs past 1.1730 after tepid US macroeconomic figures
EUR/USD extends its gains and trades above 1.1730 in the American session on Thursday. The US Dollar resumed its decline, following much weaker-than-expected Initial Jobless Claims. Market players bet for additional rate cuts despite a mildly hawkish Fed.
GBP/USD ticks north beyond 1.3400 after US employment data
GBP/USD ticks beyond 1.3400 in the American session on Thursday, as the US Dollar is back on the losing side, following worse-than-anticipated US employment-related figures. The US Federal Reserve delivered a rate cut at its December meeting, in line with the market’s expectations.
Gold on its way to retest record highs
Broad US Dollar weakness helps the bright metal to extend weekly gains. The XAU/USD pair trades above $4,250, its highest for the week and not far from its record high in the $4,380 region. The Greenback came under selling pressure on Wednesday following the Federal Reserve's monetary policy announcement, further pressured on Thursday by softer-than-anticipated United States employment data.
Solana dips as hawkish Fed cuts dampen market sentiment
Solana price is trading below $130 on Thursday, after being rejected at the upper boundary of its falling wedge pattern. The broader market weakness following the Federal Reserve’s hawkish rate cut has added to downside momentum.
FOMC Summary: A split cut and a clear shift toward caution
The Federal Reserve (Fed) went ahead with a 25 basis points rate cut, taking the target range to 3.50–3.75%. But the tone around the decision mattered just as much as the move.
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