Newbie Trading Guide – Making Your First Trade
Welcome to the exciting world of binary options trading! Ready to get started? First, you will want to have a look at our recommended binary options brokers and top ten lists, and then open an account with a binary options broker of your choice. Then you will need to deposit your funds. At that point, you will be ready to trade. With great technology like SpotOption powering binary options platforms these days, trading orders are very easy to place and monitor, and you can be up and running and in your first trade in a matter of minutes. I will talk you through the process of placing your first binary options trading now, using an example from TradeRush. Check out the screenshot below:
Understanding the Trading Platform
This screen capture shows you a binary option available at TradeRush. You will notice across the top of the screen there are tabs for different types of binary options: Binary Options, the tab which is selected, is for standard High/Low trades. To the right of that is Option Builder, which you can use to customize an option with a unique expiry time that you provide. OptionPro is an “advanced” platform with enhanced graphing capabilities. One Touch and 60 Seconds are two other types of trades you can make. Read about 60 Second Binary Options Brokers here
The tabs below these allow you to navigate to different types of underlying financial instruments. The High/Low option you are looking at can be found under Hot Assets or under Currencies. If you wanted to try stocks, you would navigate to the Stocks tab, and so on.
What can you tell about this option by looking at the display? It is a currency option for EUR/USD, and the option is set to expire at 18:00 (6 pm) today. The payout should you win your wager will be 81%. Should you lose, you will need to check with the broker to determine the out-of-money refund (if any). You also see a small graph showing you the context for the trade, what EUR/USD has been doing lately. You see the current price circled, and between the Call and Put arrows, you see that it is 1.32431.
The question the platform asks you is, “Will EUR/USD go UP or DOWN?” A more accurate phrasing of the question would probably read, “As of 18:00 hours today, when this option expires, will EUR/USD be trading ABOVE or BELOW its current level?” Remember, the currency pair may oscillate quite a bit before it settles above or below the line at 18:00.
You will also notice on the far left there is an indication of what other traders are doing. 59% (so far) have indicated that they believe that EUR/USD will be trading above its current level (or the level when they placed the trade) at 18:00 hours. Forty-one percent believe that the currency pair will be trading below the level where they placed the trade. How relevant is this display to you? If you have found a way to integrate this into your trading strategy consistently, then go for it. Otherwise, you probably should just ignore it. What other traders are doing does not necessarily point toward reality (especially considering that most traders will ultimately be losing money in any market). Use whatever indicators or strategies you have developed to decide what the pair will do.
If you can read and understand this example, you should be able to read and understand most High/Low trades on most binary options websites with no problem, since there are only several different platforms powering most websites. Those platforms look very similar to each other and work nearly identically. I have selected High/Low for this example simply because it is the most basic type of trade, but you will probably find the others equally intuitive.
Using the Trading Platform
If you believe you have spotted a great trading opportunity, it is time to enter your trade. Click on “Call” if you believe that the pair will be trading above its current level, and click on “Put” if you believe that the pair will be trading below its current level. At this point you will be asked how much money you wish to invest in your trade. I recommend that you calculate 2.5% of your trading account balance and enter in that amount of money. Always use a consistent percentage, and make it a conservative one. Once you start arbitrarily choosing investment amounts, you are sure to lose money and make serious errors in judgment. Calculate your risk based on how much you are willing to lose, not what you hope to gain.
Once you choose the amount of money you would like to risk, you can submit your order and wait for 18:00, when the option expires. At that point, one of two things will happen. Either EUR/USD will have moved in the direction you indicated, and you will win money, or EUR/USD will have moved against your position, and you will lose money. If you win, you will receive 81%, as promised. If you lose, you will receive whatever out-of-money refund is due to you.
Placing an Order is Easy – Winning is Not
One of the most important things you can learn here is that while it takes minutes to place an order and make money, it also takes minutes to place an order and lose money. Profit and loss are two sides of the same coin, and if you rely on chance alone to guide you toward gains, there is no way that you are going to make it in this game for long. Binary trading is set up so that it will be easy for you to participate in, but not easy for you to profit from. The ease with which you can place an order and the utter simplicity of the platform and the process can tempt newbies to wager more money than they should and to place orders without coming up with a justification other than intuition or instinct.
If Traderush is your binary options broker of choice you can click here to start trading now!
You can read more trading basics here.
You can learn more about what binary options are here.