Introduction to Binary Options Trading

Retail foreign exchange trading has come of age in the past fifteen years, astonishing many in the industry with phenomenal growth rates across the globe as ordinary investors have taken to the idea of trading currencies within the world’s largest market. But forex trading is not easy. It involves high risk, and casualty rates have exceeded 65% by most accounts. Traditional trading is complicated, requires nerves of steel, and is definitely not for everyone, but the industry responded about seven years back with a novel approach that has caught fire in recent years – digital or binary option trading.

Also known as “all-or-nothing” options, these new investment instruments are actually not true assets, although many of the binary options brokers cloak their offerings in investment jargon, just the same, as if you are buying something from them. You are actually betting on the direction of an underlying asset and relying on price disclosures made by a respected third party, like Reuters, to determine if you win or lose. Rule Number One in betting is that the House always wins. The odds are definitely slanted in the House’s favor, but if you use the technical techniques you learned in forex trading, you do have a chance to tilt the table in your direction.

Binary Options Brokers

Here is our list of trusted brokers. Read our reviews and check out the comments made by other traders on the bottom of this page or on the specific broker review pages to see what other binary options traders say about the different brokers.

Broker Description US Clients Regulated Min. Deposit Number of Asset Choices  
nadex
Nadex
  • Legal for U.S. citizens;
  • Unique “Event” options permit trading on the Fed Funds Rate, Non-Farm Payroll data, or Weekly Jobless Claims releases;
No Yes- CFTC $250 28+ 1
Read Nadex Review
 
24option
24Option
  • Payouts up to 89%
  • 24Option is located in London and is operated by 247 Holdings Group Ltd
No Yes- CySEC, MiFID & FCA $250 100+ 1
Read 24Option Review
 
binary-com
Binary.com
  • Over 1 million registered accounts;
  • Trade from 115 asset choices;
No Licensed and regulated in Malta, the United Kingdom, the Isle of Man, Ireland, and Japan; $5 115 1
Read Binary.com Review
 
anyoption
Any Option
  • Payouts up to 80%
  • AnyOption will rebate 15% on any unsuccessful trade;
NO Yes- CySEC $100 140+ 1
Read Any Option Review

Why is trading a binary option so much easier than traditional forex trading?

Binary options replace complexity with simplicity. You only have three decisions to make – Pick an asset; enter an amount that you are willing to wager; and, lastly, decide if the asset value will go up or down over the option period. Simple as that – just hit the execute button and wait. You are told up front what your payoff ratios will be, typically a 75% premium if you guess right or a 10% rebate on your principal if you guess wrong, i.e., you could lose 90%.

There is no need for risk management, leverage, or stop loss orders. No commissions or fees either. The limit of your exposure, in this case, is 90% of your bet. You never have to worry about margin calls, or fretting over when to close a position, a particularly difficult decision for beginners. You also have the potential of making a 75% return in a matter of hours or minutes. Try finding another investment arena where that kind of return can happen in so short a time period.

What are the pitfalls or potential downsides for this latest trading phenomenon?

As we said, the House still wins. To be successful in traditional forex trading, you have to do better than a “55/45” win/loss ratio on a total dollar basis. If you find a binary broker that pays out a 75% reward AND a 10% rebate on losses, then you are up against the same odds. To be successful, you still must use technical analysis, pattern recognition, and known levels of support and resistance to gain an edge over time, assuming you stick to a well thought out strategy.

The bigger issue, however, is to choose a reputable broker that you can trust. Binary options require a totally different back office of staffing skills. It is on par with parimutuel betting or a casino operation. For this reason, binary option brokers tend to locate in exotic locations across the globe in tax havens or islands where casino betting is legalized. Choosing the best broker, especially one located in a foreign jurisdiction, is a difficult task. Rely on experts that have studied the market and can advise you appropriately. Be skeptical, and remember that you are your first and last line of defense against fraud!  

More binary options reviews that didn't make our toplist

99binary - Read review and comment
CTOption - Read review and comment Binary Globes - Read review and comment
Yes Option - Read review and comment Option Time - Read review and comment
Option Bit - Read review and comment 24 Winner - Read review and comment
Tradorax - Read review and comment Opteck - Read review and comment
OptionBit - Read review and comment Banc de Binary - Read review and comment
OptionWeb - Read review and comment Top Option - Read review and comment
Porter Finance - Read review and comment Binary Tilt - Read review and comment
RB Options - Read review and comment uTrader - Read review and comment



Please give us your opinions on these binary options brokers and others below.

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