For UK investors, trading with binary options is a tax free form of investment with very quick results — minutes rather than months or years.
Most brokers are regulated, offering consumers the sort of protection they would expect while using financial instruments of this type. Returns from binary trading are also currently viewed as tax free by HMRC. Even cryptocurrencies such as Bitcoin or Ethereum can be traded.
The main difference between more traditional stockbroker trades, and binaries, is the clear identification of risk and reward before the trade is made. The degree of the price change is not important. The trader is purely speculating on whether the price will be higher or lower than the current price, at a specific time in the future.
Short term price movement can be triggered by news stories or headlines, quarterly statistics, buyout rumours or even global security fears. Where trades can be closed, redeemed or sold mid-trade, payouts have absolute figures of 0 and and prices move between as the market dictates — until closure.
This is the point at which the trade will end. Longer term expiries — and the element of fixed risk — does make them useful tools for hedging or diversifying other holdings.
Payouts change dependant on the asset and the expiry time. Although binary trading is in a period of growth, it remains a relatively unknown product. Over time, this is likely to change. They are a legitimate way to play the financial markets. There is however, no leveraged exposure with a binary trade, so the risk and reward ratio is also simple to manage. Which was where they originally developed. While FCA regulated agents and businesses may still have their flaws and faults, they are not fraudsters.
Read our section on avoiding scam brokers below. Many of the advantages of using binaries are related or linked. Here we list some of the benefits to using this form of investment — not just for the retail investor, but also to the market makers or brokers:. The amount of the trade is the full amount that is at risk. This clarifies the risk not only for the trader, but for the broker too.
Their pricing model reflects the accurate knowledge of their liability. This leads to low trading feed, tighter spreads and higher payouts. To protect themselves further, they may use a liquidity provider or hedge their own positions.
The expensive broker costs of clearing houses becomes unnecessary. Leverage, or gearing, is not generally available with binary trading. In other words, no trader can default on a trade. With leverage, if things go wrong, there is a real risk of the broker not being paid. This is a big difference vs spot forex or spread betting. Layers of complexity can be added to the standard fixed payout option.
Again, these robots attract many of the undesirable operators, and the automatic nature of the trades increasing risk further.
New traders should be especially careful. An alternative approach is for traders to build their own robots using their own entry points. There are however, brokers and signal providers that are untrustworthy and operate scams or frauds. It is important not to write off the concept of binary trading, purely based on dishonest brokers. Our strategy pages covers over 20 known systems, drawn from a range of forum and club chats, plus expert tips and advice.
From high risk Martingale, to intricate systems like the Rainbow. All this is aimed to help you gain an edge, and win. Signals are an alert, sent to traders. They are designed as a trading tool, helping traders to spot opportunities. They can be communicated via a range of methods — email, SMS or from a live signal website or group.
Much of the irresponsible marketing associated with binary scams is linked to signals — or auto trading robots utilising them. There are some very good providers out there too. Sometimes, but rarely in isolation. Some providers deliver a combination of education alongside signals and that represents a good mix.
Traders must be able to fully assess a signal before they can judge the quality of them. We also highlight some of the best providers on the signals page. White label platform providers such as SpotOption, Tradologic or TechFinancials also dictate what products the host site can offer, so a proprietary broker with a bespoke design might be preferable. Payment methods merit some thought — if traders want to use Skrill, Paypal, Neteller or Wire transfer, they need to check the broker delivers that.
Mobile trading apps delivered by brokers or binary agents can vary in quality too. Some specifically program for the features of specific models, like iPad or iPhone.
Others ensure cross platform compatibility, catering for android, blackberry and windows tablets and devices. Some traders may have tailored demands for any hand held app, others less so.
Our comparison table delivers a quick summary of the key points when comparing brokers. Here is a list of some of the vital comparison points for brokers;. Some points might be more important to certain traders than others. Most top brokers offer demo trading accounts. Those brokers that do provide practise or virtual balances, have confidence in their trading platform. The majority of these demonstration accounts will work on both the website, and also the mobile app.
All without risking any of your own cash or wealth. Our broker reviews are written after genuine trading on each platform, brand, or white label. The credibility of the reviews is important to us. In order for binary trading to move into the financial mainstream, comparison services need to be open, honest and transparent — and that is what we try and deliver in our broker reviews.
Binary brokers are regulated via a number of bodies. CySec regulate the majority of brokers based in Cyprus and Israel. European regulation however, allows providers to serve British clients.
Some firms also register with the FCA — but this is not the same as regulation. This is an important distinction. Regulated brokers offer greater levels of consumer confidence than unregulated firms. They must provide a dispute process for customers, and treat clients equitably and fairly.
In addition, regulated firms can only market in a responsible way, and in regions where trading is permitted. Responsible brokers welcome regulation as a way to increase levels of consumer trust. Copy trading is a growing sector of investing.
It allows users to copy the trades of others. Those copying decide how much to invest, and whether to copy some or all of the trades that a particular trader or tipster opens. The traders being copied also benefit, as the broker will often reward these clients through commission, or increased income revenue and profits based on the trade volume they generate.
EToro are official pioneers of this form of investment. When copying however, time and effort spent finding the right traders to follow will pay dividends.
Social trading is similar, but is more geared towards social media style info sharing. They were initially only available to large scale investors — institutions, wealthy individuals and funds. In however, the US Securities and Exchange Commission allowed these fixed return options to be traded over an exchange. Initially, the range of assets was limited, as were the choice of options. Nadex also began offering exchange traded options matching buyers and sellers in the US as the market developed.
As popularity and commerce grew however, the traded assets moved beyond Forex and equities and the option types expanded as well. The barriers to entry for potential market makers or brokers are much lower in the binary sector. This, coupled with the boom in internet trading over a similar period, has left regulation lagging behind the industry.
The growth of binaries however, is unlikely to slow. In order to learn binary options, traders have a wealth of learning opportunities and courses. Each trader is different, results will alter from different methods of learning. Some may prefer a pdf file or spreadsheet on the subject, while others will learn most from diving in and getting some hands on experience.
Here are a selection on learning methods:. Some tools are only made available once a trader has registered — this is purely so the broker has some contact details for things like trading seminars or web based demonstrations. A great way to learn binary options is via an online demonstration or seminar. Some brokers offer weekly seminars, some in a range of languages.
Other firms will offer one on one training, but generally require a deposit beforehand. Some traders benefit from downloading an eBook tutorial, and learning about binary options at their own pace. One note of caution, is that each broker will focus on their own trading platform and quotes for some of the explanations and screen shots.More...