A binary option is a prediction of which direction the price of an underlying asset (a stock, commodity, index or currency) will move by a specified expiration time.
With binary options, an investor doesn't purchase the asset – he is merely predicting the direction that the underlying asset moves. There are actually just two possible outcomes (binary means two). A fixed gain if the option expires “in the money”, or a fixed loss if the option expires “out of the money.”
The price of the asset is not important. The only thing that matters is whether the prediction is correct or incorrect. The prices of these assets are in constant fluctuation and this makes binary options trading possible.
Binary Options are also referred to as ‘digital options', ‘fixed return options and ‘all-or-nothing options'.
Different brokers name the trades differently but in essence, they all mean the same thing one broker calls it a Call option, another one calls it a Higher option.Wait For The OutcomeNow that the trade is placed, you simply wait for the outcome. If the trade expires ‘in the money', you make a profit. If it expires ‘out of the money', you'll lose.In the money (ITM) means you made a correct prediction and out of the money (OTM) means you made a wrong prediction.
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With forex, you can get out a trade anytime you want whether to lock in profits or to cut your losses. In binary trading with most brokers, you don’t have the option to sell a contract (getting out of a before your chosen expiry time).This means that with binary options a trade can be going your way and turn against you at the very last moment and there is nothing you can do about it. In both types of trading, there is the use of fundamental and technical analysis tools in making forecasts.Forex trading is not limited by any time guidelines one can stay in the trade as long as they wish or as long as their trading balance would allow. Binary options, on the other hand, are based on timeframes.
This depends on the underlying asset you want to trade. If you are trading binary options using forex pairs then the best time to trade is when there is an overlap of the London & New York sessions. This is around 9 am to 12 pm South African time. Profiting when trading binary options in South Africa depends on volatility and the volatility will be at its highest during this time in the forex market.
Having said that, it's important to stress that you can trade them at any time successfully if you know how to read the charts to generate your own signals.
On the other hand, if you want to use synthetic indices from Deriv then you can trade them at any time because they have uniform volatility all the time. The simulated forex markets offered by Iq Option over the weekends also have uniform volatility.
To trade binary options in South Africa you will need the following:
You will need to find a broker that satisfies the following requirements:
We have done the homework for you and we have complied a list of brokers who satisfy these requirements. You can go ahead and open your accounts below.
Binary options trades usually last for a short period of time and because of this, you may be tempted to overtrade and thus hurt your profits.
Binary options trading seems to be very simple because there are only two possible outcomes. This may mislead newbies to rush to trade live funds without getting proper knowledge first. This will almost certainly end badly as the newbies will be doing more gambling than trading.
Smaller timeframes like one minute and thirty seconds are really hard to analyse and make a correct prediction.
When you make the wrong forecast in binary options trading you will lose all your stake or investment. This is different from forex or stock trading where you can cut your losses and recover some of your invested funds if the trade goes against you.
Strategy is one of the most important factors in successful binary options trading. It is the framework from which you base your trade decisions, including your money management rules, and how you go about making money from the market.
A good strategy for trading binary options will simplify much of the decision making about where and when to trade. With timing being the key to everything where trading is concerned, the less guesswork there is around entry and exit points, the better. Particularly for less-experienced traders.
A repeatable strategy will always highlight the trading opportunities, where otherwise, the majority of those openings would be missed. Strategies encourage discipline, aid money management and provide the clearest predictor for positive expectation. While traders can profit from binary options in South Africa without a strategy, it will be exponentially harder.
We have a collection of free strategies that you can use for binary options and you can see them here.
