How to do Day Trading with Binary Options
Have you ever tried the day trading method to invest in the binary options market? Day trading with binary options comes with an amazing chance to make a huge profit.
Binary options are one of few markets where day trading can be used. But it is the only market that allows day trading at a low-cost entry. In addition, day trading with binary options can be done for different assets.
While you can make a large profit, don’t be mistaken. For doing successful day trading with binary options, you need a good strategy and must understand the risks in day trading.
More importantly, you should know how day trading with binary options can be helpful. And you will find all these answers in this comprehensive guide.
What is Day Trading?
Day trading is a speculative trading method and is precisely what it sounds like. That means traders enter and exit the stock position within the same trading day.
Understanding day trading is not a tough nut to crack. However, through this simple example, you can eliminate all the confusion.
Suppose you are buying a couple of XYZ shares on Wednesday. Now, for day trading, you are required to sell all the shares on the same day, i.e., Wednesday.
Instead of selling the shares on the same day, if you are selling them on any other day, let’s say Thursday, that’s not a day trade. Similarly, buying XYZ shares and selling different shares, i.e., ABC on the same day, is also not day trading.
As day trading is simple and gets completed in a day, so many traders are showing interest in it. Also, the fact that day trading can be done in multiple markers makes it even more popular.
You need to remember that before you execute day trades, you need to have a minimum equity of $25,000. Otherwise, you will not be allowed to trade.
How to start Day Trading?
To become a successful day trader, you need to make yourself familiar with the world of trading. Then, you can easily get helpful day trading insights via the internet. And after that, you can follow the tips mentioned here to start day trading.
Pick a market
To start day trading, you need to pick a market. Since all the markets on which day trading can be done are risky, you should choose the one you are familiar with.
If you want to day trade without investing a huge amount, binary options should be your pick. By giving a low-cost entry for day trading, binary options help you get a much higher rate of return.
Keeping aside the financial benefit, many other aspects make day trading with binary options better than the rest.
For starters, binary options day trading is simple and easy to understand. You buy a share you are interested in, select its expiry time, and click the buy button.
Furthermore, the day trading binary is much cheaper than day trading in any other market.
Another popular day trading option is the stock market. Here, traders buy stock of a company and sell all the stocks on the same day within a given time. In short, they exit all the positions.
Next is the futures market. This market is all about the agreement between seller and buyer. Here, they sell and buy any asset at a future date.
So, as a day trader, you can bet on the price variation from when an asset is purchased or sold to its end-of-day cost.
Before you invest in a futures market, you should consider the risks and trends. Also, if the futures market has certain requirements, you should fulfill them.
Another way you can day trade is by investing in the forex market. Since the forex market is more accessible, you can choose it.
If you are day trading with forex on currency pair, you can invest in currency price movement, i.e., price change.
Day Trading equipment for Binary Options
Once you have decided the market you want to day trade into, the next thing you need is good equipment. Of course, you don’t necessarily need one of the best computers. But you surely need the fastest internet connection to load the charts quickly.
Find the Right Broker
To start day trading with binary options, you need a regulated and licensed broker on your side. Here are a few things you can consider finding one.
Trading in binary options can help you make a huge profit. But working with a broker that charges unrealistic fees can quickly bring down your profit. So, you should look for a broker that has a competitive fees structure. And also, the one that is not too complicated to understand.
Knowing whether the broker you’re interested in working with has any minimum deposit criteria will be of great help. For example, if you are strapped for cash, you can choose a broker with no minimum deposit criteria. Or else, you can choose a broker that needs a small balance of $50 or $100.
To keep yourself safe from increased binary options scams, you can find a licensed broker by some trustworthy authority.
If you are interested in trading a particular kind of asset, say crude oil or gold, look for a broker that can give you a chance of trading in them.
You can always see the kind of assets offered by a particular broker on the website. And based on the available information, you can understand whether you want to work with the broker or not.
If you like to trade all day and want to keep an eye on the market price fluctuation, you should look for a broker that offers an easy-to-use mobile app. A mobile app with useful features can make your trading quick and simple.
Even a minor technical issue can make you lose huge money. Thus, it’s essential to choose a broker that offers 24/7 support.
Timing is everything in trading! To become a professional day trader, you need to fix a time when you want to trade each day.
Working at the same time every day can help you manage your trade. Also, by doing this, you can implement your strategies in a better way.
You can find the right trade time by considering various factors. Or can trade around the market closing and opening timings to make more profit.
Along with managing time, you need to analyze risk to understand how much amount you will lose.
The risk of trading is divided into two parts, i.e., trade risk and daily risk. First, you need to check what amount you are willing to lose in one particular trade in the trade risk. Risking 1% or less is always a wise decision.
For the daily risk, you need to analyze what amount you want to lose on a particular day.
What amount of tax you need to pay depends on the rules and regulations of the country you live in. For example, in the U.K., you are not required to pay any tax on your day trading income. However, in the U.S.A., India, and other places, rules and regulations on trading income are different.
The tax also depends on whether you are day trading as a professional or as a hobby. Also, tax depends on whether it’s considered business income, non-speculative income, speculative income, or personal income.
Before you start trading, you need to set a realistic limit on the amount of money you can spend. Exceeding the limit can teach you a costly lesson. So, it’s always advised to trade by staying within your limits.
Another thing you should do is set goals. It takes time to learn the art of trading. But missing a sell because you don’t know how to execute a transaction will not help you. Also, it’s never a good idea to give up on your day job for becoming a day trader until you start earning a decent amount from trading.
Binary Day Trading Strategy explained:
Without a well-planned strategy, you are using the day trading method for nothing but to lose. Here’s how you can have a good day trading strategy.
Keeping a close eye on the recent trading news and trends can help you understand the market condition better. You can do your quick research and make a note of important things. With the right information, you can unlock great trading opportunities and stay safe from scams.
While doing research, remember that if supply is more, but buying is less, the price might drop. And if supply is less and buyers are more, the price might soar.
To predict the future price movement of an asset, you need to have a chart. By keeping an eye on the chart, you can understand the price movement. And with that information, you can decide which binary options position you want to invest in.
If you have found an excellent trading strategy, stay realistic and don’t expect 100% profit out of it. Of course, no strategy works this way, but you can surely expect 60-65% of the profit from a chosen strategy.
Even when the market is not in your favor, you should stick to your strategy and avoid making trading decisions based on emotions.
It might be hard to resist the urge to not trading using real money, but you should do it. That’s because when you are trading using a demo account, you understand the challenges and risks of trading.
Additionally, by trading in a demo account, you also understand which strategies are truly effective.
One of the best things you can do to trade like a professional is to educate yourself with the available resources around you. You can read books and eBooks, take certain courses, learn from video tutorials, blogs, podcasts, forums, and PDFs.
Since you are a beginner, you should start small. Starting small will give you enough time to focus on the shares you have invested in. Also, investing small means, you won’t lose a large amount of money when failing.
Avoid Penalty Stocks
Low deal stocks might be tempting but stay away from these stocks until you have done good research on them. Low deal stocks are generally called penalty stocks, and they are de-listed from the main stock exchange.
Why Do Day Trading with Binary Options?
As we have already discussed the binary day trading strategy, let’s see what makes binary options trading better than others.
When you are day trading with binary options, you can make a low-cost entry with less risk than other markets. Not just this, but buying an option is also affordable than investing in stocks or other such assets.
In short, by investing in binary options, you can buy more shares and have good control over them.
Binary options help the traders make more profit in less time. For example, you invest in any market other than binary options. Here, if your stock price moves from 50% to 75%, you make around 100% profit.
However, even if the value of a share moves a little in binary options, you can gain more than 100% of the profit.
Options Mostly Succeed
When other market fails, binary options succeed. Meaning, your chances of losing money is comparatively less.
Risks in Day Trading
While there are numerous benefits, binary options day trading also comes with risks and challenges. Here are a few of them.
Price Movement Reductions
When investing in binary options, you might notice that the price movement of an asset depends on its time. And in the day trading, the price is even more restricted.
As day trading with binary options has increased, the scams in binary options trading have also shown a rise.
Most of these scams promise to offer an incredible amount of return in a limited time. But, sadly, traders fall for these scams and lose enormous money.
When You Lose, You Lose
Unlike other trading markets, binary options solely depend on prediction. You need to predict whether the price of an asset will move up or down with a simple yes and no.
This means if your prediction is incorrect, you will lose the entire money you have invested. But if your prediction is accurate, you will make a good profit. So, you either lose everything or gain another trader’s investment.
The last disadvantage of investing in binary options is the regulations. Since binary options trading is a new concept, there are numerous unregulated brokers.
The unregulated brokers take advantage of this loophole and scam traders who are new to the binary options market. So, you should always look for regulated brokers.
Lack of Trading Tools
Since binary options trading is a new concept, there are insufficient technical analysis tools for the traders. But you can develop a better understanding of the binary options day trading by doing detailed research.
While there are some drawbacks, this doesn’t mean you should not day trade in binary options. Keeping in mind these drawbacks, you can easily make a trading strategy that will work for you.
Frequently Asked Questions about Binary Options Day Trading:
Is Day Trading Legal?
Binary options are legal, and you can trade them without worrying about any legal complications. But keep in mind that the rules are different in various places.
For example, in the U.K., binary options are illegal. And only professionals are allowed to trade them. However, in India, Australia, and the U.S.A., trading in binary options is legal.
This means that you should do detailed research to know whether binary options are legal in your country or not.
How Can I Prepare for Day Trade?
To start trading in binary options, you should read the current financial news and make notes of important information. Then, based on the information, you can develop a trading strategy. And at the end, you can choose a trading account.
Can I Day Trade at Any Brokers?
Yes, you can! But you should always choose a regulated and licensed binary options trading broker to stay safe from the increased trading scams.
When you are day trading with binary options, you should remember two things. The first is to keep the trading risk minimum, and the second is to make a huge profit.
Fortunately, with binary options day trading, you get an opportunity to set clear limits on risks, you can trade multiple times a day, and gain enormous profit with simple price movement prediction.
But it’s also essential to trade by considering all the aspects because a wrong prediction will make you lose all of your investment.