How To Make Money Trading Binary Options

I think why most people are in this kind of trade is to make MONEY, right? 
  
It’s really easy to make huge profit in binary option but you can also lose your entire capital with it. It’s a kind of two edged sword.

Now that we have basic idea on how binary option work, let's take a look at some examples. 

Example 1
Let's assume, you want to trade GBP/USD with the assumption that price will rise in 2hours time. The pair's current price is 1.5400 by 0930Hrs.  
You pop-up the trading platform and see that the broker's payout is 75% on a two hours option contract with a target strike of 1.5400.
After careful deliberation, you finally decided to buy a "CALL" (or "UP") option and risk $100 as a premium. In forex lingo, this kind of decision is similar to going "Long" on a currency pair, in this case GBP/USD.

Again, let’s say you have $200 in your brokers account and for this particular trade, you decide to Risk $100 in your first drive.
At exactly 1130 hrs, here is a breakdown of how your account will look like if you are in-the-money (you win) and if you are out-of-the- money (you loss);

 

From the table above, you can see from the calculations that the risk involved in binary option is limited to the premium paid on the option only. You cannot lose more than what you stake. That is to say, the risk in binary options trading is absolutely limited and predefined. 

 Unlike in the Forex Market, where your losses can be bigger than what you never expected if price goes against you the more (Though the use of a Stop Loss in Spot trading can help minimize your losses.
*** (It is very important to apply SL in all your currency trades)

EXAMPLE 2
In this example, we will take a look at “Boundary Option”. There are two ways to trade range or boundary option. Not all brokers offer the second choice. 

They are;

“In Range or In Boundary” and
“Out of Range or Out of Boundary”
Let’s take it one after the other in a nut shell.

In-Range;
Let’s assume that the price of GBP/USD is currently at 1.5400, and your broker offers you a range option between 1.5375 and 1.5425 that expires in an hour time.
This implies that if price doesn't reach 1.5375 or 1.5425 within 1 hr, then you would be a winner. But if at any point within the expiration period, price touches any of the range (1.5375 and 1.5425), you lose the premium.

Out-of-Range;
In this case, don’t expect brokers to offer 25 pips only as boundary. You would see ranges between 70 to 150 pips difference. In this scenario, you should expect ranges to be at 1.5330 and 1.5470 (70 pips on both sides).
So if you believe the price will cross this level in One hour time, you would chose out-of-range option, and if you are right may be due to volatility, then you are a winner. Conversely, if the price does not cross the range, you will be out-of-the-money.

I think both situations are awesome for you because range options usually have the highest payouts with a few brokers offering between 200%-750%!

Range options are best used when we have low volatility (in-range), although some brokers offer the option to take risk on the idea that price will break out of the range (Out-of-Range). Alternatively, a few brokers also offer options on ranges that are too far from the current market price at a longer expiration time.

You can also check out some of our brokers reviews for TopOption and OptionXo. We have used them and they proved to be among the best.