The simple answer to this question is ‘very little’. However, as with any financial speculation, you will help yourself enormously by at least gaining a basic understanding of a few core elements of financial markets before trading live binary options. Once you have grasped the basic concept of binary options trading anyone can open an account online within a couple of minutes and begin trading with a direct card deposit. At their most basic, binary options profits are made as a simple higher-or-lower bet or, in other words, an anticipation that price will be higher or lower than the current price in 5 minutes, 10 minutes or however long you want the options life to be. For many people the odds of 50% ‘higher or lower’ may simply be enough to have a bit of a gamble and win between 80-500% of you original stake. For others, however, gaining an ‘edge’ over the market will take a bit more research and commitment to working out how financial markets operate.
What are binary options markets and which markets can I trade?
Binary options are based on derivative markets, which means that they mirror the underlying markets of, say, gold and oil but traders will never actually own any of the good that they are trading. Therefore, also, the market can often be slightly differently priced to the real market but this rarely poses a problem or becomes detrimental to your chances of making money trading binary options. Within the one trading platform, traders can choose from a vast number of underlying assets to purchase options and it is within these markets where traders willing to gain some insight are much more likely to generate consistent profits.
Traders can purchase binary options in a whole range of underlying assets but the chosen market is incredibly important for your chances of success. It is almost impossible to cover all of the markets that binary options platforms offer; the choice is diverse from wheat and sugar to currencies and individual stocks. Perhaps the most valuable first decision that a new trader will make is to select which markets they are most interested. Whilst some will be more attracted to the abstract and sleepless world of currency pairs and exchange rates, other may prefer to choose much more tangible markets to specialise such as company stocks which they are familiar with or physical commodities such as oil or pork bellies. This first choice will lead the trader into a world where they can start to shift the 50/50, higher-or-lower chances more in their favour.
Gaining some insight to become a profitable binary options trader
Learning a market thoroughly takes time and hours of research, but it needn’t be this boring or taxing. In the case of binary options, traders can get ahead with simple knowledge such as what times the market is most active, what makes the market move and how it reacts generally, for example, when it becomes volatile does it tend to swing wildly before returning to its original price range? All of these elements will help get an understanding and allow traders to develop an insight in to where price is likely to be heading and which time periods may be the best to trade.
Beyond the very basics and beginning to understand where profits exist
Moving on from getting a good understanding of the market that you are trading, it can be invaluable to apply some basic technical analysis to your binary options trading decisions. Although this sounds much more intense than it actually is, traders willing to get an edge in their binary options purchases should learn principally about support and resistance before learning two or three popular technical patterns. Both of these allow traders to ‘map’ any financial market, seeing where prices are likely to be pushed back and forth and, in the case of technical patterns, a big hint where the rest of the traders in the market think price will go (which it often does, of course).