Is It Possible To Earn A Living Trading Binary Options?
Making money trading binary options is simple. But that doesn’t mean it’s easy. It takes work, patience, and the ability to evaluate risks and jump on opportunities. If you’re willing to put in the time and effort, and able to control your emotions while trading, you can learn the rest. In short, with dedication and focus, it is possible to make a comfortable living trading binary options.
If you’re thinking about making a career as a full-time trader, you need to have realistic expectations. A lot of folks lose money with binary options over the long run. They stumble across sites advertising returns of 70%, 80%, and 90% (or higher), and figure they can quit their jobs. The fact that they can generate these returns in minutes by trading short-term binary options makes the “promise” doubly sweet.
Use these resources to see if you are ready to be a full-time trader:
- https://www.bestfxbrokers.com/binary-trading/guide/5-tips-for-trading-binary-options-with-a-full-time-job/ – first try trading WITH a full-time job
- https://www.bestfxbrokers.com/binary-trading/guide/balancing-options-trading-with-life/ – then try trading and balancing life
- http://www.binaryoptionsblacklist.com/are-you-ready-to-quit-your-day-job-and-trade-for-a-living/ – lastly see if you are ready
Below, we’re going to try to burst that bubble. Our goal is to dispel a lot of the marketing hype surrounding binary options and inject a healthy dose of practical sense. You can definitely earn a full-time income in this business. But get ready to put your nose to the grindstone.
Here’s what you need to learn…
Get Familiar With The Different Types Of Binary Options
You probably know about up/down binary options. They are sometimes called “high/low” trades. These options are the simplest of the bunch. You make a prediction on whether the price of an asset will end up higher or lower than the option’s strike price by the time the trade expires. If you’re correct, you win. If you’re wrong, you lose. Very simple.
Next, there are touch/no touch binary options. Here, you’re predicting whether an asset’s price will reach a certain level before expiry. You can arrange your trade on either side. You can also enter a “double touch” trade. This is an option for which you pick two price levels. If the asset’s price hits either level before the trade expires, you win.
Another instrument is called a range binary option. You’ll also see it referred to as a “boundary” option. For these trades, you predict whether an asset’s price will be inside or outside a specified price range at expiry.
It’s also worth mentioning short time frame trades, especially since they’re becoming increasingly popular. In this category you’ll find 60-second binary options (they expire in one minute). The fast pace at which you move in and out of these trades adds an extra level of risk. If you know how to manage that risk, you can make an impressive return in a short period.
Click here for more information on Binary Options Types
Create (Or Borrow) A Binary Options Trading System
Full-time trading requires a system. The absolute worst thing you can do when trying to make a living as a binary options trader is to jump into trades without having predefined guidelines. You need to identify actionable criteria ahead of time that signal whether you should execute trades or close your positions.
It doesn’t matter how you come up with a trading system. All that really matters is that it works consistently. You can borrow a system from a reputable source, and apply it as is. You can also make changes to it based on the assets you’re trading, your trading activity, and your personal observations of the asset’s past price action.
Once you have some experience under your belt, you’ll probably come up with your own trading methodology. Or, you’ll make so many changes to the system you’ve borrowed that it essentially becomes your own.
Bottom line: adopt or create a binary options trading system. Stick to its signals, even if your gut tells you to do otherwise. Then, make improvements along the way. This is a critical part of earning a living trading binary options.
Apply Technical Analysis To Identify Profitable Trades
Fundamental analysis and technical analysis both have a place in evaluating potential trades. But it’s important to realize they’re flip sides of the same coin. The former is built on the premise that markets have assigned improper prices to assets (or companies). As a result, prices can be influenced by external forces as those forces bring them into alignment with the underlying assets’ intrinsic values.
Technical analysis is built on the premise that markets have assigned the correct prices to assets (or companies). Because prices are correct, the assumption is that their future movements can be forecasted accurately by examining past price data. This is the cornerstone on which chart analysis, pivot points, and numerous other trading tools are designed. Learn more on charts here
We highly recommend that you become familiar with both fundamental and technical analysis. But realize that much of your time and effort in evaluating trading opportunities will be based on the latter. Learn how to analyze candlestick charts and look for breakouts. Learn how to identify pivot points, and figure out how to leverage them in your short-term trades. Study price patterns, and try to pinpoint trends.
Learning how to analyze binary options based on price action does not guarantee you’ll make a profit on a majority of your trades. But it will move you further down the road toward earning a full-time income as a trader.
Bankroll Management: Learn To Manage Your Money
One of the most important skills you can learn as a binary options trader is how to manage your cash. This is especially true if you plan to make a living in this business. If you don’t know how to control your bankroll, you’ll eventually put too much money in play at one time.
That can be a huge problem.
Remember, trading binary options is inherently risky. A series of bad trades can quickly erode your capital base. It’s not uncommon for traders to be sitting on a mountain of profits one day, and wondering how it all disappeared the next day.
Some experienced traders recommend putting no more than 5 percent of your bankroll at risk on any one trade. That’s good advice, but we’ll go even further. If you’re just getting started, limit your first trades to 1 percent of your bankroll. As you gain some experience, move up to 1.5 percent. Then, commit 2 percent.
In other words, be conservative with your money. If you’re making several trades at a time, keep the total amount of cash at risk under 5 percent.
It’s also worth noting that many of the top binary options brokers will let you close out your trades before they expire. Learn when to use this option. If a particular trade is all but guaranteed to end out of the money, close it early to recoup a portion of your investment. (This should be a part of your trading system.)
Wondering how to have good bankroll management skills? Find out at: https://www.bestfxbrokers.com/binary-trading/guide/bankroll-management/
A Practical Perspective On Making A Living As A Trader
Now, let’s talk about a few matters you need to keep in mind when trading binary options full-time. Assuming your trading activity generates the bulk of your income, you need to set aside a portion of your profits to pay taxes. The last thing you want is to be saddled with an enormous bill from the IRS at the end of the year without the funds to pay it.
It’s also important to set aside funds for health insurance. If your spouse already has extensive coverage, this may be a non-issue. Otherwise, build the premiums into your monthly budget. This is something your previous employer may have paid for. As a full-time, self-employed binary options trader, you’re solely responsible.
Don’t forget your retirement fund. Ideally, you should be socking away a reasonable sum of money each year to fund your lifestyle after you retire from trading. If you want to live on the beach, a monthly Social Security check won’t cut it. Save some of your trading profits.
The above assumes you’re also paying for a mortgage (or rent), car insurance, home insurance, groceries, and other items. If you were making $100,000 a year at your corporate job, you’ll need to make much more from trading binary options to pay for self-employment insurance, health care, and other necessities. Keep that in mind.
It is definitely possible to make a living trading binary options. But going full-time is not a decision to make lightly. If you’re convinced that you’ll do well, we recommend that you check out 24Option, TradeRush, and some of the other reputable binary options brokers we’ve reviewed.