FAQ For New Traders
A lot of potential binary options traders never enter the marketplace because of lingering questions. These often reflect insecurities about trading and risking money, but are very easy to answer if some effort is put into finding an honest answer.
Here, we’ve put together some of the most common questions that people have about beginning trading, and compiled them all in one easy to reference location. Hopefully, this will answer any remaining questions you have about starting out and let you know if this is right for you.
If you have a question that isn’t answered here, please feel free to contact us and we will do our best to point you toward the info you need to make a smart choice.
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How Much Money Do I Need to Start Binary Options Trading?
The minimum deposit that you will need to open up an account will vary from site to site, but the industry standard is currently around $250 to open up a real money trading account. However, while $250 will get you an account, you really should have a bit more than this to help give yourself a better chance of success. Experts recommend that you should never have more than 5 percent of your account at risk at any one time. This means that if you have $250 in your account, you shouldn’t make a trade larger than $12.50. Many brokers have a minimum trade requirement of $25, which makes it necessary to have more than $250 in your account if you want to stick to this rule of thumb. In fact, we believe that 5 percent might even be too high per trade, especially for beginners. An initial deposit of $500 is typically a safer choice if you want to account for variance. Also consider trading with a demo account before you make that deposit.
This is a personal decision though. There is no rule that says you can’t make a second deposit in the future, or that you can’t just put a little money into an account for fun or to try out trading. It’s something that you should evaluate and decide upon on your own based upon your individual needs.
How Old Do I Need to be to Trade?
The minimum requirement in most countries for traders is to be at least 18 years old. This might vary depending on where you live, but in the vast majority of cases, this is true. Check your local regulations if you are unclear.
On the other side of things, some traders worry that they might be too old to begin trading. There is a widely believed stance that trading is only for younger folk. If you are over the age of 50, it is too risky for you to partake in. The argument goes that the older you are, the less risk you should take on as you are closer to retirement age and need to have safer holdings. As an older person, you have less earning time ahead of you, and therefore any substantial losses that you face will be much more difficult to compensate for.
While this may be a convincing argument for some, it is also missing an important detail. Every decision to trade needs to be made on a personal level. If you have $1,000 in extra money that you have set aside for entertainment or higher risk trades or investments, then it doesn’t matter if you are 18 or 65. If you want to use that money for binary options trading, then it is typically okay to do so. If you do not have $500 in expendable money to use for trading, your age doesn’t matter—it is a bad idea to open up an account. Each trading decision needs to be made on a personal level, regardless of how old you are. You can try out Binary Capital Markets if you reach their age requirement.
What Should I Trade?
A lot of potential traders stay away from trading because they don’t know where to start. We say: start with what you know. If you are a tech buff, start out by looking at tech stocks like Apple or Google. If you enjoy politics, look at currency pairs in the Forex market and evaluate how political moves like elections or central bank rate decisions influence how currencies interact with one another. It really doesn’t matter, as long as you find something that you will stick with. If you are trading something that you already have an interest in, the odds of sticking with your trading when it gets tough will be higher.
Also, we encourage specialization. Have an asset or two that you know really well. This will help you to make better decisions when markets are harder to predict. It will also help you to predict long term movement for that asset, making long term options purposed for hedging your short term positions a reality. This kind of specialization will help you to reduce long term risk a little and help you to stand out from the thousands of traders who bounce around from asset to asset losing money.
Will I be Profitable?
This is the question that everyone should ask themselves, both new and experienced traders. There’s no way to answer this question with any certainty, but you can use math to give you a good idea of what your odds are. In fact, having math on your side can really tilt the odds in your favor. Think about it this way: let’s say that you’ve determined that in the past, the EUR/USD pair has gone up 75 percent of the time in the next 15 minutes after a particular chart pattern occurs. You find that chart pattern emerge, and can realistically say that the price will increase 75 percent of the time following this. Is this trade going to be profitable? By looking at your rate of return, your odds of success, and how much you would risk here, you can actually come up with a hypothetical profit number that you could expect every time this trade is made. Your profitability over the long term is determined by each trade you make and the thought and analysis that goes into it. Make enough profitable trades and few enough losing ones, and you are a profitable trader.