Day trading binary options: pros and cons

day trading options IQ

An option is a contract under which the buyer of an option receives the right to buy/sell an asset (commodity, security, currency, etc.) at a certain point in time at a predetermined price.

The obligation to execute the option falls on its seller, who can act both as the buyer (put option) and the seller (call option) of the underlying asset.

The situation is changing rapidly. These days, many companies that specialize in day trading binary options offer their clients to try as well. It is important to note that day trading binary options is one of the low-cost strategies available to investors because they allow the trader to earn income much faster and often at less risk than securities, stocks, bonds and investment funds. One of the main advantages of options is that their value is much lower than the value of the underlying asset (for example, stocks).Traders have also long realized that they can successfully apply classic binary options day trading methods to buy and sell options. Thus, instead of buying or selling a stock, a trader can simply buy an option and control the same amount of stock for much less money.

Day option trading

Those who make quick decisions prefer to work with highly volatile assets. Currency market scalpers trade the most volatile major currency pair USD/JPY, which has a daily spread of 130 pips. Stock market traders using binary options day trading choose highly volatile stocks with strong growth potential: usually these are securities of second and third tier companies.

It is important to note that binary options day trading is one of the low cost strategies available to investors since day trading options allow the trader to generate income much more quickly and often at less risk than trading securities such as stocks, bonds and investment funds.

One of the major advantages associated with binary options day trading is that option cost much less than the value of the underlying asset (e.g., stocks). Thus, instead of buying or selling a block of stock, a trader can simply buy an option and control the same amount of stock for much less money.

Advantages of day trading

According to statistics, over 78% of forex traders choose day trading in binary options, that is, an open trade is carried out only during this time.

In spite of such popularity, this type of temporary trading has not only its obvious advantages, but also a number of disadvantages.

In order to weigh all pros and cons it is necessary to consider all aspects of binary options day trading, not only its obvious advantages.

Pros and cons of day trading:

The advantages of intraday trading The disadvantages of intraday trading
No need to make long-term forecasts, which greatly saves time trader High time consumption when trading on short time intervals
Higher accuracy in predicting trend movements, as practice shows it is much easier to guess trend movement during the day than during the week Lack of opportunity to apply some forex strategies, which require a long period of time to work
No rollover fee, you only pay the broker’s spread when you open a position Losses in the form of spread fees each time a position is opened. After all, only at first glance it seems that 2 points from one order is not much, but if you are trading on scalping, and during the day you have opened a hundred of these orders, then the broker’s commission has already made 200 points. And this, when trading with one lot volume is around $2,000
The ability to constantly monitor open positions, you can hear unfavorable news on TV and just close the trade. Or simply monitor the order throughout its existence

Markets for day trading options

Deciding which market to choose for binary options day trading is very important. It will affect your future actions and results. To make this decision, you will need a basic knowledge of the different types of markets, their volume, liquidity and volatility.

There are many markets available for day trading, and your choice must be made consciously. You need to know the market and also know your preferences. Consider the following determinants.

  • Availability of resources. Market updates, online offers, and day trading market news will help you understand the market and then make good decisions.
  • Market volatility. You get more opportunities to profit when the price fluctuates a lot.
  • Market liquidity. The higher the liquidity, the more opportunities you have to open trades.

Types of day trading markets

Stock market

This is one of the most frequently binary options day trading. The principles are simple, you can buy or sell shares of a particular company.

The stock market offers a large number of indices. You will find there the FTSE 100 with a hundred major companies on the London Stock Exchange, the Dax 30 with thirty major companies on the Frankfurt Stock Exchange, the Hang-Seng with 500 companies on the Hong Kong Stock Exchange. In addition, there is the S&P XNUMX with five hundred of the most popular U.S. stocks, the Dow Jones Industrial Average with thirty major U.S. companies and the NASDAQ Composite with the titans of global technology.

The stock market is so popular among day trading binary options that you’ll find many tutorials and courses online. They also write about it in blogs, books and online forums.

Currency market

Forex is based on trading currency pairs. Your task is to decide whether the price of one currency will be higher or lower against another in the future. Depending on your predictions, you will buy or sell.

Day trading binary options in the currency market has both good and bad aspects.

One advantage is that you don’t have to worry about time. Forex works 24/7, so it’s easy to combine the trading session with your other responsibilities. And only a small deposit is required. You can start with as little as $24 in your account. Another good thing is that brokers usually take no (or very little) commission.

Currency stock market

CFD market

CFDs are contracts for difference what you do with your broker. It requires you to buy or sell when the price moves. Your contract starts when you enter a trade and ends when you exit it. Your job is to predict whether the price will rise or fall and then buy or sell. Using CFDs gives you the ability to trade a wide range of assets without owning them.

The variety in the CFD market is large and growing. You can choose from over 10,000 XNUMX instruments for day trading binary options.

You can use CFD leverage, which can greatly increase your profits. However, do not forget that it can also increase your losses.

Option market

The day trading binary options has become very popular and is available on most trading platforms. It offers you the opportunity to buy or sell an option without becoming the owner of the underlying asset.

There are usually two types of options. One is called a put option and allows you to sell at a certain price. The second option is known as a call option and allows you to buy at a certain price.

Day trading options strategies

With that in mind, we’ve put together some great day trading options strategies to give you the best chance of making money right from the start.

As the name implies, trading requires that you open buy and sell positions at certain times. Thus, a consistent and well thought out plan is very important. After all, it is all too easy to get carried away and start making decisions that have not been properly thought through.

Simply put, a binary options day trading strategy is a set of rules and an algorithm of actions that a trader follows when making trades. There are many varieties of strategies and it can be difficult for a beginner to figure them out.

No matter what market you’re interested in, one of the best day trading options strategies is to make a plan and do your best to stick to it. Many experienced traders also keep diaries, as this is a great way to review current trading strategies. It also allows one to develop new strategies by learning from past mistakes.

Here are some of the most commonly used intraday trading strategies:

  • Range Trading
  • Scalping
  • News Based Trading
  • HFT (High Frequency Trading)

Best day trading platform

Day trading involves buying and selling an asset in a single day. This type of trading is very different from other types of investing because each trade lasts only a few minutes or a few hours.

Although trading is by no means simple, it can be extremely profitable. Many traders use trading as a way to make extra money. Others can consistently make a profit and make a living doing it full time.

There are so many trading platforms out there nowadays, and to choose the right one, you need to use the day trading options rules.

A trader strives to find a day options trading platform that is not only safe and has the right assets, but also good rates and quality support. In addition, it is worth looking at various resources, options, educational materials and technical indicators.

Although binary options day trading is by no means simple, it can be extremely profitable. Many traders use it as a way to make extra money. Others, on the other hand, can make steady profits and a living by trading binary options full time. However, to succeed at it, you need a trading platform that fits your strategy and offers as many additional tools as possible.

Day trading options platform

Whatever your goals for day trading options are, it’s important to find the right broker and tools to work with. To help with that, we take an in-depth look at five of the best day trading options platforms you can use in 2021.

FXOpen The main company FXOpen Ltd is registered as a tax resident of New Zealand, official representatives operate as subsidiaries, for example, FXOpen Markets Limited, FXOpen AUPtyLtd, FXOpen Company and others. Regulation of dealing services from ASIC, FCA, FSA, but in general the regulatory policy is not transparent, on the website on this topic a minimum of information. There is a certificate of high-quality execution of orders (VerifyMyTrade) and the International Financial Commission (The Financial Commission).
Dukascopy Dukascopy Bank SA is regulated by FINMA (Swiss Financial Market Supervisory Authority), and also has the status of an investment bank and provides a full range of financial services. Note that getting such a license from the Swiss regulator is extremely difficult.
FxPro The company has been working in the global financial market since 2006 and currently provides services in 170 countries around the world. All day trading options rules work on this site.

In order to subscribe to the analytical information, it is enough to download the FxPro trading platform and open the FxPro demo account. The company offers analytics and news from the leading news agencies, FxPro economic calendar, Autochartist trading signals, and also own analytical materials on all market sections. The company actively participates in the specialized FxPro forums and FxPro blogs, supports accounts in the main social networks.

HYCM HYCM reports on all customer transactions through UnaVista, the international platform (FCA) and DTCC (CySEC), which gives customers additional legal guarantees. The company is an active participant in the anti-money laundering program by FATF standards, so be prepared to thoroughly verify the legality of the proceeds.
IQ Option But the main thing is to choose a high-quality and reliable company that will provide a high level of security, protect investments, and guarantee the payment of profits. There are many different binary options brokers on the Internet, but an effective path to success is possible only with trusted companies. The IQ Option trading platform is one of the leaders in the segment, offering a huge number of advantages to its clients. This overview will help you find out more useful information.

How to make money day trading options

Intraday trading is the most responsive to all market changes. The emergence of any significant news, statistics or other kind of information can be used immediately. This strategy allows you to save time and make a profit in the shortest possible time. Also, you should not neglect the day trading options rules in order to reduce as much as possible your risks of losing the deposit.

In day trading, it is advisable to adhere to the following day trading options rules:

  • Trade for a maximum of 2 hours per day.
  • Intraday trading should be at the same time.
  • Limit the number of trades per day.
  • Set attainable goals.
  • Stop trading when the situation is not clear.
  • Stop trading after making several unsuccessful trades in a row.
  • Set a loss limit for a certain period of time (for example, a day or a week, maybe a month).

Market analysis should be used with more caution for short-term forecasts. Some traders use economic indicators and news releases as a signal. At such times, the market can react quite strongly to changes in the macroeconomic indicators of states. But you should remember that day trading options n involves a very high risk because the market at such times can be very unpredictable.

A trader in a day can well earn 0.2% – 1% of his deposit, depending on the aggressiveness of the day options trading. You may say that it is not enough, but to get such profitability the trader must have a considerable theoretical background and several years of experience in day trading options on the financial markets. Besides, you mustn’t forget about the size of the deposit. If with 100$ trader can earn 5 – 15$, then with 10 000$ deposit trader can earn 500 – 1500$, which is significant.

In addition, day traders can be managing traders of PAMM-accounts, where they attract and trade the attracted funds of investors and receive a percentage of the profit (25-30%) for the management of funds.

You can try to use day trading options by choosing reliable broker, such as IQ option or FXPro.

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Cole Anderson
Cole Anderson / article author
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