How binary options differ from conventional online trading tools.
The question, "What Is IQ Option?" is common amongst newbies in online trading. Succinctly put, IQ Option is a trading platform that gives you the leeway to exchange a vast array of assets. On the IQ Option platform, traders can find CFDs (Contract For Differences) on Forex, Cryptocurrencies, Stocks, and Commodities.
That said, it’s worth noting that Indices and ETFs (Exchange Traded Funds) are also in the mix for traders. On IQ Option, you'll find assets that are available for trading on the "Assets" tab. Here, the choice is yours to make.
The IQ Option trading platform uses CFD (Contract For Difference) on all its assets. What does this mean? When you open a deal on IQ Option, you can get results based on fluctuations in asset price without necessarily owning them.
Here, you'll guess the price direction of an asset and open a deal. How do you go about this? By clicking the "Buy" tab. When the trader hits the "Sell" icon, the trading result is dependent on their preferences and the asset's price movement.
That said, what does it take to commence trading on the IQ Option platform? Although you'll not need a rulebook to begin proceedings, this article will give you insights on the various trading tools and other specifics you'll need to know, present on this online trading broker.
The subsequent paragraphs aim at highlighting some vital differences and recommendations crucial to guide your trading journey.
Short Description of IQ Option
Since its inception in 2013, IQ Option has steadily built a strong reputation as a leading Forex and CFD trading broker. This online broker features extensions crucial to trading instruments like Forex, bonds, cryptocurrency, derivatives, and Exchange-Traded funds (ETFs).
IQ Option is gaining traction from individuals worldwide because of its wide asset range, user-friendly interface, consistent experience across desktop/mobile trading platforms, and stellar customer support service.
Newbie traders are taught how to use IQ Option and make those profit-yielding trades. How's this possible? The presence of technical analysis tools and free educational resources present on IQ Option.
This online broker for trading utilizes its proprietary trading framework. Consequently, third-party frameworks such as MetaTrader 4 (MT4) and MetaTrader 5 (MT5) aren't present on the IQ Option platform.
However, this wouldn't act as a cog to proceedings as users may find the framework seamless regardless.
IQ Option offers $10,000 virtual trial accounts so that traders can try out all of the platform's features.
How Binary Options Differ from Forex
Forex and binary options are two separate terms that new traders might find difficult to separate.
Nonetheless, understanding these concepts is a must as they're crucial to the trading strategies a trader employs.
Binary Options are "choice" contracts that have preset risks and payouts. In binary options trading, the investor must determine if an underlying asset, such as a stock, product, or currency, will rise or fall over a specific period. When speculations are correct, profits are garnered. However, if a premise is wrong, money placed on that trade is lost.
Forex markets, popularly known as FX markets or currency markets, are markets where a trader can forecast and accurately determine the price path of an asset.
On the Forex market, nothing's definitive as risks and benefits vary at each point. Not only that, it's worth noting that there could be minor discrepancies when trading in other jurisdictions.
For instance, while there are different Forex Philippines trade firms, they still have the same "operation mode" as other countries.
Unless a trader uses specific instruments to manage trade, there are no restrictions to how much money a trader can make or lose in Forex. For example, a "stop-loss" is one mechanism that prohibits traders from losing more than a particular amount of money.
To put it another way, once a trader has lost a specific amount of money, the trade closes automatically to avoid further losses.
Similarly, traders might determine the future benefits ahead of time. Once the trade has reached a specified profit value, the trader can elect to close it. Overall, the maximum loss in Forex is the amount of money on your trading account.
Also, "limit or stop orders" can help the trader manage both losses and earnings in Forex.
Below are some of the critical areas where binary options differ from forex trading in a manner that affects the trader the most:
- Duration Range
Binary options have a rule set traders must obey. Before starting a binary options trade, customers must decide when the order will expire. It means that there's a "start and end" time for each selection and an automatic termination at the expiry time.
While some brokers might allow you to close your option early, you'll lose a percentage of the predicted profit.
However, after an increase in stake on select platforms, you can activate the "rollover" feature to postpone the expiry date to a timeframe of your choosing.
On the flip side, Forex trading takes a radically different approach to the trading timeline as users can trade for as little as a second or as long as they like.
There's a provision for them to open and terminate trades whenever they want. However, it's imperative to understand forex trading flexibility has significant benefits and drawbacks present. So, it's never smooth sailing all through.
There are five trade forms in binary options: the high or low, 60 seconds, touch or no-touch, boundary, and choice builder.
Conversely, there are many distinct margin orders in the Forex market. The most vital in Forex trading is known as “buy/sell." However, traders can opt for more advanced margins, including limit, stop, OCTO (one cancels the other), trailing stop, hedge orders, and so on.
- Risk Profile
Risk is an integral factor in both Forex and binary options trading. However, upon close examination of both trading types, there is the tendency to conclude that binary options trading is less hazardous.
Why? The trader knows exactly how much they’ll earn or lose before placing the deal. Compared to Forex trading, this is a significant benefit as it hands more control over the trader’s finances.
While Forex pushes the average trader to rely on leverages, binary options don’t, and this would seem like another noticeable advantage of the latter.
Most forex traders understand that to trade with reasonable amounts of their choice assets, they must use the leverage supplied by online brokers.
Although leveraged trades boost the chances of increased profits, they will also increase the chances for losses should the transaction go south.
Consequently, newbie traders have a higher chance of losing their trading money faster when trading on the Forex market.
- Trading Ease
Traders may enjoy varying ease levels between binary trading and Forex options. However, it's relatively easier to trade binary options than Forex.
Why? Trading activities in the binary options market are relatively less sophisticated than those in the Forex market, making participation straightforward. Here, users get to enjoy a simpler binary trading Philippines activity.
That said, everyday traders may need to adjust a few transaction settings as they can make deals in just three or four straightforward steps.
On the other hand, placing a trade on the Forex market entails adjusting the entire trade's parameters to limit losses, manage risk levels, and other alternatives.
Overall, the mere fact that a trader can only choose between two types of orders - Call or Put – makes binary options trading very simple. Forex trading, on the other hand, involves complex decisions by default.
- Profitability Index
Profit margins in binary options are dependent on your initial investment, knowledge, experience, and most importantly, the profit percentages offered by your choice broker.
In most cases, the profit percentages featured by the online broker vary from 60% - 80%. However, since some trading options can feature rates of up to 400%, profit margins rely on the options you choose to trade. These percentages determine how much you'll make after a successful trade.
As a binary options trader, you'll be able to manage finances and assess how much money you're willing to lose after earnings.
However, the reverse is the case with Forex trading. Here, traders tend to showcase a great deal of caution when placing trade contracts, as they usually set a maximum of four each day.
Unlike FX traders, binary traders are very active in the market, making over ten trades per day on average. Statistically, if you trade a 60-second binary, you'll make more than 40 deals every day.
How to Use Your Personal Account on IQ Option Correctly?
If you intend to trade on the IQ Option platform, creating an account is the first step to take. On the website's homepage, you'll have to go through basic information ranging from Name, Surname, Email Address, Password, Phone Number, Country, and Date of Birth. After you've filled in these details correctly, your account is successfully activated.
Afterward, it is necessary to familiarize yourself with the platform's various capabilities and put them to the test. Here, the IQ Option demo account comes in handy for this sole purpose.
The practice account provides $10,000 in free money, which you can use to trade assets and map out what techniques work best for you. That said, the desktop and mobile platforms are uniform to ensure that you never miss a thing.
Additionally, IQ Option's official website has a wealth of important information. You can watch video tutorials on what each instrument entails and get some pointers bordering on patterns, indicators, and methods.
The FAQ and blog section on IQ Option provide answers to various questions that the trader might have at several points. The blog segment also features multiple articles on effective trading tactics to help traders make trades that can yield high dividends.
Most Successful Strategies in IQ Option
Trading methods present on IQ Option are so extensive. However, while some trading methods are impeccable, others fall short of expectations.
That said, if you're looking to bolster your profit margins on IQ Option, here are some trading methods up for consideration. They include:
- PullBack Trading Strategy
The PullBack trading strategy, in simple terms, is predicting that an asset (usually a corporate stock or ETF) will move in the reverse direction of a favorable trade trend.
When the retracement (temporary reversal of a high trend asset price) is reaching its limit and the price action is predicted to rise again, you might consider establishing an extended position.
On the other hand, you can do the same on negative trends. Here, try establishing a short position when the price is at its local maximum, as a negative trend typically shows a modest upward movement.
- Momentum Trading
The momentum strategy is straightforward to grasp, even though it's not necessarily easy to practice.
During momentum trading, traders wait for the asset to show rapid movement before opening a transaction.
While you can open both long and short positions, it's worth noting that asset prices can go in any direction.
Since technical and fundamental elements can cause substantial price changes, traders must regularly keep a close eye on them.
Here, earnings reports and important news are the event types to look for in publicly listed firm trades. Why? Both have the potential to impact stock values drastically.
Also, technical reasons are just as essential in assets like currencies and cryptocurrencies as strong rising and falling trends can emerge with no apparent cause.
- Scalping Strategy
Traders that follow the scalping strategy can set "buy and sell" thresholds before opening a trade. Afterward, they can observe the asset's price move in the desired direction. Using the "Scalping Strategy," deals can be as short as some seconds.
Consequently, scalpers must be ready to respond quickly and make critical financial decisions instantly. It's worth noting that fundamental research has no use or place in scalping due to the brief period traders have to open and close positions.