The Complete Binary Options Trading Guide

Binary options were introduced in 2008. What characterizes a binary option is its fixed payoff: if the option is in-the-money at expiration, it pays a predetermined amount; if it is out-of-the-money at expiration, it pays nothing. Binary options are also known as digital options, ‘all-or-nothing options,’ or Fixed Return Options (FROs) in the US (notably on the American Stock Exchange).

Payout rates are not fair for traders

Generally, the payout rates of binary options correspond to the popularity of their underlying instruments. For example, EUR/USD tends to offer better payout rates than less popular currency pairs. This is because popular assets attract more competition among brokers, which usually results in better returns for traders.

However, binary options typically offer much lower returns than they should. A fair return would be around 98%, considering the risk is 100%. In reality, binary options usually provide returns between 75% and 90%, making them unfair for traders.

 

Binary Options Trading Features

Binary Options Platforms provide a wide variety of features that cater to all trading styles. Below are the most important binary options features reviewed in this article.

 

Early Closure Feature

The Early Closure feature allows traders to close positions before the original expiry time, offering added flexibility to binary options trades. There are two main ways to benefit from this feature:

■ Realizing Early Profits:

This tool is especially useful when news or events are expected to impact market conditions. You can close a trade early to secure a smaller portion of your potential profit.

■ Preventing Upcoming Losses:

The Early Closure feature can also be used when a trade is losing money. If a contract is out-of-the-money, this feature lets traders close it early and recover part of their initial investment — typically around 50%.

Note:

(i) The Early Closure feature is not available for all Binary Options types (High-Payout Options are excluded).

(ii) There are certain time periods when Early Closure cannot be applied, depending on the broker’s policy.

(iii) This feature may also be called the Option Buyback or Settle Now function.

Early Closure Zone:

This indicates the start of the period during which the Early Closure feature can be applied.

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The Rollover Feature

The Rollover Feature, alongside Early Closure, is one of the most commonly used binary options tools. It allows traders to extend the expiry time of a binary options contract. This is particularly useful when the asset’s price is close to the strike price but the trade looks likely to close at a loss. Using Rollover, traders can extend the expiry to the next period and potentially save their investment.

Note:

(i) Contracts are commonly extended by 1 to 10 minutes.

(ii) Brokers usually charge an extra 20-30% of the initial investment to provide this feature.

(iii) Only one Rollover per trade is allowed.

(iv) Rollover is not available during the last expiry period of the day.

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Double Up

This feature lets traders double their initial investment in an active trade. When a trader is confident that a trade will be profitable, Double Up can increase the potential return. It supports advanced money management by allowing entry with a small investment, then increasing it later once the outcome seems likely.

Example:

You might enter a trade early, wait for confirmation from technical analysis, then Double Up. For instance, you could wait for a break of an important support or resistance level before applying a trend-reversal strategy.

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Options Builder

The Options Builder feature allows traders to create customized binary options contracts by selecting:

(i) Financial Assets

(ii) Expiry Time

(iii) Payout / Refund Rate

(iv) Investment Amount

This feature adds extra flexibility and can enhance any trading strategy.

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Using These Trading Features

Timing is Everything

The profitability of these features largely depends on timing. Knowing when to extend expiry with Rollover or when to Double Up on a trade you’re confident about is crucial.

Flexibility Always Comes with a Cost

Remember, using these features in every trade may lead to losses because you will pay an additional “premium” each time.

Conclusions

• Calculate carefully to understand the extra cost or premium for using these features.

• Integrate these features into a broader trading strategy and follow clear rules to use them precisely.

• Diversification is the number one rule in financial investing. Don’t let the use of any feature interfere with maintaining a well-diversified portfolio.

 

 

Major Types of Binary Options

(1) Up/Down Binary Options

(2) Touch Binary Options

(3) Range Binary Options

(4) Pair Options

(5) Turbo or 60-Sec Binary Options

(6) Binary Options Builder

(7) Options Ladder

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(1) Up and Down (Put and Call) Binary Options

Up or Down Binary Options are the classic digital options offering two possible outcomes: win or lose. Traders select either Up options for anticipated bullish markets or Down options for expected bearish markets. This type is also known as Call / Put Options.

■ Move Up (↑) if a bullish market is expected

■ Move Down (↓) if a bearish market is expected

■ Payout Rate: 70–90%

■ Refund Rate: 0–15%

■ Time Expiries: from 5 minutes to hourly, weekly, or monthly expirations

■ Features: full range supported, including Take-Profit, Rollover, Double-Up, and more

Basic Information

Up and Down Binary options require traders to speculate whether the price of a financial asset will rise or fall within a specified timeframe.

Case 1: If the Speculation is Correct

If the speculation proves correct, the trader receives a payout. The payout amount is calculated as:

■ Payout = Initial Investment × Payout Rate

For example, with an initial investment of $100 and a payout rate of 85%:

■ Payout = $100 × 85% = $85, resulting in a profit of $85.

Case 2: If the Speculation is Wrong

If the speculation is wrong, the trader loses the initial investment but typically receives a refund based on the refund rate:

■ Refund = Initial Investment × Refund Rate

For example, with an initial investment of $100 and a refund rate of 10%:

■ Refund = $100 × 10% = $10, so the trader gets back $10.

Binary traders using Up and Down options can choose from a wide selection of up to 200 assets, including Forex currencies, commodities, stocks, and stock indices. Additionally, multiple trades can be executed simultaneously.

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(2) One Touch / No Touch Binary Options

One Touch Binary Options are becoming increasingly popular among binary traders due to their potential for extreme returns.

One-Touch Options offer a high payout if the price of an asset reaches or surpasses a predetermined price barrier. The payout is made immediately once this barrier is broken, so the trader does not have to wait until the option’s expiry. This type of binary option is ideal for traders who expect significant price volatility in the near future—especially news traders. One-Touch Binary Options can only be purchased during weekends.

• Payout Rate: 300–550%

• Refund Rate: 0%

• Time: Purchased only during weekends

• Features: Higher or Lower speculation only

Introduction to One Touch / No Touch Binary Options

This binary option type is traded exclusively on weekends when the financial markets are closed. The minimum trade amount is usually $25 or $50.

Definition of One Touch Options

Similar to classic Up and Down options, One Touch options have two possible outcomes:

1. If the price reaches a specific barrier, the trader receives a predetermined payout.

2. If the price does not reach this barrier, the trade results in a loss.

The Difference Between Touch and No-Touch Options

• One-Touch Options:

  These allow trading specific price levels. If the asset’s price touches the predetermined level within a set timeframe, the trade pays out immediately—before expiry. The payout rate is fixed and predetermined, like classic Up & Down options.

• No-Touch Options:

  No-Touch options are profitable when the asset’s price does not reach certain price levels during the specified period. This means the trader wins if the price stays above or below the barrier, depending on the contract.

Why Are Payout Rates So High?

Payout rates for One-Touch and No-Touch options can be extremely high, sometimes reaching 500% or more. How is it possible for brokers to offer payouts above 100%? Because such payout rates imply the probability of winning is significantly below 50%.

Note: The higher the risk of losing money, the greater the potential return.

One-Touch / No Touch Binary Options Trading Hours

Trading hours for One-Touch options differ from other binary options. They can only be purchased between 21:00 GMT Friday and 19:00 GMT Sunday.

The Importance of Volatility in One-Touch Trading

Unlike other binary options that require forecasting only the price direction, One-Touch options require forecasting two variables:

1. Price Direction (higher or lower)

2. Upcoming Price Volatility

Volatility can be measured using various technical analysis tools, such as:

► Commodity Channel Index (CCI)

► Average True Range Indicator (ATR)

A simpler approach to anticipating volatility is to trade around important news events. During such times, prices of underlying assets (like Forex currencies or commodities) often experience extreme volatility.

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(3) Range or Boundary Binary Options

Synonymous Option Types: Tunnel Options, Boundary Options, In/Out Binary Options

Range Binary Options allow traders to speculate on whether the price of an asset will stay within a predetermined price range during a specific period.

• Payout Rate: 70–350%

• Refund Rate: usually 0%

• Time Expiries: typically around 30 minutes

• Features: Early Closure

Introduction to Range/Boundary Options

Trading Range Options involves predicting whether the price of an asset will remain within a specific price range for a set duration.

Trading Within Two Lines

In any Range Option chart, two horizontal lines mark the upper and lower boundaries of the price range. If the asset’s price stays between these two levels until expiry, the trade closes profitably. Range Options are available with multiple expiry times, starting from 30 minutes up to daily expiries.

Extreme Returns

Along with Touch Options, Range Options offer some of the highest payout rates among binary option types. Like all binary options, Range Options follow an all-or-nothing payout structure: if the contract expires out-of-the-money, the trade is lost. However, if it expires in-the-money, traders can earn extreme returns—up to 350% in high-yield boundary contracts. Range Options are ideal for trading both strong trending and ranging markets and are also useful for news traders.

As with Touch Options, the ability to accurately assess market volatility is key to profitable Range Options trading.

Early Closure Feature

Range Options allow traders to exit early before expiry, securing profits early but at a reduced payout. However, early closure is not available if the asset price leaves the traded range.

Two Types of Range/Boundary Options

• In-Range Trade: Profitable if the asset price remains within the predetermined range during the specified time period.

• Out-of-Range Trade: Profitable if the asset price finishes outside the predetermined range.

Range Trading & Technical Analysis

The best way to trade Range Options is to focus on range-bound markets. Various technical analysis tools can help identify these conditions. The most popular indicators for detecting range-bound markets are Bollinger Bands and Parabolic SAR.

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(4) Pair Options

Options Pairs is a relatively new type of binary option, and not all brokers offer it. Pair options were first introduced in 2010 by StockPair.

Binary Options Pairs involve trading two different assets simultaneously, one against the other. Generally, both assets belong to the same asset class, although you can also trade a stock against a stock index.

■ Payout Rate: 70–85% (Fixed Pairs) / Up to 300% (Floating Pairs)

■ Refund Rate: 0–10%

■ Time Expiries: From 1 minute up to several months

■ Features: Early Closure

Introduction to Pair Options

Binary Options Pairs have the same basic setup as Up and Down options, but instead of choosing a direction, you select which of two financial assets will outperform the other within a specified time frame.

Two Basic Forms of Binary Options Pairs

• Fixed Pair Options: The better-performing asset is determined by its performance from the time the position is opened until expiry. Payouts can be up to 85%.

• Floating Pair Options: The better-performing asset is determined by its performance over a fixed, predefined period, such as a day, week, or month. Floating pairs can offer extreme returns, with payouts up to 300%.

Example Using Pair Options

For example, you might trade Google shares against Facebook shares. What’s the advantage? It’s simple: by trading pairs, you can completely eliminate the effect of overall market conditions.

Let’s say you are optimistic about Google’s upcoming earnings report but concerned that the Nasdaq Composite might decline due to negative investor sentiment caused by unexpected macroeconomic factors. In this case, you can trade Google against another asset, like Facebook shares.

If your prediction is correct, your trade will end profitably regardless of whether Google’s price goes up or down relative to its current level. In our example:

• You make a profitable trade if Google outperforms Facebook over the specified period.

• You incur a loss if Facebook outperforms Google during that same period.

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(5) Turbo Binary Options

What are Turbo Options?

Turbo Options are very short-term binary options with expiry times as brief as 30 seconds to 1 or 5 minutes. They are also called 60-Sec options and represent the most speculative, fast-paced form of binary trading — almost like scalping in traditional markets.

Key Characteristics

• Payout Rate: 70% to 80%

• Refund Rate: 0% to 10% (usually very low or none)

• Expiry Times: 30 seconds, 1 minute, 5 minutes

• Features: Limited use, very high risk

How Turbo Options Work

Just like classic binary options, to win you must predict if the price will go up or down by expiry. The difference? Your window for prediction is extremely short, so trades are lightning-fast.

Risk and Profitability

• Extremely risky: Very volatile, often likened to gambling if not handled skillfully.

• For professionals only: Best suited for traders who are experts in reading market direction very quickly and can trade on strong momentum or news.

• Avoid if inexperienced: Most casual traders lose money due to the speed and randomness.

Trading Strategy for Turbo Options

• Follow the trend: The only way to have a chance at profitability is to trade with the market’s current momentum.

• Trade news or reactions: Turbo options work best immediately after major news releases or when prices react strongly to key levels like support or resistance.

• Keep it boring: As George Soros said, “Profitable investing is very boring,” meaning disciplined, trend-following strategies are key — don’t chase “fun” trades.

Summary

Turbo Options can be exciting but are the riskiest binary options type. They are fast, speculative, and demand professional skills. For most traders, longer expiry options are safer and more sustainable.

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(6) Binary Options Builder

What is Binary Option Builder?

The Binary Option Builder is a feature that allows traders to customize their own binary options contracts from scratch, tailoring key parameters to fit their trading strategy and risk appetite. It originally debuted on the SpotOption platform but is now available on multiple platforms under various names.

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Key Features

• Payout Rate: 15% to 85% (variable, based on trade setup)

• Refund Rate: 0% to 80% (optional money-back if trade loses)

• Expiry Time: Any timeframe (from minutes to longer periods)

• Customizable Variables:

  • Financial asset (e.g., Forex, commodities, indices)

  • Expiry period

  • Payout and refund levels (affecting risk/reward)

  • Investment amount

How It Works

Unlike classic binary options with fixed terms, the Option Builder lets traders modify the risk/reward ratio by adjusting payout and refund rates:

• Want to reduce risk? Choose a higher refund rate with a lower payout rate — this means if you lose, you get some money back, but your profit is smaller.

• Prefer higher profits and accept more risk? Set a higher payout rate with low or zero refund.

This flexibility makes it ideal for novice traders to experiment with different risk levels or for experienced traders to customize trades precisely.

Why Use the Option Builder?

• Maximum flexibility and control over trades

• Helps in risk management by choosing refund levels

• Adapt expiry and payout to market conditions or trading style

• Usually allows trades starting as low as $25

Summary

The Binary Option Builder is a powerful tool for personalizing trades, letting traders balance risk and reward according to their preferences, which is a big advantage over classic fixed-binary contracts.

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(7) Ladder Binary Options

What Are Ladder Options?

Ladder Options are a type of binary option featuring multiple strike prices (target levels) above and below the current market price. Each strike price has its own payout rate and separate Up/Down choices, allowing traders more flexibility and strategic options.

Key Characteristics:

• Payout Rate: 1% to 800% (can be extremely high)

• Refund Rate: 0% (no refund on losses)

• Expiry Times: From a few minutes up to daily expiries

• Purpose: Ideal for trading during high volatility or around news events

How Ladder Options Work

• The asset price must cross the chosen strike price before expiry for the trade to end in-the-money.

• The further the strike price is from the current market price, the higher the payout.

• Traders can select from multiple strike prices both above and below the current price, each offering different payout rates.

Choosing Strike Prices

• Ladder Options offer multiple levels to bet on, rather than just simple up/down.

• Each strike price has an associated payout and direction (up or down).

• Traders decide expiry time and strike price based on risk tolerance and market expectations.

Example Strategy: Straddle Around News Events

Scenario: EUR/USD Trading Before ECB Unemployment Data Release

• Current price: 1.25433

• Expiry: 5 minutes after news release

• Strike Prices Available: 5 levels above and below current price, with Up/Down options for each (10 total choices)

Trade Setup:

• Because the news could cause big moves either way, use a straddle strategy: buy one Up option and one Down option on different strike prices.

• Example Trades:

  • Up option at 1.25516 (Payout: 560%)

  • Down option at 1.25332 (Payout: 874%)

Risk/Reward

• This is a high-risk trade since you pay for both positions.

• If price moves significantly above or below the current level, one option will be in-the-money with a big payout, potentially outweighing the loss on the other.

Summary

• Ladder Options add more strike prices to binary trading, giving more choice but higher complexity.

• Higher payouts come with higher risk, especially on short expiries.

• Best suited for volatile markets or when anticipating big moves (like during major news).

• The straddle strategy uses Ladder Options on both sides to capture moves regardless of direction, but involves risking both sides.

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Trading Platforms for Binary Options

 

As the binary options industry expands, both the variety and quality of trading platforms continue to improve. Alongside the classic high-and-low binary options, new option types are emerging, enhancing the overall trading experience for users.

Moreover, additional trading features are now widely available, including the Option Builder and High Payout Options. As competition intensifies within the binary options market, new and improved platforms will continue to evolve. In this analysis, we review the three most popular binary options platforms currently used by nearly all binary options brokers:

(a) SpotOption

SpotOption is a fully web-based platform offering an easy-to-use interface for selecting and trading popular financial assets.

(b) Tradologic

Tradologic is a highly popular platform for binary options trading, featuring:

• Customizable expiry times

• Trading robots and signal plug-ins

• Super Turbo feature, allowing trades in 45, 30, and 15 seconds

• Triple Options, enabling up to three trades on a single asset simultaneously

(c) TechFinancials

TechFinancials ranks as the third most popular binary options platform, providing several advanced features such as market data feeds and API technology.

Binary Options Tips

Key Recommendations for Trading Binary Options

1. Practice with a Demo Account
   Trading binary options involves a high level of risk. It’s strongly recommended to open a demo account and practice extensively before risking real money.

2. Be Cautious with Expiry Times
   Although 60-second options may look like a quick way to earn money, trading in such short periods significantly increases portfolio risk. Choosing longer expiry times can help reduce market risk.

3. Learn to Use the Early Closure Feature
   The Early Closure feature is very important. Market volatility should guide your decision on when to secure profits early using this tool.

4. Prefer Popular Assets
   Popular assets such as Gold, Oil, or EUR/USD generally offer better payout rates and more reliable market information.

5. Choose Binary Options Brokers Wisely

   • Avoid being swayed solely by deposit bonuses or risk-free trades. Focus instead on payout rates and availability of core trading options.

   • Select only regulated brokers. Use trusted rating sites like BinaryValue.com to find reliable brokers.

   • Use live chat customer support to ask questions and verify broker credibility before opening an account.

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Binary Options and Money Management

 

Money management is crucial when trading financial markets, regardless of the asset or instrument. Even the best trading strategies cannot guarantee long-term success without proper money management. Binary options platforms typically offer simpler frameworks for managing trades compared to more sophisticated platforms like MetaTrader4.

 

Basic Money Management Rules

1. Portfolio Diversification

   The golden rule of investing is diversification. Never trade with all your funds at once or place more than 5% of your trading capital on a single position. For larger portfolios, this percentage should be even smaller (1-2%). Ignoring this rule can quickly lead to complete loss of funds.

2. Avoid Emotional Trading

   Human brains are naturally emotional, which can negatively affect trading decisions. You must keep your logical brain in control to become a successful trader, even though it is often overshadowed by emotion.

3. Limit Your Losses

   Recognize bad trading days early and stop trading to prevent further losses. For example:

   • Stop trading after losing 3 trades in a row.

   • Stop trading if losses exceed 5% of your available funds.

4. Withdraw Some of Your Profits

   The ultimate goal is to make real money. If you have doubled your initial capital, withdraw a significant portion (e.g., 2/3 of your profits). For instance, if you start with $1,000 and now have $2,500, withdraw $1,000.

5. Prefer Longer Expiry Periods

   Expiry times start as short as 30 or 60 seconds but can last hours or even months. Prefer expiry times of at least 1 hour to avoid noise and excessive market volatility.

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Choosing Binary Options Brokers Wisely

Selecting the right broker is critical and should be based on thorough research and reviews.

Characteristics of Reliable Binary Options Brokers

• Regulation and Safety: Choose brokers based in countries with strict financial legislation, preferably regulated ones (e.g., CySEC in Cyprus).

• Popularity and Reputation: Use internet tools and rankings (Google PR, Alexa rank) to gauge popularity. Avoid brokers with very low rankings or that are too new.

• Trading Account Features: Examine minimum deposit requirements, payment methods, withdrawal fees, and bonuses before opening an account.

• Asset Index: Ensure the broker offers a diverse asset range, especially those you plan to trade (e.g., Forex minors, exotic pairs, specific stocks).

• Payout and Refund Rates: This is crucial after reliability and asset index. Compare brokers by summing payout and refund rates for your preferred assets.

Example comparison formula:

$$\text{Total Earnings Ratio}=\text{Payout Rate}+\text{Refund Rate}$$

Choose the broker with the best total earnings ratio for the assets you intend to trade.