Innovations in the binary options market

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News: Innovations in the binary options market

As you surely noticed trading markets have been tumultuous since early 2020. Some brokers are going (such binary brokers closing down their businesses), others are coming. On top of that, a lot of incomplete or twisted stories have spread over the internet such as about what happened in March. A lot of people are sending me e-mails asking about what may come next. I would love to answer your questions, unfortunately right now nothing is 100% sure.

In this text, I will do my best to explain to those who don’t understand the situation or want to know more about what’s happening in the markets. Please, read the article completely and attentively.

Intro: What’s happening?

This had been a hotly debated issue in the binary options trading community for long but nobody knew when it was going to come. It came not long ago. What I am talking about? I’m talking about tightening rules or setting restrictions for online trading.

To be more specific, binary options trading will be banned totally because some people suffer losses. Obviously not everybody is a loser but the majority of the traders is. As we described in our article Statistics of binary options earnings 75 % of all traders lose, which was admitted by ESMA.

Regulated vs. non-regulated brokers

The mentioned changes will only impact brokers regulated by the EU. It’s a pity, but there is no other way to tackle this issue. Brokers regulated outside the EU (such as HighLow in Australia) or non-regulated brokers will not be affected by this change. These brokers will be allowed to continue offering binary options trading as before. However, be careful.

MasterCard has recently announced its intention to ban all payment transactions on accounts operated by non-regulated brokers and scam brokers. VISA has not yet mentioned such plans in the public but it’s likely that it will follow the suit. This could be the end of scam brokers – eventually.

You may say that binary options as such (traditional options) will soon no longer be allowed for trading. Attention! Digital options, ladder options, and similar instruments will remain unaffected. These will be available in the future same as before. By the way, digital options are being offered by the best broker in the market, IQ Option, so don’t worry that nobody will be offering trading this instrument.

Along with binary options, the recent regulations are centered on other financial instruments such as CFD or cryptos – continue to read.

Changes in Forex and CFD trading

The change will also affect Forex and CFD brokers by imposing leverage limits for trading. The new limits will be as follows:

  • 30:1 for major currency pairs (EUR/USD, USD/JPY. )
  • 20:1 for other currency pairs, gold and main indexes
  • 10:1 for commodities (except gold) and secondary share indexes
  • 5:1 for individual shares and other reference values
  • 2:1 for cryptocurrencies

The restrictions also include a rule of closing a trade at a certain margin based on the account, protection against negative balance based on the account, ban on using incentives by CFD providers and warning from risks associated with specific companies communicated in a standardized fashion.

Today, I’ve read in an article published at FXStreet that people from PurpleTrading simulated a case to demonstrate how trades opened until now might look like under the adoption of the new restrictions. Their verdict was as follows:…The majority of our clients is efficiently using leverages 1:10 or 1:20. These conservative traders will not be affected by the lowering of the leverage limits. These traders will be allowed to continue trading in the same way with the same trade volumes as so far.

What about cryptocurrencies?

Cryptocurrencies represent a different league. Which means that the changes and restrictions mentioned above will apply to each authorized CFD broker (such as Plus500) offering cryptocurrency trading.

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Other brokers including crypto exchanges such as bitfinex, coinbase, or binance will not be affected.

Your frequent questions on this topic

When the changes come into effect?

According to ESMA: “The regulations will be published in the EU Bulletin coming into effect one month (binary options) and two months (for CDF) respectively from being published in the official bulletin”. The regulations have not yet been published, so binary options will be offered for trading for at least one month from now.

Does this measure mean the ultimate ban on trading?

No. It doesn’t. The official document says: “In line with MiFIR, ESMA may adopt temporary intervention measures for the maximum of three months. Before the end of the 3-month period ESMA shall consider whether the measures should be extended for another three months.” This means that the ban applies to 3 months, after which the trading of binary options will be possible unless otherwise decided by EMSA.

Can I continue trading?

Yes, you can. As mentioned above you still have some time to enjoy binary options trading in the same way as before. Sooner or later, this type of trading may have vanished. But digital options, Forex and cryptocurrencies will survive.

Is my money at risk?

No, it’s not. This would contradict to the regulators’ ambitions. Your money is yours and nobody will take it from you. If you have your money deposited on a trading account controlled by a broker like IQ Option or HighLow you don’t have to fear. You can continue until the regulation (ban) comes into effect. Then you can either withdraw your money or use it for trading other instruments (forex, cryptocurrencies, digital options etc.)

Brokers to choose from for trading

We advise the same as many times before: Read our list of recommended brokers for binary options, for forex and for cryptocurrencies. We namely recommend the following brokers: IQ Option, HighLow, Plus500, PurpleTrading a CoinBase.

More information below: (to display, click one of the buttons)

  • Statement of ESMA
  • Quite a good video summarising the topic is available at YouTube
  • Message about MasterCard and blocking of transactions of non-regulated brokers
  • Official EU Bulletin

Author

More about the author J. Pro

Unlike Stephen (the other author) I have been thinking mainly about online business lately. I wasn’t very successfull with dropshipping on Amazon and other ways of making money online, and I’d only earn a few hundreds of dollars in years. But then binary options caught my attention with it’s simplicity. Now I’m glad it did because it really is worth it. More posts by this author

Smart Chart Strategy, New Innovations for Binary Options Trading

Smart chart is a new innovation from binary options. This sophisticated chart tool will make your technical analysis even more exciting. It looks so attractive, surely you will be fascinated to see it.

Just open binary.com, select the ‘source’ menu where there is a smart chart option. Try selecting an asset class, then select the bollinger band indicator with the candlestick chart, as soon as your computer screen looks like hills decorated with red flowers and green leafy trees add to your passion for technical analysis.


Smart Chart has everything needed by professional traders

There are also facilities contained in the smart chart, namely:

– Powerful interactive graphics that can handle and visualize large data easily
– A smooth and intuitive user experience across desktop and cellular devices
– More than 100 technical indicators, comparison studies and 33 different images that allow all levels of analysis

Smart charts can be used for all types of asset classes found on binary platforms, namely, Forex, Indices, OTC Stocks, Commodities, Volatility Indices.

Apply Smart Chart

One of the facilities that we can enjoy in this smart chart is that we can compare several asset classes in one screen. Maybe you want to see trends from other asset classes while constantly monitoring the main asset class that is operating.

For example, we are opening a volatile chart of 75, which is illustrated by a candlestick with a thick line. Then want to know the condition of the volatility 25 index asset class, shown in green. The Volatility 50 index, shown in blue. and the 100 index volatility, indicated by an orange color chart. We can see it simultaneously.

From the picture above we can see that the asset volatility class 100 index is in a bullish trend, while the asset volatility class 25 index and volatility of 50 index are sideways.

Thus we can plan what strategies can be used to utilize this moment to the four asset classes simultaneously. Or you can choose one of them to play.

This product is available on the binary platform, you can see and try it. Which will definitely make you feel at home in front of the screen. And in order to be able to apply the results of your analysis, immediately create a binary options account. It’s free.

A Guide to Trading Binary Options in the U.S.

Binary options are financial options that come with one of two payoff options: a fixed amount or nothing at all. That’s why they’re called binary options—because there is no other settlement possible. The premise behind a binary option is a simple yes or no proposition: Will an underlying asset be above a certain price at a certain time?

Traders place trades based on whether they believe the answer is yes or no, making it one of the simplest financial assets to trade. This simplicity has resulted in broad appeal among traders and newcomers to the financial markets. As simple as it may seem, traders should fully understand how binary options work, what markets and time frames they can trade with binary options, advantages, and disadvantages of these products, and which companies are legally authorized to provide binary options to U.S. residents.

Binary options traded outside the U.S. are typically structured differently than binaries available on U.S. exchanges. When considering speculating or hedging, binary options are an alternative—but only if the trader fully understands the two potential outcomes of these exotic options.

Now that you know some of the basics, read on to find out more about binary options, how they operate, and how you can trade them in the United States.

U.S. Binary Options Explained

Binary options provide a way to trade markets with capped risk and capped profit potential, based on a yes or no proposition.

Let’s take the following question as an example: Will the price of gold be above $1,250 at 1:30 p.m. today?

If you believe it will be, you buy the binary option. If you think gold will be below $1,250 at 1:30 p.m., then you sell this binary option. The price of a binary option is always between $0 and $100, and just like other financial markets, there is a bid and ask price.

The above binary may be trading at $42.50 (bid) and $44.50 (offer) at 1 p.m. If you buy the binary option right then, you will pay $44.50. If you decide to sell right then, you’ll sell at $42.50.

Let’s assume you decide to buy at $44.50. If at 1:30 p.m. the price of gold is above $1,250, your option expires and it becomes worth $100. You make a profit of $100—$44.50 = $55.50 (minus fees). This is called being in the money. But if the price of gold is below $1,250 at 1:30 p.m., the option expires at $0. Therefore you lose the $44.50 invested. This called out of the money.

The bid and offer fluctuate until the option expires. You can close your position at any time before expiry to lock in a profit or a reduce a loss, compared to letting it expire out of the money.

A Zero-Sum Game

Eventually, every option settles at $100 or $0—$100 if the binary option proposition is true and $0 if it turns out to be false. Thus, each binary option has a total value potential of $100, and it is a zero-sum game—what you make, someone else loses, and what you lose, someone else makes.

Each trader must put up the capital for their side of the trade. In the examples above, you purchased an option at $44.50, and someone sold you that option. Your maximum risk is $44.50 if the option settles at $0, and so the trade costs you $44.50. The person who sold to you has a maximum risk of $55.50 if the option settles at $100—$100 – $44.50 = $55.50.

A trader may purchase multiple contracts if desired. Here’s another example:

  • NASDAQ US Tech 100 index > $3,784 (11 a.m.).

The current bid and offer are $74.00 and $80.00, respectively. If you think the index will be above $3,784 at 11 a.m., you buy the binary option at $80, or place a bid at a lower price and hope someone sells to you at that price. If you think the index will be below $3,784 at that time, you sell at $74.00, or place an offer above that price and hope someone buys it from you.

You decide to sell at $74.00, believing the index is going to fall below $3,784 (called the strike price) by 11 a.m. And if you really like the trade, you can sell (or buy) multiple contracts.

Figure 1 shows a trade to sell five contracts (size) at $74.00. The Nadex platform automatically calculates your maximum loss and gain when you create an order, called a ticket.

Nadex Trade Ticket with Max Profit and Max Loss (Figure 1)

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Binary Options Trading School
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