Binary Options – Commonly asked questions
This page answers some of the most frequently asked questions that we receive from our visitors. We will endeavor to regularly update this page with new information.
Are binary options legal?
Binary options have been traded by professional and institutional traders for decades. Many of the major investment banks such as Goldman Sachs, JP Morgan and Standard Chartered offer binary or digital options to clients such as hedge funds or proprietary trading firms.
It was only around 2008 that retail binary option brokers started to emerge and offer the product to the general trading public. And in recent years it has taken off in a big way. Government regulators (ASIC, CySec, FCA etc.) have responded swiftly to regulate the industry to ensure customers’ rights are protected and that brokers adhere to strict standards. Per most government regulators, binary options are a legitimate financial product and hence perfectly legal to invest in.
I am new to trading and would like to start. Do you have any advice for beginners?
Our advice is to first do your research. We have spent a lot of time trialing different brokers and writing reviews which cover many aspects of the trading process, this is the best place to start. We suggest signing up for a free account once you have decided on a broker (or even try a couple), read through their education materials and practice some trades on their demo platform.
Is trading binary options the same as trading forex?
They are similar, but have some differences. Binary options are a very straight-forward way to trade global markets (currencies, commodities, stock indices) and control risk compared to regular forex. Traders simply need to understand two outcomes: will the price go up or down? Binary option traders know the risk to their capital before they enter the trade, yet there is still opportunity to make large profits.
What ID documents do I have to provide?
This part is very important. Most brokers will require two types of ID documents to sign up, primary photo ID and secondary proof of address. Your name and address during sign-up must exactly match as on your ID. Acceptable ID documents include:
Primary ID (photo ID): passport, drivers license, government issued residency card
Secondary ID (proof of address): bank or credit card statement, utility bill, drivers license, government issued residency card
What is the minimum capital needed to start trading?
The minimum capital ranges from $5-50 for all the brokers we have reviewed. While you can begin with the minimum we recommend funding with at least $100 and then adding capital after you feel comfortable. Profitable professional traders will sometimes lose money in the short term on their strategy so it is important to have sufficient capital to see through these “draw-down” periods.
What is the minimum transaction amount?
The minimum trade amount for most options is typically $5-10. Some brokers advertise a $1 minimum trade size but it is often only on limited option types.
I want to deposit a large amount. Which brokers are the safest?
If you are a trader who transacts in large amounts or plan to deposit above $5000 we recommend you only deal with brokers who operate in highly regulated jurisdictions i.e. HighLow Markets, IQ Option or Binary.com. Regulation ensures brokers operate with high levels of their own capital, have strict risk management and that client rights are protected.
What are the market opening hours?
Most currencies and gold trade continuously 24 hours a day, Monday to Friday. Stock indexes (Nikkei, Dow Jones, ASX, Hang Seng, DAX) are available during their respective stock market opening hours.
How old do I have to be to trade binary options?
You must be over 18 years of age.
What’s the maximum amount I can earn?
It is impossible to say. There is no effective limit, some people aim to make a couple extra hundred dollars per week as a side hobby while others will be risking $1000-5000 per trade multiple times a day. One common characteristic of consistently profitable traders is they usually have a plan, for example focusing only on one asset type (e.g. gold), trading after major data releases like US Non-Farm Payrolls when market volatility is high or trading only during a certain time each day when there’s lots of activity such as the US or Asian market opens.
I don’t have a credit card, am I still able to deposit?
Yes, but it depends on your broker. Alternative methods include using a payment processing company like Neteller (some brokers only accept USD) or local and international bank transfers. Payments are one of the most complicated aspects, so it’s important to carefully check the methods offered and that you can make both deposits and withdrawals easily before signing up.