Binary options are an intriguing and exciting financial instrument that can yield up to 95% profit in as little as one minute. In this article, we will explore what binary options are, the types available on IQ Option, how to trade binary options, binary trading tips for beginners, and the strategies you can use to analyse short-term market action.
What’s Binary Options?
Binary options are a high-risk, high-reward financial instrument that involves predicting whether the price of a selected asset will rise or fall over a certain period of time. Simply put, you click the “Higher” button if you think the price will rise in the near future, or the “Lower” button if you think the price will fall.
If your prediction is correct, you make a profit; if not, you lose the investment amount. Hence, these are also known as “all-or-nothing” options. If the closing and opening prices are the same, you neither win nor lose, and your investment is returned to your balance.
Binary Options: key terms to know
To understand how to trade binary options, it’s essential to understand the basic terms.
Opening price
Your predictions are made in comparison to the opening price, which is the price at the moment when the trade is initiated.
Closing price
The closing price is determined according to your chosen expiration time. For example, if you trade a 1-minute option, it will close at the price at the end of that minute.
Expiration time
Your trade will be closed automatically at the selected time. At IQ Option, options can last from 1 minute to 1 month. The expiration time will be indicated on the chart as a red line.
Payout offer
This is the potential profit you will make if your prediction is correct.
The profitability percentage is pre-set for each asset — you can view it on the right-side panel.
Purchase deadline
A dotted white line on the chart indicates the time until which you can buy options. You can purchase as many options of the same asset as you want before this deadline, in any direction.
Call Option
Also known as a “Higher” or bullish option. The Call option will result in a profit if the closing price is higher than the opening price.
Put Option
In other words, a “Lower” or bearish option. It will result in a profit if the closing price is lower than the opening price.
Types of Binary Options at IQ Option
IQ Option offers several assets in the Binary Options category. These include currency pairs, stocks, gold, and OTC (over-the-counter) assets that you can trade during the weekend when other markets are closed.
- Currency pairs
| EUR/USD | USD/JPY |
| EUR/GBP | EUR/JPY |
| GBP/USD | AUD/JPY |
| AUD/USD | USD/CAD |
| GBP/USD | CAD/CHF |
| GBP/JPY | USD/CHF |
- Stocks & Commodities
| JPMorgan | Alibaba |
| Microsoft | Amazon |
| Coca-Cola | Intel |
| Snapchat | Tesla |
| Goldman Sachs | Nike |
| Baidu | |
| Mcdonald’s | Meta |
| Citi Bank | Apple |
| AIG | Gold |
- OTC Options
| USD/JPY | GBP/JPY |
How to trade Binary Options on the IQ Option Platform
Let’s cover the main steps of opening and closing a binary options trade on the platform.
1. Enter the amount you want to invest in the ‘Amount’ section on the right side of the screen.
2. Set the expiration time below the amount.
3. Analyse the price movement using indicators and binary options strategies (more on that later).
4. Select the direction of the price change: Higher or Lower, before the chart reaches the purchase deadline.
5. Wait for the trade result. Meanwhile, you can open more deals without waiting for the first one to close.
6. If your trade is going wrong, you can close it manually before it expires to lose only a portion of your investment instead of the entire amount. To do this, click the Sell button in the upper right or select ‘Show Positions’ in the bottom right and choose your option from the list.
Binary Options strategies that traders enjoy
Since binary options trades are usually short-term and fast-paced, they can be challenging to analyse. However, many methods can help back your decisions with analysis. Here are a few simple and effective binary options strategies.
5 candlesticks
Sequential candles of the same colour are a simple method for finding entry points.
How to use:
1. Switch the candle type to Heikin-Ashi.
2. Look for five consecutive candles of the same colour, indicating a likely trend continuation. Ignore dojis or spinning tops (candlesticks with small bodies and long tails), which suggest the sequence may break soon.
3. Enter a trade at the close of the 5th candle, following the direction of the trend.
Bollinger Bands + RSI
This strategy involves two indicators, each performing its own role: Bollinger Bands help identify the entry point and trade direction, while RSI confirms the signal.
How to use:
- Go to the ‘Indicators’ section in the bottom-left menu and apply 2 indicators with the following settings:
| Bollinger Bands | RSI |
| Period: 20 Deviation: 2.5 | Period: 4 Overbought level: 80 Oversold level: 20 |
- Search for the entry point. Wait for a candle to close beyond the upper or lower line of the Bollinger Bands; the farther it closes, the better. Simultaneously, check if the RSI crosses above 80 or below 20.
- Open a Binary Options trade. Enter the trade on the second candle moving in the opposite direction when it crosses the Bollinger line.
In the example below, a green candle breaks above the upper line, followed by a red candle, indicating a signal to open a bearish trade.
At the same time, the RSI is crossing above 80, confirming the signal.
Binary Options for beginners involve exploring different approaches and strategies. Check out our articles on choosing your trading strategies (part 1 and part 2) and be sure to apply the binary trading tips below 👇
Binary trading tips for beginners
1. Follow the 2% risk rule
Binary Options trading is a high-risk financial activity. If you lose a deal, you lose it all. That said, you might not want to risk more than 2% (conservative approach) or 5% (aggressive approach) of your balance per trade. It’s also a good idea to find signals that support your trading intuition by using technical indicators and trend lines.
2. Test on Demo
There are hundreds of binary options trading strategies, but only a few have truly good win rates. So, how do you figure out which ones are legit?
Here’s the plan: pick a strategy and put it to the test with at least 20 trades. Don’t risk real money just yet — use a demo account for this trial run. Once you’ve seen consistent, promising results, you can confidently transition to making real trades with your newly vetted strategy.
3. Control your emotions
Binary options trading can feel like riding a high-speed roller coaster without a seatbelt, making it easy to lose your bearings. That’s why developing a ‘trading brain’ is crucial — it means taking losses in stride and seeing them as part of the job.
Losses happen for two reasons: either the market unexpectedly turns against you despite your analysis, or you made a mistake. If it’s the market, why stress? It was out of your control anyway. If it’s your mistake, learn from it. You will remember it forever and won’t repeat it.
In the end, an experienced trader is just someone who’s made plenty of mistakes and learned from them. Embrace each loss with patience and dignity; it’s all part of becoming a better trader!
