1-Day Binary Options
1-day binary options trading is a fast-paced investment style. Hold your nerve for 24 hours with a simple price prediction on popular markets like stocks, forex and commodities. This guide explains how 1-day binary options contracts work, beginner-friendly strategies, plus steps to start trading. We also list the best brokers for trading 1-day binary options in 2022.
What Are 1-Day Binary Options?
Binary options are a straightforward derivative product used to speculate on financial markets, such as the Nasdaq. As the name suggests, 1-day binary options expire after 24 hours. Investors simply make a straightforward bet on the future price of an asset. For example, will the price of gold be higher in 24 hours versus its value now? If the trader is correct they win a fixed payout, while if the prediction is wrong, they lose their initial deposit.
1-day binary options are arguably less risky than contracts with a tighter timeframe, for example, 60 seconds. However, as with all forms of trading, there is always an element of risk involved.
Let’s say a trader wants to speculate on the GBP/USD forex pair…
The current market rate is listed as 1.18. Based on some prior research and knowledge of the market, the investor predicts that the value of the US Dollar will increase in the next 24 hours. With this in mind, the trader invests $100 and the broker offers a pay-out of 70%.
If at the 24 hour expiry, the rate is higher than 1.18, the investor receives the $100 stake plus $70 in profit. However, if the market rate stays the same or drops after 1 day, the trader loses their $100 initial investment.
Pros Of Trading 1-Day Binary Options
- Rewards – The top brokers offer competitive returns on 1-day binary options. Average pay-outs are normally between 65-80%
- Upfront risk – Traders know how much they stand to lose before taking out a contract. For example, if the investor buys a 1-day binary option for $100, that is the maximum amount they will lose
- Portfolio diversification – Day trading binary options can be used to spread risk between various markets, from equities and forex to precious metals and cryptocurrencies
- Turnover – A key advantage of 1-day binary options is the quick pay-out potential. If your prediction is correct, you could see profits automatically credited to your account following the 24 hour expiry. Returns can then be withdrawn or used to open a new position
- Straightforward – With only two possible outcomes, binary options offer a relatively straightforward way to speculate on financial markets, making them popular with beginners. There is also no need to constantly monitor positions or make complex trade amendments. Once a position has been opened, it is simply a waiting game
Cons Of Trading 1-Day Binary Options
- Scams – There are some scams operating in the binary options space. And while regulators are clamping down on untrustworthy providers, investors should still be careful when signing up. If pay-outs sound too good to be true or if abnormally high welcome offers are available, traders should think twice before investing cash. Some brokers also manipulate price indicators and pay-out conditions
- Capped profits – No matter how much the market moves in your favour, profits are capped. This can help keep a handle on your risk exposure but it also means a ceiling on returns
- Limited protection – Binary options platforms do not typically offer the same level of protection provided by CFD brokers, for example. Safety measures like negative balance protection, 24/7 customer support and access to investor compensation schemes may not be available
Inexperienced investors can lose money if they trade without a plan. The best strategies combine technical and fundamental analysis and take into account the specific expiry time, for example, 1 day. So consider the following when developing a plan:
Many of the best binary options day traders use technical indicators to identify patterns and trends in underlying markets. Leading platforms offer a suite of free indicators that can be downloaded and added to graphs and charts. But with sometimes thousands of technical indicators available, we have listed a few particularly useful options for investors trading 1-day binary options:
- Relative Strength Index (RSI) – The relative strength index indicator can show whether a market is overbought or oversold
- Moving Averages (MA) – The moving average indicator can help identify support and resistance levels. The trend indicator is based on past prices and can be used to view the performance of an asset over the previous day, for example
- Average True Range (ATR) – The average true range indicator is typically derived from a 14 day moving average. It is particularly useful for 1-day binary options trading because it can suggest how much a price could move, highlighting minimum and maximum thresholds
The best 1-day binary options trading strategies incorporate a considered approach to risk management. Seasoned traders, for example, often follow a maximum 5% rule, meaning they only invest 5% of their total capital per trade. This means a couple of bad trades won’t wipe out your trading pot.
Note, you can increase the percentage as you develop and refine a consistently profitable strategy.
Signals are another useful tool for novice traders. Signals alert investors to potential trades and can be delivered via SMS straight to mobile devices. Algorithms or expert market analysts essentially do the heavy lifting, allowing you to buy and sell based on recommendations. Just make sure you read reviews and customer ratings before paying for a service. Some of the best brokers for trading 1-day binary options also offer free signals.
Binary options day trading requires emotional resilience. The volatile nature of financial markets can lead to hasty decision making. With that in mind, we recommend that beginners practise holding their nerve in a free demo account before putting cash on the line.
Once you have established a successful 1-day binary options trading strategy, you may want to consider automating your plan. Trading bots will automatically enter and exit positions based on agreed criteria. These instructions can be set by you, the trader. Alternatively, you could buy a pre-existing bot from a central hub like the MetaTrader Market.
Day trading binary options is not legal in every country. In 2018, European regulators prohibited the sale or promotion of binary and digital options to retail investors in the EEA. This included those under the authority of the UK Financial Conduct Authority (FCA). Concerns centred around pricing models where investors were being offered high returns for lower probability events and low returns for higher probability events. The European Securities and Markets Authority (ESMA) believed this, alongside short expiry times, encouraged addictive trading behaviours.
Following a crackdown on misleading brands, many binary options brokers are offering more transparent trading services with clear pricing schedules and risk percentages. Retail traders can now sign up with various onshore and offshore providers with high customer ratings.
Final Word On Trading 1-Day Binary Options
Day trading binary options is an exciting yet high stake investment style. To succeed you will need to take a careful approach to market research, have a defined risk management plan, and make use of your broker’s trading tools. For beginners, it could also be worth getting familiar with 1-day binary options on a demo account before investing money.
What Are 1-Day Binary Options?
One-day binary options trading involves price speculation within a 24-hour time frame. Traders must predict whether the price of an underlying asset will be above or below a certain price at the end of the period. Correct predictions will result in an automatic pay-out while incorrect predictions will mean the loss of your initial deposit.
Which Global Brokers Offer 1-Day Binary Options Trading?
Is Day Trading Binary Options Legal?
Binary options trading is legal in some countries, however, some regulatory authorities have banned the concept, regardless of the expiry time. In the US, India, Singapore, China and Australia, among others, retail traders can invest in binary options though some local restrictions may apply.
Can Anyone Participate In 1-Day Binary Options Trading?
Yes – anyone can invest in binary options if they are legal in your area and you open an account with a supporting broker. However, trading 1-day binary options does come with risk, so we recommend using a demo account until you feel confident investing real funds.
How Can I Succeed Trading 1-Day Binary Options?
There is no universal method for successfully trading 1-day binary options. Research previous market trends and utilize the tools, indicators and educational content offered by your online broker. It may also be a good idea to practise trading in a demo setting before risking capital.