1-Day Binary Options
1-day binary options trading is a fast-paced investment style. Hold your nerve for 24 hours with a price prediction on popular markets like stocks, forex and commodities to either win a fixed payout or lose your stake. This guide explains how 1-day binary contracts work.
Best Brokers With 1-Day Binaries
Most platforms we've tested offer 1-day binaries, but these scored the highest ratings in our hands-on evaluations. Some of these binary brokers are based offshore and may not be regulated in your country.
List all Binary Options Brokers
What Are 1-Day Binary Options?
Binary options are a straightforward derivative product used to speculate on financial markets, such as a US stock. As the name suggests, 1-day binary options expire after 24 hours.
Investors make a 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 stake.
Example
Let’s say a binary trader wants to speculate on the EUR/USD forex pair…
Based on some prior research and knowledge of the market, the trader predicts that the value of the euro vs 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 80%, which you can see in the CloseOption platform below, where we placed this trade as an example.
If at the 24 hour expiry, the rate is higher than the value of the euro when the trade was opened, the trader receives the $100 stake plus $80 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
- 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 – Trading binaries with 1-day contracts can be used to spread risk between various markets, from equities and forex to precious metals and cryptocurrencies.
- Turnover – An 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 Returns can then be withdrawn or used to open a new position.
Cons Of Trading 1-Day Binary Options
- Volatile – While longer than some binary timeframes, which can expire after mere seconds, a 1 day binary contract is still short and can fluctuate due to macro factors or news announcements that can be hard to stay abreast of and factor in when opening trades.
- Scams – There are binary options scams operating in the industry. And while regulators are clamping down on untrustworthy providers, with bodies like the CFTC in the US issuing warnings, 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 may also manipulate pay-out conditions on 1 day binaries.
- Capped profits – No matter how much the market moves in your favor, profits are capped with a 1 day binary contract. 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 and access to investor compensation schemes may not be available.
Strategy Tips
Inexperienced investors can lose money if they trade 1 day binaries without a plan. The best strategies use either technical and fundamental analysis and take into account the specific expiry time and have a money management plan for binaries.
Indicators
Binary options traders operating at the 24 hour timeframe often use technical indicators to try and identify patterns and trends in underlying markets. Leading platforms offer a suite of free indicators that can added to charts.
But with sometimes dozens of technical indicators available, we have listed a few particularly useful options for those interested in trading 1-day binary options:
- Relative Strength Index (RSI) – The relative strength index indicator can help show whether a market might be overbought or oversold.
- Average True Range (ATR) – The average true range indicator is typically derived from a 14 period moving average. It is particularly useful for 1-day binary options trading because it can suggest how much a price could move, highlighting possible minimum and maximum thresholds.
- 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.
Risk Management
The best 1-day binary options trading strategies incorporate a considered approach to risk management. Seasoned traders, for example, often follow a maximum 2% rule, meaning they only invest 2% of their total capital per trade. This means a couple of bad trades won’t wipe out your trading pot.
That said, some of our team suggest going much lower, starting at just 0.5%. This is more conservative from a risk perspective but may further shield beginners from blowing up their accounts.
Note, you could increase the percentage if you develop a profitable strategy.
Signals
Binary signals are another potential useful tool for novice traders. Signals alert investors to potential trades and can be delivered via SMS straight to mobile devices, or can be viewed directly in many platform interfaces.
Algorithms or market analysts essentially do the heavy lifting, allowing you to choose whether to buy and sell 24 hour contracts based on recommendations.
However, we recommend caution here, as many binary signal providers are scams and there’s no guarantee you’ll make winning trades by following their recommendations. It’s also worth checking signals provided align with your 24-hour view of the market.
Emotional Control
Binary options with 1 day contracts 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 binary demo account before putting cash on the line.
Regulatory Considerations
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), which issued its own ruling. This product intervention wasn’t renewed in 2019 as many member states brought in their own rulings.
Concerns centred around unfair pricing and payout models, short-term expiries that encourage overtrading, promotions and incentives, and outright fraudulent providers.
Other regulators followed a similar approach, with ASIC in Australia prohibiting the sale of binaries, with the ban extended until 2031.
Traders interested in 1-day binaries can still use offshore providers but these come with high risks. You could lose any money you invest and may not have legal recourse if you run into withdrawal disputes or other problems.
Bottom Line
Trading binary options over a 24-hour timeframe can be an exciting yet high risk 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.
FAQs
What Is A 1-Day Binary Options Contract?
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 stake.
How Can I Succeed Trading 1-Day Binary Options?
There is no universal method for successfully trading 1-day binary options. Understanding market trends and utilizing the tools, indicators and educational content offered online is a sensible place to start. For beginners, it’s also worth getting familiar with 1-day expiries in a binary demo mode before investing money.