Over a brief few years, binary options have become the preferred financial instruments of the masses. Their appeal is largely due to their apparent simplicity and accessibility. Binary options do not require massive investments, yet they can indeed yield handsome profits for those who know how to make proper use of them. Using binary signals can be a great help.
The mechanics of trading are extremely simple as well. A person who never heard about trading and binary options before, can understand the mechanics and be off trading in less than 5 minutes. All this apparent simplicity hides an extremely difficult equation though that every profitable binary option trader has to solve.
Payouts on binary options range from a dismal 55% to 90%. What this means is that one needs to find a way to win a lot more than 50% of his/her trades, on a consistent basis. This is accomplished through the combination of mechanical, technical and fundamental analysis elements, and frankly, it isn’t an easy task. The rank-and-file binary option trader will simply not be able to afford to properly analyze the market, and therefore – without outside help – he/she won’t be able to beat the above detailed equation. This is where binary signals come into the picture.
What are binary signals?
Binary option signals are essentially trading recommendations. As such, they come in a large variety of shapes and sizes. A typical binary option signal comes from an entity which has performed proper market analysis and thus, has strong reasons to believe the signal will indeed result in profitable trades. Such signals can be generated by automated signal services or by actual human traders. Sometimes, human traders allow others to follow their trading and to actually copy their moves. This is called copy-trading and it is indeed a signal service of sorts too. Most signal services however aim to make money through their recommendations, and therefore it is very important for them to put out a product which delivers. There are of course others out there, who abuse the situation. These are binary option signal scammers.
Are binary option signals legit?
Some are legit indeed, while others are not. One of the main challenges faced by any trader looking to resort to signals for trading, is to spot the differences between legit services and scammers. As a starting idea, one needs to look at whether there’s an actual human involved in the signal-generating chain somewhere. This is important, because without proper fundamental analysis, trading signals aren’t particularly reliable. Fully automated services are exclusively based on combinations of various technical indicators. Such systems work well too, under given conditions, but when the markets are jolted by fundamental factors (and that happens a lot), they become utterly useless. The fundamentals always have to be included in signal generation. Binary option signals which benefit from human input are often called “expert alerts”. Some fully automated systems use auto-traders to act on their own signals. Such setups are scams without a single exception. One should never make any sort of investment with one of these auto-trading scammers, regardless of the lofty promises they make and the outrageous deals they offer.
What types of binary signals are there?
Binary option trading signals can be of two basic types: simple and complex. When talking about such signals, most traders refer to the simple kind. Such signals tell the trader the strike-price at which the recommended trade should be placed, the direction of the trade, the expiry time and the underlying asset, of course. They look something like this: EUR/USD, 1.100, Call, 1 Hour. As you can see, all the information is provided to the signal user, in a semi-digested form. All one really needs to pay attention to when acting on such a signal, is timing. Trades need to be placed at the right strike-price, as soon as possible. Any delays mean that the quality of the signal decays.
Complex trading signals are a different breed. Such signals tell traders where the price of an asset will be at given time in the future. Everything else regarding the actual trading of this signal is left to the trader. Such trading signals have a particular kind of charm too, and they do leave quite a bit of control in the hands of the trader. This way, one will be able to take full credit in case of success, and deflect all blame in case of a failure…this might indeed be the perfect trading setup for many.
Another advantage associated with such complex trading signals is the fact that they lend themselves well to certain trading strategies and mechanisms. NADEX for instance offer a feature which works extremely well with complex trading signals.
There are indeed good trading signals out there. There are lots of scams too. Even if you happen to find a solid and reliable signal service provider, take a long hard look at its pricing. You can’t afford to pay more for the signals than you’re making on your winning trades.