Trading Binary options is a fantastic investment opportunity to get into when you’re looking to make short term investments that yield a great profit. As a Nigerian trader, trading in binary options in Nigeria would require that you get to know the best brokers that have a good history with Nigerian traders.
If you’re a beginner, you would find this guide more useful though as the basic knowledge required for trading will be shared as long as other relevant resources that would be fundamental to your binary options trading education and investment.
Here’s what you would learn from this guide:
What are Binary Options?
A binary option is a type of option with a fixed payout in which you predict the outcome from two possible results. If your prediction is correct, you receive the agreed payout. If not, you lose your invested capital, and nothing more. It’s called ‘binary’ because there can be only two outcomes – you either make a profit from your investment or you lose the entire capital. There is no middle ground.
The main difference between more traditional stockbroker trades and binaries is the clear identification of risk and reward before the trade is made. An investor knows exactly how much is at risk, and crucially, also knows the exact value of any potential returns. No calculator, formula, or maths degree is needed to work out profit and loss on a binary option.
The profit from binary options is usually between 75% to 95% of trading capital depending on the broker and the trade in particular.
Here’s a short video showing the basics of trading binary options, we’ll get into more details in the “How to Trade Binary Options in Nigeria” section.
Top Brokers in Nigeria
Here’s our list of the best binary options brokers that are favourable to the Nigerian Trader. We’ve taken factors like licensing, payouts, over the counter or exchange-traded options, minimum deposit (plus deposit and withdrawal methods), minimum trade / maximum trade, charting tools (graph types, forecasting tools), expiry times available,regulation (FCA, CySec, CFTC etc), and customer feedback to select the online trading platform you should be trading with.
Top Recommended Binary Options Broker
Get Started with IQ Option
This broker has been hand-picked by us as the best binary options broker to trade with as a Nigerian trader.
How to Start Trading Binary Options in Nigeria
Below is a step by step guide to placing a binary trade:
- Choose a broker: The first thing you have to do is create an account with an online broker.
- Make a deposit: Deposit the amount you’re willing to use in your trade. It is to be noted that many brokers have a minimum deposit before you’re allowed to trade actively.
- Select the asset or market to trade: Assets lists are huge, and cover Commodities, Stocks, Cryptocurrency, Forex or Indices. The price of gold, or Google’s stock price, for example.
- Select the expiry time: You have to select the time at which you want your prediction to be assessed. Options can expire anywhere between 30 seconds up to a year.
- Click Call / Put or Buy / Sell: This is the part where you choose to buy or sell an asset. Call is the same as buy and put is the same as Sell. If you predict that the value or price of an asset will go up, you choose to buy but if you predict a decline, you choose to sell.
- Check and confirm the trade: Many brokers give traders a chance to ensure the details are correct before confirming the trade.
Types of Binary Options Trade
- Up/Down Options
An Up/Down option can go by a few different names: High/Low, Above/Below, and Over/Under. It is the simplest and most common type of binary option. Up/Down Binary Option Traders simply purchase a “call” option if they believe that the closing price will be above the strike price when the contract expires, or buy a “put” option if they think that market will close below the strike price at expiration.
At this point, we need to explain what the strike price means
The strike price of an option is the fixed price at which the owner of the option can buy (in the case of a call), or sell (in the case of a put) the underlying security or commodity.
- One-Touch Options
One-Touch option requires that the market price touches the strike price at least once during the option contract period for it to be profitable. With One-Touch option, it doesn’t matter if the market is above or below your strike price at the expiration time.
- No-Touch Options
This is literally the opposite of One-Touch option. No-Touch trades require that the market price does not touch the strike price during the life of the contract for a trader to make profits.
- Double Touch/Double No-Touch
They are just like Touch/No-Touch options, only with two strike prices. The asset’s price has to touch (or not touch) two different levels for a trader to win the trade.
- Range Options
For In Range trades, the market price must stay within a predetermined range and avoid touching the two strike prices within the option period in order for your trade to be in-the-money.
Some brokers offer Out of Range options where traders can profit if price breaks out of the predetermined range within the option period.
Popular Trading Strategies
Before we proceed to touch on the strategies one by one, it is important to grasp the idea behind sticking to a strategy or two in the first place. Strategies help in filtering out emotional-based decisions from decisions based on pre-defined parameters that are developed with clear thinking.
A clear trading strategy is also important in pattern formulation and repetition. This helps in being able to replicate similar results on multiple trades over time. Asides the pattern recognition, having a well thought of money management strategy will help you gauge your appetite for risk.
Money management strategy will help you manage your balance so you can get through bad patches and maximize winning streaks.
Moving on to a couple of binary options trading strategies, we have:
- The Trend Strategy
From its name, the trend strategy places a major priority on monitoring the rise and fall of trend lines of the traded asset. The goal is to spot a trend from the market and make a decision to call/put an asset, based on information from recent previous trends.
- Pinocchio strategy
This strategy is utilized when the asset price is expected to rise or fall drastically in the opposite direction. If the value is expected to go up, select call or buy and if it’s expected to drop, select put or sell.
- Straddle Strategy
This strategy is best applied during market volatility and just before the break of important news related to specific stock or when predictions of analysts seem to be afloat.
This strategy involves selecting the buy or call option as well as the put or sell option one after the other depending on how you see an asset moving. An example is to use the put or sell option on an asset when the value or price is high with the hope that it will soon drop in value or price.
When the drop happens, you place the call or buy action to get back the asset with the insight that it will go back up in value. The opposite of this can be done when an asset is initially at a lower value and is expected to rise then fall back down again. The entire point of this is to increase a trader’s chances of making a profit when an asset is very volatile and sharply keeps fluctuating in value
- Risk Reversal Strategy
This strategy is executed by placing call and put options simultaneously on an individual underlying asset. This is especially beneficial when trading on assets with fluctuating values. Since it’s known that binary options can yield profit from one of two outcomes, predictions are made on the two possible outcomes to guarantee at least one profitable outcome.
- Hedging Strategy
This strategy is mainly used by large corporations that trade binary options, investors and traditional stock-exchange as a means of protection and to minimize the associated risks. This strategy places both the call and put options on the same asset so as to be assured of profit regardless of the direction the value of the assets goes, be it up or down.
- Fundamental Analysis
The fundamental analysis binary options strategy is usually adapted when trading the stock of a company. This strategy involves carrying out an in-depth review or analysis of the financial history, earning reports and market share of a company. The aim is to understand the financials of this company so as to make a prediction for the future under similar financials circumstances.
Pros of Trading Binary Options
- Simple Trading
Binary Options Trading has been made simple by brokers such that it only takes minutes from your time of initial deposit to trading assets. All you have to do is select the amount for trading, select the direction you anticipate the market price of your asset to move to, select the expiry time and then wait for the outcome. It’s not complicated at all.
- Low Investment
Binary Options brokers in Nigeria and other parts of the world have made it pretty easy to get into binary options trading with low capital. Some brokers have even lowered the initial deposit to $10 (₦3,700) so as to encourage new traders to start investing.
- Extensive collection Of Assets
While trading binary options in Nigeria, you get to choose from a host of assets like every other trader in the world. The common asset types traded are currencies, stock, commodities, and Indices. Currency trading is similar to Forex and it involves the prediction of one currency’s value against the other. Stocks trading in binary options has to do with trading on the rise or fall of the perceived market value of a company. Trading on commodities involves the prediction of the value of popular commodities like gold, silver, and oil. Indices combine various stocks together to reduce a trader’s risk of losing it all if one of the combined stocks fails with the hope that the success from others will make up for it.
- Fixed Risk and Reward
You get to know you much you stand to gain by investing a particular amount on an asset at the beginning of your trade. This way you’re able to know what you stand to gain or lose upfront. Expiry times for binary options are much shorter compared to more traditional financial trading methods. They can range from 15 mins up to a week whereas more traditional forms are usually held longer for up to months or years before you see any return on them.
- 24/7 Trading
You place binary options trades at any time of the day every day. Brokers now also have mobile apps that allow you to trade on the go.
Cons of Trading Binary Options
Regulation in the binary options industry is somewhat of a gray area. That’s why some unscrupulous platforms have taken advantage of unsuspecting newbie traders. These platforms have made it difficult for traders to earn any significant profit through manipulation of data and payout difficulties. This is why we’ve only recommended trusted binary options brokers for you.
- High Risk
Binary options trading in Nigeria is risky due to the potential of losing your entire investment in one trade. It’s advised that you start trading with a demo account as provided by the broker before proceeding to trade live.