Binary Options Trading in the UK

Everything you need to trade binary options successfully.
Research. Find a broker. Trade.

For UK investors, trading with binary options is a tax free form of investment with very quick results – minutes rather than months or years. The word binary is used because there are just two possible outcomes – either the trade is successful, and the investor gains a significant return (usually between 75% to 95%) – or the trade is unsuccessful, and the full investment amount is lost.

So ‘binaries’ (or ‘digital options’) are a high risk form of investment, but that risk is offset by the potential for very high rewards with minimal waiting time. Most brokers are regulated, offering consumers the sort of protection they would expect while using financial instruments of this type. Returns from binary trading are also currently viewed as tax free by HMRC.

Top Brokers in the UK 2017

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What Are Binary Options?

Binary options are a derivative, traded on any asset or market. For example a stock price (Twitter, AstraZeneca etc), indices (FTSE, DAX, Nikkei), commodity value (gold, crude oil) or foreign exchange rate (EUR/USD, GBP/USD). Even cryptocurrencies such as Bitcoin or Ethereum can be traded.

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.

This structure of the trades is what has led to the terminology of “all or nothing” , or “cash or nothing” being widely used.

The traders only decision is if they think the value of the asset will rise or fall. The degree of the price change is not important. The trader is purely speculating on whether the price will be higher or lower than the current price, at a specific time in the future.

Short term price movement can be triggered by news stories or headlines, quarterly statistics, buyout rumours or even global security fears.

Example Binary Trade

If a trader felt the price of oil would rise, he would be a buyer and take a ‘high’ option on oil (a “call”). If, when the option ‘expires’ (more on expiry times later) the price is higher, the trader wins. They would then receive the stake back, plus 65 to 95 per cent. If the price was lower at the point of expiry, the entire invested amount would be lost.

Trading binary options offers a Yes/No proposition. Although there are variations on the High/Low option, this type of investment will always have a black and white, Yes/No, binary outcome. Where trades can be closed, redeemed or sold mid-trade, payouts have absolute figures of 0 and 100 and prices move between as the market dictates – until closure.

Expiry Times

Every binary option is offered with an expiry time. This is the point at which the trade will end. So the price at expiry is the one that will decide whether an option has won or lost (“in the money”, or “out of the money” in binary jargon). These expiry times can vary from just 30 seconds or 1 minute, (known as ‘turbos’), to a full day (‘end of day’), to even longer in some circumstances – rolling up to a full year.

Generally however, a binary option is used for short term trading – usually under 30 minutes. Longer term expiries – and the element of fixed risk – does make them useful tools for hedging or diversifying other holdings.

So What is Binary Trading?

The meaning of ‘binary trading’ is the act of placing binary trades. Traders can invest in prices going up or down, or staying within a certain range or reaching a preset value. All of these represent examples of online binary option trading.

Payouts change dependant on the asset and the expiry time. Differences can be significant so traders looking to use binary options long term, need to shop around to find the best payout for the asset class (or classes) they intend to trade.

Who Are Binaryoptions.co.uk?

At binaryoptions.co.uk, we provide a full suite of services and information to anyone looking to get involved in binary options trading. From educational material and tutorials, to advanced strategy, tax implications and broker comparison.

Binary options offer a form of market speculation. Providing a method of making money from price movement in the majority of major asset classes. It is a growing area of trading in the UK, and that is one of the reasons why we are aiming to provide the definitive guide to binary trading in the UK. Get in touch here.

Legitimate Investment

Although binary trading is in a period of growth, it remains a relatively unknown product. Over time, this is likely to change. As digital options (as they are also known) offer a very simple fiscal arrangement. They are a legitimate way to play the financial markets.

Binaries offer a clear trading choice, but they are also high risk / high reward. There is however, no leveraged exposure with a binary trade, so the risk and reward ratio is also simple to manage.

The structure gives binary trading it’s strength. It is a tool that can be used to hedge other investments, or can be operated as an investment vehicle in it’s own right. There are a wealth of trading strategies, and each caters for a specific investment need.

Are Binary Options Safe?

Binary options suffer from a poor reputation. This is basically a result of dishonest and irresponsible marketing and cyber crime, more than an issue with the product itself. With tighter regulation, and a better understanding by the wider public, these options can – and will – move into the financial mainstream. Which was where they originally developed.

While FCA regulated agents and businesses may still have their flaws and faults, they are not fraudsters. The angry emails we receive focus entirely on unregulated brokers promising “easy money”, or a route to “get rich quick”. Read our section on avoiding scam brokers below.

Video – Binary Trading Explained

Watch this video tutorial of the IQ Options platform, which shows how to place a binary trade:

Risk Warning
The Financial Services provided by brokers on these pages carry a high level of risk, and can result in loss of funds. Only trade with money you can afford to lose.

Brokers And Reviews

A binary option can be used in a number of ways, and across a huge array of commodities and markets. This means finding the best dealer, best account, or best trading platform, really depends on the needs of the individual investor.

For example, some brokers may focus on forex (foreign exchange) and trading the Japanese Yen, Euro or sterling. Others may be strong on commodities and only offer a handful of FX markets. Likewise, the returns (or payouts) may differ between asset classes, and with these varying by as much as 25%, it is easy to see the importance of making the right selection.

Payment Methods

White label platform providers such as SpotOption, Tradologic or TechFinancials also dictate what products the host site can offer, so a proprietary broker with a bespoke design might be preferable.  Payment methods merit some thought – if traders want to use Skrill, Paypal, Neteller or Wire transfer, they need to check the broker delivers that.

Trading Apps

Mobile trading apps delivered by brokers or binary agents can vary in quality too. Some specifically program for the features of specific models, like iPad or iPhone. Others ensure cross platform compatibility, catering for android, blackberry and windows tablets and devices. Some traders may have tailored demands for any hand held app, others less so.

Trade size limits may also point some investors either to, or away from, certain trading accounts. Some brokers offer minimum trades of just £1, while others cater for investors willing to invest £200,000 in a single trade. So every investor needs to consider their own trading style before deciding to open an account. Even working out the ‘cheapest’ broker is not as easy as it sounds.

How To Compare The Best Trading Platforms

Our comparison table delivers a quick summary of the key points when comparing brokers. Our detailed reviews then allow potential new users to assess some of the finer points that might confirm their decision. Here is a list of some of the vital comparison points for brokers;

Some points might be more important to certain traders than others. So finding the “best” will be an individual choice for each new client. A speculator taking a position on the monetary policy of the Bank of England or ECB might be best served by one broker, while the person looking to bet on growth in the Apple, Facebook or Vodafone share price might want another.

Demo Accounts

Most top brokers offer demo trading accounts. These allow new clients to try the services on offer. They can see if the range of markets and investment scales suit them and only proceed to a funded account when they are happy that the right trading account has been found.

Those brokers that do provide practise or virtual balances, have confidence in their trading platform. They are prepared to let new traders see it, and try it out, risk free. The review for each broker will include whether it offers a demo in the “Key Details” section.

Trial Website And Apps

The majority of these demonstration accounts will work on both the website, and also the mobile app. Both systems can be checked before making a deposit. The very best demo accounts are not time restricted, and allow traders to ‘top up’ the balance if required. This type of account allows the user to not just trial the broker, but also use the demo account to try a new trading strategy, or even back test a strategy based on past financial data. All without risking any of your own cash or wealth.

Trading Strategy

We also provide insight into trading strategies. Our strategy pages covers over 20 known systems, drawn from a range of forum and club chats, plus expert tips and advice. We also cover more specialist subjects, like forex , technical analysis, the best price action indicators, trading signals and winning strategy. All this is aimed to help you gain an edge, and win.

Reviews

Our broker reviews are written after genuine trading on each platform, brand, or white label. They include all aspects of each provider – good or bad.

The credibility of the reviews is important to us. So they are checked and updated regularly and feedback we receive forms part of the overall rating. In order for binary trading to move into the financial mainstream, comparison services need to be open, honest and transparent – and that is what we try and deliver in our broker reviews.

All of this is designed to provide investors with the definitive guide to binary options trading in the UK!

Avoiding Scams

Binaries are ‘legit’, and not a scam. There are however, brokers and signal providers that are untrustworthy and operate scams.

It is important not to write off the concept of binary trading, purely based on dishonest brokers. These frauds continue to drag down the image of this form of trading. Regulators, and rule makers are slowly starting to get to grips with these operations and the industry is being cleaned up. If you want to complain about an operator to our watchdog, please let us know via our Contact Us page.

Avoid scams with these simple checks:

  • “Make money online” or “Get rich quick” marketing. This is a huge red flag. Binary options are a high risk / high reward investment vehicle – they are not a get rich quick scheme and should not be sold as such. A “no loss” system does not exist. Operators making such claims are being dishonest. A binary options millionaire is almost certainly fake. The Brit Method is one high profile example – swerve.
  • Cold Calls. Reputable brokers will rarely make cold calls – they do not need to. Cold calls are from untrustworthy brokers. This could include email contact.
  • Bonus Terms and Conditions. If taking a bonus, read the terms and conditions. Some terms include tying in any initial deposit or capital until turnover requirements are met. The deposit is still the trader’s money – honest brokers will not lay claim to it before any trading has been done. The better brokers will also offer the option of cancelling a bonus if it does not suit the trader. CySec, the leading regulator, has recently banned the use of deposit match bonuses as they believe it leads to clients ‘over-trading’.
  • Account Managers. Be very wary of any account manager, tipster or ‘guru’ wishing to trade on behalf of clients. There is an obvious conflict of interest – they have jobs with the broker. These managed accounts generally encourage traders to trade with figures way beyond their means. This “upselling” is very harmful. The intensely risky Martingale system is a frequent tactic, and results in many quickly blown balances.
  • Celebrity Endorsement. Sporting legends or team sponsorship is usually fine – and verifiable. Where this backing should worry rookie investors, is where the name of a mega rich billionaire or credible source is ‘pushed’ as a selling point. Warren Buffet, Richard Branson and Martin Lewis have all been presented as backing certain propositions when they actually have zero involvement – other than to sue the perpetrators for damages via a lawsuit.
  • A trader must know their broker. Seems obvious – but some operators ‘funnel’ clients to a brokers of their choosing, not yours. If the merchant demands new clients sign up with a particular broker, or they pick the broker from a limited list – do not proceed. A trader should know the broker they are going to trade with!

Read more about avoiding scams here.

Being aware of the above methods should help those new to binary trading to avoid the less responsible brands. Improved regulation and more awareness should hopefully reduce these types of complaints. This in turn can allow binaries to move forward.

Regulation

Binary brokers are regulated via a number of bodies. CySec regulate the majority of brokers based in Cyprus and Israel. Operators with equipment in the UK will need a license from the UK Gambling Commission (the concept was originally classed as a ‘wager’ on financial markets – a view that is now changing). European regulation however, allows providers to serve British clients. The MiFID II legislation allows this ‘passporting’ of regulatory powers.

In the UK however, a stronger layer of consumer protection is available if a broker is regulated by the Financial Conduct Authority (FCA). Some firms also register with the FCA – but this is not the same as regulation. This is an important distinction.

In the US the CFTC have only licensed two brokers to operate there – Nadex and CBOE. In Australia, ASIC (Australian Securities and Investments Commission) oversee brokerages. Some firms are also regulated by the Malta Gaming Authority, or the Isle of Man GSC.

Benefits Of Using A Regulated Broker

Regulated brokers offer greater levels of consumer confidence than unregulated firms. They are obliged to retain trader funds in separate accounts, and not in company accounts. They must provide a dispute process for customers, and treat clients equitably and fairly. In addition, regulated firms can only market in a responsible way, and in regions where trading is permitted. Responsible brokers welcome regulation as a way to increase levels of consumer trust.

History

A brief history: The concept of a binary, or ‘digital’, option has existed for many years. They were initially only available to large scale investors – institutions, wealthy individuals and funds. The options were provided ‘over the counter’. In 2008 however, the US Securities and Exchange Commission allowed these fixed return options to be traded over an exchange.

This allowed the Chicago Board Options Exchange (CBOE) and the American Stock Exchange to offer binary trading on certain underlying assets. Initially, the range of assets was limited, as were the choice of options. Nadex also began offering exchange traded options (matching buyers and sellers) in the US as the market developed.

Demand For Digital Trades Grows

As popularity and commerce grew however, the traded assets moved beyond Forex and equities and the option types expanded as well. Rapid developments in software, and the globalisation of trading, led to a boom in these ‘digital’ options – and the expansion trend continues.

The barriers to entry for potential market makers or brokers are much lower in the binary sector. This, coupled with the boom in internet trading over a similar period, has left regulation lagging behind the industry.

The growth of binaries however, is unlikely to slow. The simplicity, coupled with the clarity of risk, allows almost anyone to take a view on a particular asset but manage their risk much more easily than versus contracts for difference or stocks purchases.

Education

In order to learn binary options, traders have a wealth of learning opportunities and courses. Each trader is different, results will alter from different methods of learning. Some may prefer a pdf file or spreadsheet on the subject, while others will learn most from diving in and getting some hands on experience. Here are a selection on learning methods:

Learn Binary Trading Via Tutorials

Brokers are keen to give traders the confidence to start trading – and many offer some or all of the above for potential new clients to learn about binary options, generally for free. Some tools are only made available once a trader has registered – this is purely so the broker has some contact details for things like trading seminars or web based demonstrations.

Seminars and Demonstrations

A great way to learn binary options is via an online demonstration or seminar.  Some brokers offer weekly seminars, some in a range of languages. These offer ‘walk through’ style demonstrations which can be really useful.

Other firms will offer one on one training, but generally require a deposit beforehand. This training will follow a basic “How to” format, but can then move quickly on to more advanced subjects as required.

EBooks

Some traders benefit from downloading an eBook tutorial, and learning about binary options at their own pace. In their Education centres, brokers often deliver a great ‘manual’ for traders looking to learn the basics. One note of caution, is that each broker will focus on their own trading platform and quotes for some of the explanations and screen shots.

Brokers want new traders to use their services. The good news is that while the look and feel of some trading platforms will differ, the underlying functions are the same – so the knowledge is transferable easily.

Some independent books have been written, including the popular ‘for dummies’ series. We list the best here.

Videos

Video tutorials are the most popular learning method. Some brokers do make more effort than others though, and viewers may also be presented with the same video at different brokers – only the voiceover has changed! There are however, some very good suites of videos available, and they are viewable without registering. We have embedded a video above from IQ Option which introduces their trading platform and online binary trading. They offer a full range of videos on their site.

Knowledge base & FAQ

Most brokers will provide an education area or ‘knowledge base’, but the quality varies. Firms constantly update their training portfolio, so there is no clear winner in this category.

Brokers want to encourage trading, so they make it very easy for traders to learn the basics. More advanced information is harder to come by from brokers – but hopefully the strategy and technical analysis pages on this website assist.

Below are some of the questions and topics we are asked about most often regarding binary trading online. Hopefully these short paragraphs can provide an answer – but if not, there are a number of links to more in-depth articles that explain each subject area.

How To Place A Binary Trade

Open a Binary option in 3 steps

Steps to open a binary trade;

  1. Identify the underlying asset to trade e.g. the price of gold, the Facebook share price or the GBP/USD exchange rate
  2. Set the expiry time (The time the option ends), and decide on the size of the trade or investment
  3. Decide if the value is going to rise or fall (Call or Put)

How Much Can Be Won?

Generally, binary options pay out within a range of 75% to 95%. This percentage is made clear before the trade is made. Other than being higher or lower than the starting price, the closing price does not affect the magnitude of the payout.

As binary trading becomes more sophisticated, the amount that can be won is evolving too. Some brokers now offer trades that do depend on the size of any price movement. There are also trade types (covered below) where payouts can reach 400%, 500% or even 1000%.

What Types Of Binary Trade Are There?

Put Options And Call Options

Put and Call options are simply the terms given to buying or selling an option. If a trader believes an asset will go up in value, they open a call. If they expect the value to fall, they place a put trade.

Some binary trading brokers change their trading buttons every couple of seconds, from Call and Put, to Down and Up to avoid confusion. Others dispense with the terms put and call entirely, using arrows instead. Icons are always clear so mistakes are not made.

Are Binary Options Gambling?

It depends entirely on the attitude of the trader. If a trader applies no strategy or research, then any investment is likely to be reliant on good fortune, and the odds are against them. On the other hand, a trader making a well thought out trade can ensure they have done all they can to avoid relying on luck.

Signals

Signals are an alert, sent to traders. They are designed as a trading tool, helping traders to spot opportunities. They can be communicated via a range of methods – email, SMS or from a live signal website or group. Much of the irresponsible marketing associated with the scams is linked to signals – or auto trading robots utilising them. There are some very good providers out there too. However, in general, learning how to trade binaries is a safer route than using signals to compensate for a lack of trading knowledge.

Do signals work?

Sometimes, but rarely in isolation. Some providers deliver a combination of education alongside signals and that represents a good mix. Traders must be able to fully assess a signal before they can judge the quality of them. We also highlight some of the best providers on the signals page.

Are Binary Options Halal?

Interest, or “riba” is forbidden under Shariah law. Binary options, even those considered longer term, do not incur overnight charges, or rollover fees. Many brokers have developed Islamic trading accounts which adhere to Muslim guidance (offering immediate execution of trades, and charging no interest). But traders need to tread carefully before deciding if trading binary options is legal, halal or haram. The answer may not be  clear. A trader might use binaries with no planning, or strategy – effectively betting or using them to gamble. This would be banned for most Muslims. For this reason, we cannot state categorically whether trading binaries are halal or haram. It will be down to the individual.

Copy Trading

Copy trading is a growing sector of investing. It allows users to copy the trades of others. Those copying decide how much to invest, and whether to copy some or all of the trades that a particular trader or tipster opens.

The traders being copied also benefit, as the broker will often reward these clients through commission, or increased income revenue and profits based on the trade volume they generate. EToro are official pioneers of this form of investment.

Copy trading (or ‘social trading’) is a useful function for those people without the time or knowledge to trade themselves. When copying however, time and effort spent finding the right traders to follow will pay dividends. Social trading is similar, but is more geared towards social media style info sharing.

Robots and Auto Trading

Auto trading robots (‘bots’) often rely on signals and algorithms triggered by price graphs. Again, these robots attract many of the undesirable operators, and the automatic nature of the trades increasing risk further. New traders should be especially careful. A large amount of ‘due diligence’ is required when trying to find the right robot service.

An alternative approach is for traders to build their own robots using their own entry points. A growing number of brokers now offer traders the ability to put their own trading robot or program together, using simple tools. These hacks allow combinations of technical analysis settings, such as moving averages, Bollinger bands or RSI / MFI patterns, that then open trades when those criteria are met. It has made binary options ‘pro’ robots available to everyone.

Binary Option Trading Guides:

Step by Step Guide to Binary Options trading
  1. Select a broker
  2. Find the asset to trade
  3. Set the expiry time
  4. Set the size of the trade
  5. Click Buy or Sell
  6. Check and confirm the trade

The binary trade has been placed!

Advantages Of Binaries

Many of the advantages of using binaries are related or linked. Here we list some of the benefits to using this form of investment – not just for the retail investor, but also to the market makers or brokers:

Risk management

Managing risk when trading binary options is very simple. The amount of the trade is the full amount that is at risk. This clarifies the risk not only for the trader, but for the broker too. Their pricing model reflects the simplicity.

Trading Fees And Spreads

The certainty of risk provides a solid foundation for brokers to work within and manage. To protect themselves further, they may use a liquidity provider or hedge their own positions. The expensive broker costs of clearing houses becomes unnecessary.

Leverage

Leverage, or gearing, is not generally available with binary trading. This benefits the broker again, as it means all trades must be funded in full. In other words, no trader can default on a trade. With leverage, if things go wrong, there is a real risk of the broker not being paid. This is a big difference vs spot forex or spread betting.

Trader Choice

Layers of complexity can be added to the standard fixed payout option. From a ladder option, to boundary trades or more advanced ‘nesting’ of options to create ‘strangles’ etc – binaries can be used in a huge variety of ways.

A binary trade offers the greatest level of flexibility. They even provide a mechanism to speculate on a market remaining flat, arbitrage, or to take a view on the trade volume of the underlying asset.