Introduction to Binary Options [Aonori School - Mr. K]

Thanks to the negative news from a while back, many people have misunderstood binary options as something shady and are avoiding it. However, regulations have now been established, and binary options at domestic companies are being operated soundly. It may be unfortunate to distance yourself from it without knowing this. Because binary options have efficient strategies to make money.

Table of Contents

1. I am convinced binary is easier to profit from than FX
2. Conveying the魅力 of binary that is misunderstood
3. Profits fluctuate depending on the probability of the forecast being correct
4. Main trading types
5. Rules changed in 2013
6. The flow of everyone's binary trading
7.安心 with Financial Services Agency registration

● Number of characters: 3815 characters (including headings)
● Images: 6

※This article is a re-edited version of FX攻略.com June 2016 issue

I am convinced binary is easier to profit from than FX

Hello, readers. I am K-sensei from Aonori School. I currently teach binary options strategy at Aonori School.

Since childhood I have been interested in finance. I studied in the United States and specialized in areas related to option trading within economics. Later I worked for a foreign FX company, handling CFD introduction and troubleshooting.

At that time, binary options were just starting to be offered in Japan, and there were high expectations for a new service separate from FX. My company even planned to introduce binary options, but the company was acquired midway, and the plan fell through.

After leaving that company, I actually contemplated whether mastering binary options could be more profitable than FX, and I developed and tested various methods to prove it. Now I am convinced binary options can profit in any market environment as a superior investment product.

Conveying the魅力 of binary that is misunderstood

However, today binary options have not become as widely adopted as expected. Furthermore, there are opinions that it feels like gambling, is dangerous, or that many companies are suspicious, making it hard to trade with peace of mind.

In this opportunity to write, I want readers to know the real picture, combining the good and the bad points of binary options, so you can understand its true魅力.

First, I would like to talk about what binary options actually are. “Binary” in Japanese means a choice between two options.

In binary options, you predict whether a specified price will reach or not reach within a fixed period, which is exactly a two-option scenario. However, its essence is not a simple dichotomy.

Profits vary depending on the likelihood of the forecast being correct

The most common misunderstanding about binary options is that it is a coin-toss gamble. When researching binary options, you often see explanations that compare it to a coin flip, or to a game of high and low in playing cards.

This is like turning over one card from a deck and predicting whether the next card will be higher or lower than the first. But I believe this analogy does not capture the essence of binary options.

The core of binary options is that the potential profit changes according to the probability that the forecast will be correct. In other words, when the likelihood of a forecast being correct is high, profits are small, and when the likelihood is low, profits are higher.

From this perspective, binary options resemble horse racing in a sense: the payout for a horse with a high chance of winning is low, while the payout for a horse with a low chance of winning (the so-called long shot) is high.

Therefore, to consistently profit with binary options rather than gambling-like coin flips or high/low trades, you need information gathering such as economic indicators and statements from key figures, as well as strategies that vary with market conditions. The same logic applies to horse racing: you consider the horse's condition, track conditions, and jockey compatibility when deciding bets.

Main trading types

So, how exactly do we trade? Binary options mainly come in three types of trades.

① Ladder Trading

Ladder trading is a trade where you predict whether the rate at the end of the trade will be above or below the target rate (strike price). It is the most popular trading type in binary trading, and all providers in Japan offer this type.

② Range In/Out Trading

Range in/out trading is a trade where you predict whether the rate at the end of the trade will be within a specified range or not. The range is narrower than that of ladder trading.

③ One-Touch Trading

One-touch trading is a trade where, during the trading period, you predict whether the rate will reach a specified level at least once or not. Unlike other types, it considers all price movements during the trading period, not just the rate at the end.

Rules changed in 2013

In fact, binary options underwent a significant regulatory change in December 2013. As a result,

• Trading time became two hours or longer, and ticket purchases could be made right up until just before expiration (1–2 minutes before)
• Fixed strike price
• Stop loss during the trading period
• Introduction of take-profit, with ticket sales possible just before expiration

now the form you see today has emerged.

With this in mind, let us look at the actual trading method using the most popular ladder trading. (The image below is from Traders Securities’ Minna no Binary)

The flow of everyone’s binary trading

First, choose the currency pair to trade (①). Binary options have a market size far smaller than FX, so domestic companies only offer major currencies.

If you trade minor currency pairs in FX, you should be aware of this. In FX, this pair itself is the product, but in binary options, the price movement of this currency pair becomes the product.

Let’s look at the trading screen. First, a baseline rate is determined at the start of trading (②). Accordingly, a target rate to reach in two hours (strike price) is assigned (③).

Then, a ticket price is set against that target rate (④). If your forecast is correct and the option is exercised, you receive a payout of 1,000 yen per lot.

As mentioned above, binary options, much like horse racing, give smaller profits for more likely forecasts and larger profits for less likely forecasts, so tickets priced near the baseline rate are expensive, while tickets farther from the baseline rate are cheaper to buy.

The cheapest tickets can be about 50 yen, so if the rate moves significantly you can achieve up to 20x profit. However, if your forecast is wrong, the ticket price you paid becomes zero and you lose your entire investment.

Additionally, under the new rule, you can sell your tickets right before expiration, enabling take-profit or stop-loss without waiting for the trade to end. This broadens strategies and even allows profit through scalping.

安心 with Financial Services Agency registration

Thus, binary options trading is very simple and straightforward. Many of you may think it can be easily done. However, when you hear binary options, you may also have a negative impression of high gambling potential or disputes with brokers.

Indeed, in recent years the Consumer Affairs Agency has seen a sharp increase in troubles related to binary options trading. According to the Consumer Affairs Agency site, there are many cases such as “I saw an online ad, started trading binary options with overseas brokers, and when I requested withdrawals they would not respond.”

In reality, many of these troubles involve overseas brokers. Overseas brokers offer high payout rates and various attractive services not regulated in Japan, but that means they do not fall under Japanese law, and when trouble occurs you bear the risk yourself.

When engaging in binary trading, the first thing to confirm is whether the provider is registered with Japan’s Financial Services Agency. As of April 2016, there are seven binary option providers registered with the FSA:

• Traders Securities
• Hirose Tusho
• FX Trade Financial
• FX Prime
• GMO Click Securities
• IG Securities
• YJFX!

Among them, each offers various services to differentiate themselves. Each company provides free demo accounts to try trading, so please try the user experience first. My method for selecting a strategy-specific company will be introduced in subsequent installments.

This time, I first introduced what binary options are and that trading with a company registered with the Japanese FSA reduces the risk of troubles.

Next time, I would like to explain in detail how leveraging the advantages and avoiding the disadvantages of binary options can allow you to profit more stably than FX trading.

FX攻略.com Editorial Department推薦のバイナリーオプション提供会社

If you are thinking, “I want to start binary options from now on!”, first check whether your current FX account can support binary options. If there is no binary options service, you might consider the options listed in this FX攻略.com article: “FX攻略.com Editorial Department recommends binary options-capable FX companies.”

・【Editorial Department Recommendation】FX companies that offer binary options