Binaries are an exciting way to trade the directional moves, or future volatility levels, in the underlying market. Binary CFD trades are based on the performance of a financial market over a specific time, with only two possible outcomes.
What is a binary trade?
Binaries are designed to be easy to use, with each trade priced between 0 and 100, based on several factors - mainly the time to expiry and underlying market price.
Binaries allow you to take a view on whether a specific outcome will or will not occur. For example, will Wall Street close up on the day?
- If the answer is 'yes', the binary settles at 100
- If the answer is 'no', the binary settles at 0
Quick guide to binary CFD trading
A binary CFD market asks you a question
on whether an event will occur -
there are only two possible answers:
Quick guide to binary CFD trading
For example, on a daily Australia 200 UP trade, you are being
asked whether you think the Australia 200 will finish
above 4611.11
If you disagree,
you 'sell' this market.
If you agree,
you 'buy' this market.
Quick guide to binary CFD trading
As with all our markets, the price features a spread. But
with a binary, the price is displayed in a range between 0
and 100, such as 86.2 – 89.5. Here, you would 'buy' at
89.5 and 'sell' at 86.2.
These prices are dictated by the underlying market price
and the time to expiry. Therefore, the closer you get to
expiry, the closer the price will move to either 0 or 100.
Quick guide to binary CFD trading
The nature of a binary is that it magnifies very small movements in
the market. A sharp tick in the underlying price close to an expiry
time could cause the binary price to move dramatically.
For example, if the underlying market price was at 4660 just five minutes before the expiry of a Australia 200 UP [>4611.1] the binary price is likely to be close to 100 as the chance of the binary expiring above 4611.1 is quite high. If, however, the Aus 200 suddenly ticks down to 4610 and trade expires below 4611.1, it will instantly settle
at 0, which is potentially a massive swing.
Types of Binary
Ladder A binary trade on whether the underlying market will finish above a stated level. For example, a 'Gold to be above 1256' Ladder will settle at 100 if the Gold finishes the day above 1256 and will settle at 0 if it finishes below 1256.
Target A binary trade on whether a market will close in a certain range. For example, a ‘FTSE® to finish down 50-60 points’ on that day’s trading target will close at 100 if this should happen. It will close at 0 if this event does not occur.
Hi-Lo A binary trade on whether the day's high or low will be a given distance from the previous closing level.
OneTouch A binary trade on whether the market will touch or go through the barrier level at any time before the stated expiry. For example, the ‘Daily Cash Australia 200 to touch 4710’ will settle at 100 if the 4710 level is breached before the end of the day’s trading session. It will settle at 0 if the level is not breached before the expiry time.
Tunnel A binary trade on whether the market will stay within two given barrier levels for the full period up to expiry. For example a ‘Wall St +/- 100’ tunnel’ will settle at 100 if Wall St stays within the +100 / -100 range for the whole trading day. But if it hits up 100 or down 100 at any point during the trading day the trade will settle at 0. Therefore when you buy a tunnel you are selling volatility and when you sell a tunnel you are buying volatility.
For details of how binary CFD trades work, see our examples page.
Trading Spreads
We offer a range of variable spreads on binary trades.
You can trade on 5-minute, 20-minute, weekly, daily and hourly binaries
Nearly all binary trade markets will have a spread in the range of 4-6 points. As prices move towards 50-50, the spread will be closer to 6, and as prices move towards 0 or 100, the spread will tend toward the lower end of the scale. If the price is close to 50-50 near the end of the market, the spread will often increase.
For details on our trading spreads, see our contract details page.