It is important to understand what Binary Options are and the basics of this type of trading before going further.
Binary Options are an innovative and relatively new way of trading options. The name derives from the fact that there are two possible outcomes (up or down, “in the money” or “out of the money”), hence the binary name. The idea is to predict where the asset will go after a predefined period of time. For example, the USD / EUR can be predicted to rise to 1.35 in the next hour. If you get to that point, an 85% return is possible. If you do not lose your investment, but many brokers will return a small proportion of up to 15%.
Binary options trading relies on research and a certain amount of knowledge of the traded assets. Although you don’t need to be an expert, any knowledge you have will help you manage your risk. The online platforms available today make it easy to trade from anywhere in the world once you have an internet connection. All the information and research you need is also available online. You make predictions about the expiration price of your chosen asset and decide how much to invest.
Smart traders use strategies to help them maximize their successful trades. A simple and effective strategy for new traders is the trend strategy .
Binary Options can be traded in stocks, stock indices, currency pairs, or commodities. Binary options trading is straightforward and can be lucrative with quick returns available, but nothing is certain and losses can happen as well.
For starters, I recommend that you learn all you can about this way of trading. Educate yourself and give yourself the best possible chance of success. Sign up with a recommended broker and take advantage of the demo systems to practice your strategy before trading for real money. Good runners also have support staff on hand to give you any necessary help and assistance.
There is some terminology used in Binary Options Trading that you will find helpful to know. If a trader believes that the market is going up, he would place a “CALL”. If the trader believes that the market is going down, he would place a “PUT.” For a CALL to make money, the price must be above the strike price at the time of expiration. In order for a PUT to make money, the price must be below the strike price at the time of expiration. The exercise price, expiration and payment are defined at the beginning of the operation. (Watch Glossary for a complete list of terms used in Binary Options trading.
One of the advantages of binary options trading is that the risk and reward are known from the beginning. It doesn’t really matter how much the market moves for or against you, you will either win a fixed amount or lose a fixed amount. Since you never own the assets you are “trading” in, you are not cash-strapped. One downside is that you must be right more than 55% of the time to make money with many brokers.
In short, Binary Options is a new and innovative way to speculate on stocks, currencies, indices and commodities, but with advantages and disadvantages. However, you can increase your chances of success by doing smart research and implementing a good solid strategy similar to those discussed on the Strategy Pages. .
Binary options are a fun and fast way to make some extra money for a casual trader or a substantial income for a dedicated full-time entrepreneur.
See: How to make a living from binary options, fundamentals and strategies