Binary options may be one of the simplest and easiest ways to trade. These options offer the opportunity to make a prediction on the value changes on the assets at the end of a specific period of time. The asset could be stock, indices, or commodities. As the trader, you simply predict how the asset will move during a defined period of time.
Binary options are also called “all-or-nothing” options. If you accurately predict the movement of the asset within a set period of time, you are paid a fixed return on your investment. You lose your investment completely if the asset does not perform as you expected. The term binary refers to something that has two parts. In this case, there are only two possible outcomes to the investment – win or lose.
How Does Binary Options Trading Work
The most common type of binary option is the high/low option. Let’s assume that you select a binary option in the gold market. You believe the price of gold will increase within the next 6 days. This is referred to as a “call option”. If you believe the price of gold will decrease within that timeframe, you are investing in a “put option”. You will receive a payout of a predetermined amount if you correctly predict whether the price of gold will increase or decrease at the expiry.
Although the high/low option is the most common, there are other binary options available to traders outside of the United States. With range options, traders select a price range at which they believe the asset will trade before the expiry. The “one-touch” option allows the trader to select a specific target price that the asset needs to hit at any point during a specific timeframe; the following video shares a few tips on “one-touch” options.
How to Trade Binary Options
Learning how to trade binary options is as easy as choosing a broker, selecting an asset, deciding how much to invest, and determining the expiry. Binary options are a fast-paced, exciting way to trade but they are also simple and easy to understand for new investors.
Choosing a Broker
There are many binary options brokers available. A good broker will help you to earn more profit. Be sure to check for new investor incentives before you join any broker. Fees and returns on the options vary by a broker, as does the minimum and maximum amount for trades. Be sure to check these details for each broker you consider.
Selecting an Asset
Unlike other types of trading, binary options allow the trader to make predictions on the asset, instead of purchasing the underlying asset. Traders can select from commodities, indices or stocks. Once determining which type of asset you are interested in, you can then decide to invest in a call option or put option.
Deciding How Much to Invest
Each broker’s policies will outline the minimum and maximum trade. Typical trade ranges are from $10 to $10,000 but will vary by broker. When you determine how much to invest, the broker will provide the exact return on the option you selected.
Determining the Expiry
To determine the time frame for a binary option, you will need to consider the market conditions ,as well as its impact on the price of the asset. Time-frames can vary from minutes to months depending on the types of assets you choose.
Find a Good Binary Options Signals Service
In order to maximize the potential of getting profit, it is advised to check out signals services. Basically, this type of service will inform you when a profitable trade is available.
Make Money with Binary Options
The profits you can achieve are based on your ability to accurately predict the movement of the asset. By accurately determining the movement of the asset, you can make a profit with binary options. The amount is based on the predetermined return rate.
How to Play Binary Options
Many brokers and trading platforms allow for a demo period prior to placing live investments. Investors are offered play money to practice their investments. You should take full advantage of these demos prior to going live. You will get a feel of how the platform works and how to trade before ever putting in any real money. We’ve reviewed a few of the best binary options trading demos here: https://www.personalincome.org/benefits-of-a-binary-options-demo-accounts/
The Bottom Line
If you’re interested in fast-paced, simple trading, then binary options may be the right choice for you. Learning how binary options trading works is straightforward and easy to understand. It’s an all or nothing game, so there’s always risk involved, but these options offer a simple trading opportunity even for the newest of traders.
If all this spells too much risk for you, then you may best stick to stocks trading. We also suggest subscribing to trading veteran John Thomas’ Trade Alerts, wherein you’ll be cued on what to buy and what to sell and the best time to do it. Sign up below and you get to use his smarts to make yourself a killing.