Binary Options Trading Basics
With binary options trading, you either win or you lose, and for a trader this means that instead of the option payout fluctuating with the asset price, the payout is a set sum. To become a good binary options trader doesn’t happen overnight – it requires practice. With more experience you simply become better equipped for making the right analyses and the right decisions. For instance if you want to start making money with binary options, you’ll benefit from a few tools such as the price chart to give you a better idea of what your asset is doing.
There are many types of binary options available to trade, with the simplest and more common one being the Up/Down trade. The purpose of the binary options trader is to bet on whether the asset price of gold, silver, foreign currencies, crude oil, indices and many more will end higher or lower than the strike price, and of course, if you bet correctly, you win the trade. The returns with binary options are large, with the winnings typically being between 70-90%. If you win a binary options trade you win a fixed amount of cash.
Binary Options Trading Basics – The Payout Offer
The important components of a binary option trade are the expiry time, the strike price and the payout offer. The payout offer is the part every trader is interested in as it is the return the binary option broker offers you. Some trades do have a return percentage for losses, up to 10% but this is trade and broker dependent. The payout offer is known up front before risking any money.
A few things you need to know about binary trading before you start are –
- the minimum trade as as little as $10
- you do pay for losing trades – you lose some of- or all of it
- to make money over the long term, you need to win most of your trades
- your risk is limited to your trade amount
- there is a lot of risk involved
- you don’t take ownership of the underlying asset – you bet on the direction of its price movement
The attractive thing with binary trading is that it is designed to be easy, simpler to trade and of course there are a number of advantages of trading binary options than traditional options.
Some of these advantages are –
● they have a controlled risk-to-reward ratio. This means that the risk and reward are pre-determined at the time of acquiring the contract. There are no defined boundaries of risk and reward with traditional options and this means gains and losses are limitless
● they require only a sense of direction of the price movement of the underlying asset. Traditional options require a sense of direction as well as magnitude of the price movement.
● if a binary option finishes in the money by just a tick, the trader still receives the full fixed payoff amount.
● binary options contracts can last from just minutes, months or a year, providing the trader with great flexibility and also great money making opportunities.
Binary Options Trading Basics – Choose a Site with a Good Economic Reputation
Binary options are traded in different countries, and are popular in Europe for instance and are traded in major European exchanges such as EUREX. To trade secure binary options, it is important to have a reliable broker service as this way you get benefits from different features of binary options trading. Always check out security of funds, customer support, reliable trading terms and a user friendly environment. Choose a well reputed site with a good economic reputation and which give maximum options for deposit of funds and withdrawal.
Some people who claim that binary options is easy might have people disagreeing with them. The point is that experience is the only way to succeed. For this you will need plenty of demo trading and trading only in small amounts – and this way you’ll slowly get the hang of it.
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