Binary Options Trading

Binary options have changed the face of the trading world. In the not so distant past investing and profiting from the stock markets was reserved for professional traders and the very rich. However, this is not so anymore! Nowadays, thanks to binary options anyone can invest and profit from stock market trading.

Binary Options Explained:

Binary options’ trading is a fast paced, high return form of investing, where you predict the future prices of assets – indices, commodities, currency and stocks. Trades usually last about ten minutes but they can be longer (if you choose so).

The basic concept is easy – You choose an asset, let us say a commodity such as Oil, you then make a prediction as to whether the price will rise or fall over a certain amount of time. If your prediction is correct you make considerable profits, however, if incorrect you stand to lose most, if not all of your initial investment. 

How it works:

Every trading platform is different in regards to what you can trade, and the tools and resources that you are provided. However, the trading process itself will be roughly the same across all platforms – you select the asset(s) that you want to trade, once selected you will see a real time trading graph that will depict the movement of that asset in the market. From this movement you predict the future price of the asset – be it up or down from the price at which you commence trading to the time when the trade ends.

Binary Options Trading

The beauty of binary options trading is that profits are predetermined before trading starts, so that you know exactly what you stand to make before you invest, the same is true on the flip side, and you can only lose what you invest – no more! E.G – If you invest, $25 on a “Call” option the most can lose is $25; however, if you are correct you stand to make a profit of 71% or more.

Some basic jargon:

“Call” option – When you think an asset will finish above a certain price you select a “Call” option.

“Put” option – When you think an asset will finish below a certain price you select a “Put” option

“Strike Price” – This is the price / position of the asset at the time that you commence trading. It is this entry point that determines the outcome of your Call and Put options. E.G – If my “Strike Price” is, 4.47 and I take a “Call” option - if the trade ends above this price, I make a profit, but if the trade finishes below this price, I make a loss.

“In the money” – Over the course of a trade if your prediction is correct the trade is referred to as been “in the money”, this is also the same if the trade finished in profit. 

Who can trade binary options?

In theory anyone can trade binary options, however, it is not advisable that you start trading off the cuff without educating yourself a little. Many of the binary options platforms will sell the idea that no prior knowledge or expertise is needed to trade, and to a certain extent, this is true but it can also be a recipe for disaster, the real key to successful binary options trading is knowledge, and you can never have enough.

If you are interested in trading and investing in binary options there are some basic steps that you can take that will help you achieve success.
  • Pick an underlying asset that interests you be it a stock, a commodity, Index or currency pair and find out as much about it as possible – you are looking to learn the factors that affect and have an influence on its price.  These can be many and vary depending on the underlying asset you are trading.
  • Stay updated - Once you know what affects the price of your underlying asset, ensure that you stay updated on the news that relates to it.
  • Learn some simple strategies – there are many but for beginners the “Trend Following Strategy” is probably the easiest to master.
Where can you trade binary options?

Binary options’ trading is conducted through brokers / trading platforms, of which there are many, but be aware not all of them are reputable, so caution must be exercised when choosing a trading partner. 

I would always recommend going with a major broker such as anyoption.com, the deposits can be a little more expensive to begin trading but the peace of mind and security you have is priceless.

Regulation should also be key to your decision making process. Major brokers will be (or should be) regulated by a financial regulator - regulation details will be clearly stated on their websites, if you cannot find it then move on. Never, trade with an unlicensed broker!

Finally yet importantly, before you decide to trade with a broker you should ensure that they offer the types of underlying assets that you want to trade, not all brokers offer the same selection of assets, and again the major brokers will offer you an extensive range of options.

That’s it! I hope you enjoyed the article – binary options trading can be fun and very profitable just ensure that you do your homework first before you start trading.

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