When you start looking at online options trading, it is likely that you will first stop on products such as spread betting platforms (such as CDFs) or international currencies. Those seeking fast profits can even head to speculation sites offering financial spreads. Option trading is an alternative to these types of trading. In this article, we specifically discuss binary options.
Strategies for earning in binary options
When it comes to trading binary options, it works a little differently, since you do not buy directly the asset, the commodity, the currency or the share against which you trade. At the point of expiration, the market movement will decide whether your option is in the money and gives you a return on your investment. Binary options offer a type of trading called “all or nothing”. If your option is “in the money”, you get a total return on investment, otherwise you do not receive anything. It’s this simplicity that makes binary options attractive to beginners who are making their first steps in option trading or on any other online trading platform.
You have spent time learning what binary options are and your broker has answered all your questions about choosing to trade these binary options. The next step is now to sign up for your online binary trading platform and start trading. However, in order to facilitate your understanding and to better manage it, it is useful to have in mind exactly what a binary trade looks like.
Imagine that you are now a seated trader facing your computer, observing the financial charts. If you traded in the traditional way, you would look for assets with a higher probability of value, with a target of buying at the lowest and selling at the highest.
Knowing the precise level of potential risk and gain makes trading binary options ideal for beginners. When you trade stocks or commodities , for example, you have no clue about how much the price rises or falls. Critics of binary trading have belittled it to a vulgar game of chance, but it is actually much more of a traditional investment or free trade deal than a gambling game.
The balance between risk and gain lies in the answer to the following question: is the risk incurred justified in relation to the promise of gain? Since binary options offer a return on investment percentage, and closing “out of price” means that you lose your entire starting bet, the risk offsets the return. To go back to our previous example, we risked $ 500 to earn $ 425. This is equivalent to bet on a team before a match without knowing the outcome.
This is the simplest form of binary trade, where you simply need to evaluate whether a price will close above or below the target set when the option is presented. When a target price is given, choose “high” if you think the price will exceed the target, or “low” if you think it will not reach it. It is possible that the transaction is presented to you in the form of a “call” (purchase) or a “put” (sale). Generally, it is up to you to set the expiration time, but some platforms will offer specific binary trade terms.