A Beginner’s Guide To Binary Options Trading
What is binary options trading and why it has become so popular?
There are many advantages in the binary options trading market, the main one being the ease in which a new trader can make money. Instead of buying the asset, the investors can just speculate the direction in which the assets are about to move in.
The price of the binary options can rise or fall according to the market situation at the time of investment and a trade in this market can be made in either direction whether up or down, if the prediction is correct than the trader makes a profit starting from 70% upwards.
Purchasing the binary option, the contract is made between the investor and the broker. The purchaser can buy the asset at a price fixed during a dedicated time frame.
A binary option trading is an interesting and novel method of investing in the stock market. These options are flexible and straightforward to trade, newcomers to this type of trading need no previous knowledge in order to invest profitably.
Two Potential Outcomes
The binary options are frequently called digital options as well as all-or-nothing options. They are also known as fixed options returns due to the known profit prior to making the trade. There are two potential outcomes in this trade which is either up or down and the investor knows well in advance about the loss or profit to be made in each trade.
Money Back Trade
Let’s take an example of binary options trading of an asset. Say an investor purchases a commodity option for $100 predicting that at the time of expiry, the asset will stand on at a higher price level. If the asset is in-the-money, then the trader is has made a good prediction and the trading account will be immediately deposited with the profit made.
If on the other hand, the traders prediction was wrong and a loss was made, the trader is will get back anywhere between $15 and $25 of the initial investment in this case, the trader ends out-of-the-money but the broker will reimburse a certain amount back.
The nature of these binary options is such that investor knows the profit and risk margins himself. The trader can assess and weigh the risks involved before making the investment. In this case, the stakes are pretty clear to the trader in advance, there are no hidden fees or charges after the trade is over.
In binary options trading, the trader is just purchasing a contract, not the entire asset which opens up to a huge market of investors in the binary options trading. Otherwise, the audience would be limited due to high asset prices.
This is one of the main reasons why binary options trading have become so popular in a short period of time, almost anyone can invest in this simple and very profitable market.
For instance, if the shares of IBM cost $50 per share, in the conventional financial markets purchasing 20 shares would require a huge investment of $1,000. If the trader made the right prediction and the share made a rise to $55 per share, then the investor is in profit. In this case this trade would have made a ten percent profit margin, a $100 in all.
In binary options trading, the asset only needs to close above the purchase price and the trade is in profit. If for instance the trader invested the same $1000 in the binary trade the profit would have been anywhere between %70 – %80, that is an amazing profit of $700 to $800.
The profit is linked with change in direction of the rise or fall of an asset’s price. The trader can make great earnings from just trading on the predicted direction of the asset. The trader has the option to either call or put (buy or sell) an asset.
Simple yet effective
The knowledge required regarding an asset is minimal in binary options trading for that matter. The payouts solely rely on asset prices changing directions and either closing above or below the predicted price. An asset’s history and detailed knowledge are not needed in binary options which make this form of trading easier.
The international binary markets are open day and night for that matter. This allows the investors to trade in the time or place which is comfortable to them, be it from the mobile on the go, from the office on their break or from the comfort of their home.
The qualities of binary options trading
1: In case of short term times of expiry (60 seconds trade), the traders can make a quick profit here. These are much more flexible than the known vanilla options.
2: There are only two outcomes in the case of binary options, while vanilla options the trader’s pays according to the contract. It depends on the expiry level and strike price difference.
3: The trader has to keep up the binary option until the option expires at the date of expiry.
Binary options trading is a great and easy way to make an extra income and financial independence, if you are considering getting into the fascinating world of trading, than binary options trading would certainly be the right market to start in.