What are the Binary options?
An option can be described as a financial derivative that is based on any asset (stock, currency pair, oil etc.) Options give the right but not the obligation to buy or sell a security or asset at a specific price.
A binary option is a non-standard option used to profit from price movements for certain assets over a period of time. Binary options trading is a method that allows you to trade on assets such as currencies, commodities, and indices. It is one of the fastest and easiest methods to trade in the market.
Binary options are a unique investment vehicle that allows traders to generate significant returns over a short period of time. Binary options get their name from a simple yes or no question which is will the security in question be higher or lower from the current level at some time in the future. Given the binary nature of the question (either above or below) the option receives the name Binary option.
The time prior to the expiration of a binary option could be as little as 5 minutes are a long as a year. The most popular binary options are intra-day binary options which are 1-minutes to 5 hours as well as daily options which generally expire at the end of a trading session.
A binary option is available depending on the terms of the transaction. The main characteristic of this type of option is that brings a fixed income (the difference in trade income and price of the asset) or a loss (in the amount of the asset’s value).
One of the advantages of binary options trading over other types of trading is that the profit and loss potential of the binary option is known before trades.
These deals also have a time limit, you can set the time of expiration from 60 seconds to 5 hours. Each binary option comes with a time limit and expiration time.
In binary options trading, No matter how much the price of the underlying assets has changed (how much it has fallen or increased), this type of financial derivative brings fixed payment that will always be made in the event of winning an option. Your risk is limited by the amount you have purchased the option.
What are the different binary options available to trade?
When you make a binary options trade, it is important to choose the underlying asset that will support the option. This is the first step of binary options trading, the selected asset will serve as the basis for your forecast.
When you trade binary options, You are betting on the price movement for a digital asset by buying an options contract.
An “item” on your trading platform that is priced on the market at the time of a trade is called an underlying asset. Most of the assets available on the world financial markets can be the underlying assets of binary options. There are four types:
- Securities / Stocks (shares in world companies)
- Forex Currency pairs (EUR / USD, GBP / USD, etc.)
- Commodities, Raw materials, and precious metals (oil or gold, etc.)
- indices (SP 500, Dow, the dollar index, etc.)
- Cryptocurrencies (Bitcoin, Ethereum, etc.)
There is no universal underlying asset to trade binary options. Some markets may be more volatile than others due to various factors such as the supply and demand for these assets or due to an important event in the market. You can only use your intuition and different types of analytical information to choose the right underlying asset for trading binary options.
How do you trade binary options?
To trade binary options an investor will need to open a binary options account with a binary options broker. There are many reputable brokers that offer a plethora of assets which include, currency pairs, stock indices, commodities (such as gold, silver, and oil), and individual stocks in the US, Asian, and Europe.
To trade binary options you will first pick a specific asset such as the EUR/USD currency pair, and then select the tenor for when you believe the EUR/USD will be higher or lower (for example, 5 minutes, 15 minutes, or by the end of the week. An investor will then choose the amount of money that he would like to trade and then select either above or below. Once these options are chosen, you can purchase your binary option.
The payout on binary options is unique as it allows investors to quickly compound their capital. Most brokers pay their clients between 75 and 98% of the amount of capital that is used to purchase a binary option. For example, a winning trade on $100 dollar would pay an investor between $75 to $95 dollars on top of their original capital. This payout is standard and delivers the opportunity for an investor to compound their trading capital at spectacular rates.
Just as an example, a $100 dollar investment that fully compounds on 5 successful binary options trades in a row, will turn into $1890 will an 80% payout. This is an amazing rate of return that can be achieved with successful binary options trading strategies, without using leverage.
First, the first step is to choose an asset to trade, an asset is a commodity or a financial product whose price fluctuates according to different factors such as supply and demand. You can choose to trade in Forex Currencies, Stocks, Commodities, Indices or Crypto.
- To start choosing your assets, you can scroll through the entire list of assets currently available on your binary options broker. All assets are highlighted in white. To start trading on an asset, click on it.
- Trades can be made on multiple assets simultaneously. To trade on multiple assets at once, click the “+” button in the asset section. You will see the total value of each asset.
Each of the binary option trading instruments offered by the broker has a pre-defined return on investment. Higher percentages mean higher profits in the event of success.
Example. $180 will be added to your account if a $100 trade closes with positive results and profitability of 98%. $100 is your investment and $98 is your profit.
In general, the return on investment of these assets can fluctuate according to different factors such as their expiry dates and various market conditions.
All trades are closed with the profitability indicated at their opening.
2. Select an expiration time
The expiration period refers to the time that the trade is considered closed and the sum is automatically calculated.
You can decide the execution time for a binary options trade when you make it. ). You must choose a particular trading time ranging from 60 seconds to several hours.
3. Determine the amount that you will invest. Trades can be made for as little as $1. Maximum trades are limited to $1000. To get familiar with the market, we recommend that you start small to make your first trades.
4. Make your forecast by analyzing the price movements on the chart. when trading binary options, you need to place a prediction. The prediction is the trading result, whether the price of an asset will go up or down at the expiration of the option. Depending on the forecast, you can choose between Up (Green), or Down (Red). If you expect the price will go up, press the “Up” button. If the price is expected to fall, press the “Down” button.
5. To find out if your forecast was accurate, wait for the trades to close. If it was, your balance would be increased by the amount of your investment and the profit made from the asset. Your investment will not be refunded if your forecast was wrong.
You can Monitor Your Order’s Progress under The Trades
Whether you are a new trader or an experienced trader, binary options trading is easy to understand. You also do not have to spend a lot of time learning the system. You just need to understand the mechanics of trading and predict the outcome of the market.
Binary Options Trading Glossary
The asset: This is the type of item of financial product that you are going to trade.
The type of binary options: Most binary options brokers offer High/Low options, but some brokerage companies also offer Touch/No Touch options, Boundary options, and Range options.
The payout: Payout determines how much you can earn in trading.
The expiry time: The expiry time is the time that the option expires.
Binary options pros and cons
With a short history of just a couple of years, the so-called digital options managed to impose themselves as the easiest and most profitable form of trading. But are really binary options the top choice in online trading?
Many say that it’s enough to take a look at their features and you will convince yourself why these options are surrounded by such a positive aura.
Binary options pros include:
- Web-based trading platforms which do not require download or installation make options trading accessible from any PC, laptop or even mobile phone with an internet connection.
- The software is usually user-friendly with simplistic design and intuitive menus. The options can be purchased with just few clicks whether they are custom-made or default options.
- In binary trading the trader doesn’t buy assets, he only needs to predict the future evolution of the asset’ price. Accordingly the skill and knowledge requirements are at a minimum level.
- The trading offer is as extensive as for forex trading including the hottest currency pairs, most traded commodities, popular stocks and important indexes.
- The return rates are among the highest possible, most brokers offering more than 65% return for binary options that can expire within minutes. This huge profitability is the most attractive feature of binary options, especially for amateur traders because if you can predict the market evolution you can really earn considerable amounts of money.
Here are the cons of binary options:
- The trading is based on prediction, not on purchase so binary options are more like bets on the forex market or stock market.
- Once bought, the expiration time is fixed and the options cannot be closed before reaching it. Some brokers allow the trader to sell options but in exchange for a fee.
- As it can be seen binary options have both strengths and weaknesses that are up to traders’ subjectivity so we cannot draw a final conclusion on whether binary trading is the best choice for online trading. Like in any other form of online trading is advisable to be prudent because nothing is sure and all money invested could be lost.
Important Tips for Successful Binary Options Trading
The binary options market is one of the most exciting and innovative markets in the derivative space, which has recently become available to retail investors. Binary options are all-or-nothing options, which use significant leverage which allows investors to reap 70-80 percent gains on each individual trade. For those who are new to this exciting market, we have put together the “five most important tips” that should be followed to achieve successful returns.
1) Understand the Binary Options Market and Products
Binary Options are considered “all or nothing” options which means that an investor will receive a payout nearly 1.7 times the notional amount that is wagered or nothing. For example on $100 Call option trade in which S&P 500 moves higher relative to the strike price, the investor will receive back $170 dollars. If the S&P 500 moves lower, the investor will receive nothing (meaning the investor will lose the $100 dollars speculated). The returns are either a gain of a whopping 70%, or a loss of nearly a staggering 100% (in some cases the broker will return 15% to their clients).
Some binary options give investors the option of selling their binary options when they are in the money, but the majority of these options settle when the time of the option expires. For example, a daily binary option will have a specific expiration time/date, and the payout is not determined until the option expires.
2) Find a Reputable Binary Options Broker
Finding a reputable broker in this space takes time and research. There are many players in this new industry, and investors need to find brokers that have staying power and solid reviews. Choosing the right binary options broker is the most important decision that you have to make when trading binary options online. To make this decision easier our expert’s test and review binary options brokers. We have been testing binary option brokers since 2009 and since that time we have encountered many brokers that did not meet our standards. Either the platform was terrible, support was lacking or making a withdrawal was problematic.
3) Find a Robust Binary Options Trading Strategy
To successfully navigate the binary options market, traders need to win more than they lose. A trader needs to win approximately 55% of the time to break even, which means the Binary Options Strategy that is employed needs to focus on winning more as opposed to gain more on each trade. Break out strategies are generally the best strategies to use as compared to trend-following strategies.
4) Trade Daily Binary Options
In general, short time horizons work against traders. Hourly binary options (and shorter periods) work against an investor given that the broker receives a 15% commission in the form of a bid/offer spread (payout out 70% for every 85% wagered). With the odds stacked against the investor, trading daily or longer options with a robust binary options trading strategy gives an investor the best likelihood of achieving solid returns.
5) Have Realistic Goals
Binary Options are excellent trading tools, but they are not the panacea for getting rich quickly. Binary options are simplified ”above or below” options in which an investor just needs to pick a direction, but underneath the hood, these products are relatively complicated and enjoy significant leverage. The key to success is to look for realistic returns, as opposed to earning 500% within 3 months.
Frequently Asked Questions about binary options trading (FAQ).
What are the potential results when trading binary options?
Three outcomes are possible when you trade binary options: winning, losing, or breaking even. When you win, you generate profits. When you lose, you lose the invested amount. When you break even, you recuperate your invested fund.
1) If your prognosis regarding the direction of price movement for the underlying asset is accurate, you will receive a fixed income.
2) If your forecast is incorrect by the end of the option, your loss will be limited to the value of the binary options. In other words, you cannot lose your entire investment.
3. If the outcome of the trade is the same (the price of the underlying assets has not changed), the option is closed at the original price. You are allowed to return your investment.
What is the profit margin?
There are many factors that can affect your profit size in your binary option trade :
- The time of trade (the liquidity and liquidity of an asset at the morning and afternoon can differ significantly).
- The liquidity of the asset that you choose in the market. (The more in demand the asset is, the greater the profit you will make)
- Brokerage company tariffs and fees
- Market changes (economic events, changes to a part of financial assets, etc.
How do I calculate profit from a trade?
Binary options trading provide a pre-fixed return so, It is not necessary to calculate the profit by yourself.
Binary options offer a fixed profit per transaction. This is calculated as a percentage of the option’s value and is not affected by the amount of change in that value. With binary options, the magnitude of the price movement does not matter if the price moves in the same direction as your prediction of a position. You will always earn 90% of the option value. The same amount will be gained if the price slightly passes the price in the same direction. This is also the case if the price goes down and you predicted that the asset price will go lower at expiration. even if the price is slightly lower, you will still earn 90% of your investment.
These steps will help you determine how much profit you are making.
- Choose the asset that will support your option
- Indicate the price at which you would like to purchase the option
- If you have a good prognosis, these actions will determine the trade’s time. The platform will then display your exact profit percentage.
Trades can yield a profit of up to 98% on the investment amount.
Binary options trading offers pre-fixed returns so, you do not have to wait for any unpleasant surprises such as a lower percentage at the close of trade.
At the expiration of the option, Your balance will be automatically replenished with the profit as soon as the trade closes.
What’s the essence of binary options trading?
Binary options trading is very popular among traders because is the simplest form of derivative financial instrument. You don’t need to know the exact market price an asset will reach to make money with binary options trading.
Binary options trading is only a process that solves one task. The price of an asset will change or increase depending on the time the contract is executed.
These options have the advantage that you don’t need to worry about whether the price of the underlying assets will move one hundred or one points from the time the trade is closed. You must determine the price’s direction only.
If your prognosis holds true, you will receive a fixed income.
How can I quickly learn how to make money on the binary options market
In binary options trading, you can only make a profit by correctly predicting the direction in which the price of the asset will move (up or downward) to be able to make a profit on the binary options market. You need to have a steady income.
- Develop your own trading strategies. The best strategy will predict the most trades. Follow them.
- diversify your risks
As well as developing strategies, and searching for diversification opportunities, market monitoring, and studying statistical information that can been obtained from different sources (Internet resources. Expert opinions. Analysts in this field., etc.). MoneyFair.org is one example of a resource that can be used to assist you.
What is the cost for the Company to make a profit for the Client in the event of a successful trade?
Customers earn for the company. The Company is keen to share in profitable transactions that are significantly more profitable than those that are not. This is due to the fact the Company receives a percentage of the client’s successful trading strategies.
Additionally, the trading volume of all Client trades is transferred to a broker/exchange, who in turn are added to the pool of liquidity providers. This results in an increase in liquidity on the market.
What is a trading platform? Why is it necessary?
A trading platform is a software system that allows clients to trade (or operate) with different financial instruments. It also has access to various information, such as the price of quotations, market positions, and actions, etc.
Are there fees for withdrawing or depositing money from the account?
It is important to remember that payment systems may charge a fee and convert the internal currency rate.
What is the time it takes to withdraw funds?
The withdrawal process takes on average one to five business days from the date the Client receives the request. This depends only upon the number of requests being processed simultaneously. The company will always make payment directly to the Client upon receipt of the request.
What is the minimum amount that can be withdrawn?
For most payment systems, the minimum withdrawal amount is $10.
Bitcoin withdrawals are limited to 50 USD
Are there any documents I must provide to withdraw my money?
Most often, you don’t need additional documents to withdraw money. However, the Company may request certain documents to verify your personal information. This is usually done to stop illegal trade and financial fraud as well as the illegal use of illegal funds.
This list is very short and you won’t have to spend much time or effort to get them.