A binary option is a type of option where there is possibility of getting only two types of outcomes. The trader who is executing binary options trades can either make a Call option or a Put option depending on their prediction of how a particular asset will move over a predetermined time frame. This kind of trading is fairly easy, but risky as well. There are benefits of trading binary options and before we move on to how these are traded, we will take a look at how investing in general works.
Usually, investing involves traders to buy an asset and wait for its performance. The asset value can either move up or down and it is this changing value that determines the amount of profit that is possible for the trader to make from that asset. Suppose the asset value increases and the investor makes a decision to sell it back, then the trade will be a profitable one. Selling an asset following a drop in its value, will result in a loss for the investor.
The problem with investing in binary options is that the trader has to monitor the market conditions and the performance of the asset continuously. There are emotions involved as well because there is constant worry on the part of the trader about the losses he will have to face if the asset value goes down. He has to worry about when he would have to sell the asset back so he can avoid getting his account exposed due to the extremely volatile nature of the market. This type of trading is complicated, but binary options trading is fairly simple.
Binary options involves predicting the movement of the asset within a predetermined time frame. The psychological factor isn’t as great as that is there in traditional investing.
A Look At Binary Options Trading
Binary means “having two parts” which in binary options trading is “Call” and “Put”. The investing part involves only two possibilities that traders have to consider. Traders must make the decision between Call and Put based on their predictions about the movement of the asset. If the trader predicts that the asset price will rise, then he can Call the option. If the prediction is that the price will fall, then the best option for him is Put.
The first step towards investing in binary options is choosing an asset. A good advice for traders is to choose an asset they are familiar with so they can improve their chances of success when it comes to predicting its movement.
What Assets Are Available?
There is a variety of assets available that can be traded. Usually, the selection and the number of assets you can choose from depend on your broker. Usually, traders can pick assets from the following categories:
Indices – these can include assets such as Dow Jones, Nikkei, FTSE, Nasdaq, etc
Commodities – coffee, oil, corn, silver, gold and many others
Stocks – the options in stocks can range from some of the biggest companies and industries in the world. These can include Coca Cola, Google, Apple and many others.
Currencies – the most popular form of trading is currency pairs. A combination of a variety of major currencies such as GBP, USD, AUD, JPY and EUR are available.
Learning Binary Options Trading
Today, there is no shortage of reputable brokers out there that offer a great variety of educational materials and tools that traders can benefit from. There are video lessons, comprehensive guides and a wide range of educational tools that can enhance your overall experience. Traders who register with these brokers can get access to their education library or learning centre. When you have learned how to trade and how to implement the strategies that actually work you can surely become a successful binary options trader.
How To Get Started?
The first step towards getting started is creating an account with a broker of your choice and funding your account so you can start trading. You can begin by selecting an asset you want to invest in. For example, if you have knowledge about the gold market and have up to date information about its fluctuation history, then you must choose to invest in gold. After you select the asset, you have to choose how much you want to invest. The result will be either a gain or a loss and the result depends on the asset performance during the specified time period.
Using a demo account is beneficial because it offers a unique and an efficient way in which a trading platform can be tested. With this feature, traders get the opportunity to understand the features offered and how they can be used to maximize gains. Demo trading also enables traders to test their strategies which can allow them to trade more confidently.