Binary options are a modern way of trading fast and dealing easily in the world of finance. This idea was born and made legal in 2008 in the United States.
The essence in this type of trading is the non-ownership of any asset. There is instead, an attempt to somehow foresee the course of the underlying asset. One chooses an asset and gives a prediction of its movement. It is an investment in the present.
How do binaries operate?
In not so many words, binary options give you two choices - the choice to be right or the choice to be wrong. Either one wins, or one loses. There is no gray area.
It is not as scary as it sounds. Binary options, as a concept, is simple and concise. You choose an asset after which you foresee whether or not the price of the said asset will go up or go down in price.
Once you have made a decision, the broker you have made a deal with will show you the percentage of the amount. This will be returned to you before you have signed on your money to the trade.
You will then choose the amount that you want to invest. You will also choose the period within which you are willing to work. After taking all of these factors into consideration, you may then click on the button that finalizes the trade. Execution will take place.
Transparency is what makes binary options beautiful. Nowhere can you find such open access to information regarding the possible result of a trade than in binary options. You know the exact amount of that which you may profit from the trade and the exact amount of time said money may be claimed. All of these are laid out before you and is done prior to any agreement on a binary options contract.
What can you possibly trade with?
You can deal all of the major currency pairs, stocks, indices, and commodities in binary options. You are not going to be hindered to just deal using one kind of asset. This platform allows you to trade HSBC's stocks, gold futures, or the Euro.
There is also no need to change brokers in order to trade internationally.
There is a wide array of excellent brokers in the international arena dealing with a variety of stocks and indices. They allow traders free access to their platforms. Imagine an avenue whereby you can trade virtually anything without the need to keep transferring to another screen.
What is the period for these trades?
It is vital that one must be mindful of observing the binary options trade period strictly. Time is crucial in this type of trade. Varying lengths is irrelevant. You are the one who makes a decision on what timeframe works and what does not. If you desire for a quicker return and you wish for your money to be able to move freely, a shorter period may be availed of. One minute to 5-minute choices may be the best for you. If you feel like you have the luxury of time, you may choose longer periods. Such is the freedom given in binary options trading.
Because one is given these options, there is also a setback. The freedom to choose your expiry date is only up until the time whereby you have committed to the trade. The moment you have chosen your expiry date and the trade is already locked in, the waiting time sets in. You cannot touch your money not until after the expiration of the period. The exception is when brokers concede to the sale of your trade for a small fee. This is, however, very rare.
What are the main types of options?
The three categories of binary options that one must keep in mind are the following:
a. Basic call or Put trade
This is a simple prediction of whether, at the expiration period, the price of the asset will have gone up or gone down.
b. Touch trade
During the beginning of the trade, a target price is given. During the expiration period, the asset will then be examined. If it is able to reach the target price or go higher, the investment is considered successful. It is the broker who stipulates the price after which you can execute the trade. Your understanding of all the requisites for this transaction paves the way for you to profit adequately from this trade.
c. Boundary trade
This type of trade allows brokers to give you a wide range of prices to choose from. You will thereafter consider whether the asset's price will fall within or over said price.
The result of this type of trade vary and is dependent upon the broker. Payouts may go as high as 300%.
One touch trade falls under this category. For one to be able to maximize one's returns in the form of payouts for this trade, one must choose the most difficult option to reach. Simply put, choose the most far off target price. Since this option is the hardest to achieve, the rates of returns are also higher.
Which Binary Option should I choose?
Choosing the best binary option to go with varies for each person. The best question to deal with is this - what is my goal?
Find out what your trading goals are. You may then figure out a way on how to achieve those goals.
Wanting to have 2,000 dollars after the end of a two-week period may seem limiting at first. Ultimately, the opposite is true. It frees you to follow a path that will eventually lead to your goal. It will direct all of your efforts to choose an option that will help you hit such mark. It also limits your timeframe within which you may work with all you might to achieve such goal.
The big emphasis is in the polished quality of your trade. Work hard but also, work smart. A small number of trades with all of it gaining a profit in the end is better compared to entering a big number of transactions with only a few trades winning and most falling to losses.
It is imperative to look at yourself. Where is your expertise? Is this your first time to ever invest in the stock market? Or maybe you used to be a day trader or perhaps traded in Forex? Answering questions and learning your strengths and weaknesses will help determine the best path for you to take.
Where do I begin?
Basically, you must first choose a great broker. As you have determined the broker to best assist and partner with you, you may then go to the next step of depositing your trading money. How? You do this through the use of a credit card or wire transfer. A caveat to think of: you must be absolutely sure that the money you will use for trading is extra money. What do we mean by this? It is money that you no longer need for the payment of your home mortgage. It is money that has not been set aside for tuition fee or car maintenance.
So when can you start trading? When your account is set and there are funds in it, then you may trade. There is no need to rush though. If your broker has offered demo trading accounts, you must take him up on his offer.
Demo trading, a first glance
Demo trading is learning how binary options work and trading with it as in real time. There is, however, no risk attached to it as it is only play money that you use in such transactions. For a limited period, you will be able to trade as if you are really trading binary options. You are practicing your skill in the trade. The longer you demo trade, the lesser time you will have to spend learning the ropes during your actual trade using your real money.
Maximize on this chance to learn and use up all of the free hours given for you to demo trade. Consider it a gift to soak yourself in. This will prevent a lot of mishaps in your future trading especially in your handling of the trading software. It will minimize the risks of errors and also of losses. Demo trading allows you to build your own method of strategy and defense as well.
This is an opportunity that you surely would want to capitalize on.
Binary trading is an exciting way to trade. If you are new to the trade or simply wish to expand your business, or you have extra money that you wish to invest, binaries are perfect for you.
Binary options, when learned and adequately prepared for, almost always lead to profitable trades. However, since it is really an all or nothing type of trade, there is also a huge risk of losing money. Because of this, the keyword to hang on to is practice. Practice, practice, and more practice. Research and learn all that you can before embarking on this wonderful journey of binary options trading.
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Vinz de la Fuente
INO.com Contributor - Binary Options
Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.