Binary Options Trading
Binary Options Trading – Everything you need to know about Trading in Binary Options
What are Binary Options?
Binary options, also known as two way (binary means two) options are one of the most hassle free ways of trading. Also called fixed or digital return options they are based on determination of whether the value of an asset like gold or share price will close above or below the current price within a specific time period. Not only does it sound simple, it is an extremely lucrative way of trading. If your prediction is correct you can take up to 60-80 % of the value of the trade.
Although trading in binary options has gained mass popularity in the recent times, this mode of trading has been in the market since the 20th century. Banks and financial investment companies have been offering them for a very long period. The internet era has increased awareness and also accessibility about various trading options, hence the boom. Now, at the click of a button you can earn money while watching TV at home. Now, who wouldn’t want that?
How do you do it?
Before you start trading, you first need to familiarize yourself with the terminology. These options can also be called fixed return options. This is because the option has an expiry date/time and also what is called a strike price. If you bet correctly on the direction of the market (up or down) and when the specified time period expires, you will be paid a fixed amount of money no matter how much the price changed. If you bet incorrectly on the direction of the market you will end up losing a fixed percentage of your investment or all of it, depending on the terms and conditions of your investment company.
If you are of the opinion that the market will go higher, you will purchase what is called a call. If you think that the market is going to go down, you will buy a put. In order for you to make money on your investment on a call, the price should be above the strike price and vice versa in case you invest in a put. The strike price, expiry, payout and risk are all disclosed at the beginning of the trade. They are all subject to changes depending on the market and also the company you are using for your investment. Hence, payouts differ from person to person.
Why trade in Binary Options?
It is a known fact that any trading venture has both ups and downs. However, trading in binary options need to be considered with more perspective rather than at face value. The first benefit of this type of trading is that the trader is aware of both the risk and reward- you either win or lose a fixed sum of money. It is an extremely simplified way of trading which allows you to trade in multiple markets- forex, commodities like gold, stocks etc. Unlike other trading methods, trading in binary options allows you to make money from both a rising and falling market. There are usually no fees or commissions involved in binary options trading and also no liquidity concerns since you don’t actually own the underlying asset.
As is the case with any trading practice, trading in binary options is also a high risk activity. It is purely based on speculating the market prices and how they are affected by near term economic events. It involves high volatility movements and risk of loss. So be a smart trader, invest only what you can risk to lose. Also be practical and know what you are getting yourself in to, like any other gamble trading in binary options is also addictive and you need to be disciplined and responsible with your trading.
To summarize, trading in binary options is a smart and easy way to make money. But like any other shortcut money making methods, there are risks involved so do your homework before you invest your money in binary options trade.
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To keep abreast of what is going on in the financial markets, take a look at the Reuters website.