If you are new to the world of Binary Options, it can all seem a little daunting and confusing. There is a lot to try and take in, but we believe that anyone can trade binary options. We have broken the process down, to make it easier for those who are trading binary options for the first time. So, read on if you would like to discover binary options, explained and simplified.
Binary options essentially are the estimates of how underlying assets will perform in any given time frame. Investment is normally when the investor has actually purchased the asset that they have invested in, and the value of both profit and loss is determined by the changing value. Should the investor choose to sell the asset back to the market when its value increases, they are making a profit, but if they sell it back to the market when the value decreases, their money is then lost. This type of investment requires a lot of work, and often leaves the investor constantly worrying about when to sell. Binary options is actually a much simpler trading method and instead trades futures on the market and not in the market.
To put it literally, the word binary means ‘having two parts’, which is why binary options trading has only two investment possibilities for you to predict and choose between – Call or Put.
- Call Option: If you believe that the price of an asset will rise, your investment will be named a ‘Call’ option.
- Put Option: If you think that the price of the asset will fall, your investment is named a ‘Put’ option. There are many assets that can be traded as binary options, from Indices, Forex, Commodities and Stocks.
Different types of Binary Options:
There are different types of binary options, all with their own individual benefits and features, which you can use depending on your own preferences and the different markets’ formations.
- High/Low: If you select this option, you are choosing whether the market price will close above or below the current price. So, by calling a Call option – the price must stand above the striking price at the time of expiry; and calling a Put option – the price must stand below the striking price at the time of expiry.
- Quick: A Quick option is exactly as the name suggests – it allows you to make quick and profitable returns. The expiry times will range between 30 seconds to one hour, with its prime objective being that you’ll make quick returns.
- One Touch: One Touch trading will allow you to decide if the market price will reach a certain value before the expiry time. If you believe that the price will rise above the upper line presented on the graph you would put in a Call option, and if you believe the price will fall under the bottom line presented on the graph, you will put in a Put option.
- Range: Range trading has both an upper and lower option target price which eventually forms a boundary range. To put in a Call option, the price needs to remain higher than the striking price and lower than the upper line at expiry. To put in a Put option, the price needs to remain lower than the striking price, and higher than the lower line at expiry.
Are there any benefits to Binary Options?
Binary options have many benefits, and it is easy to see why is has become one of the most popular forms of trading. Because they are so easy to use, it is easy to see, when compared to other more traditional types of trading that the benefits of binary trading easily surpass all other options. You get a much higher Return on Investment, with the expected rate of return reaching up to 83% on a single trade. This is the only form of trading that offers such a huge return on investment. You already know the risks and rewards, even before you have placed your binary options trade. You are taking a calculated risk, and know how much you can profit. Because there is no risk of leverage, you are not rising any more than you invest. If you are new to binary options, one of the most appealing benefits that you simply cannot get from other trading options id the opportunity to test your trades in a completely risk-free environment using a demo account. This gives you the chance to try out different landing strategies, and look at different analysis techniques without having to risk anything.
Binary Option Strategies:
Finally, we will take a look at the binary options strategies. This is important because having a better control of your binary trades is essential to your understanding about the financial markets behaviour, which in turn in essential to your trading success.
- Hedging/Straddle:The hedging/straddle binary options strategy is comprised of simultaneous trade on one asset in opposite directions. Using this strategy prevents you from enduring a full loss of your trades invested capital. It is based on the presumption that ‘what comes up, must come down’. To use this strategy, you must choose your general direction – that is whether you invest in a ‘call’ or ‘put’ option, and choose your underlying asset and invest according to the general direction that you decide upon. Once the financial assert advances according to your predicted assumption, you are then required to make an opposing investment. By putting in both Call and Put options, you are minimising the risk of losing on both options, and maximise the chances of gaining from one of them.
- The Correction Binary:The Correction binary strategy is slightly different and works as follows; during the beginning and end, assets will tend to undergo unexpected surges, often after important market announcements. These are what you should be looking out for if you want to apply the correction binary trading strategy. This strategy is founded on the Correction rule, which states that if a price of an asses surges upwards or downwards and a gap appears, the asset will correct itself and return to its previous price. The Correction strategy is advantageous as it asks you to detect these gaps and then execute a binary options trade in the opposite direction.
If you are interested in Binary Option trading and still do not know where to start, take a look at our tutorials, which have been tailored for beginners, and will take you through each step in detail.