Binary options. Right out of the gate, the term sounds like it is going to throw out a list of immensely complicated Forex lingo that will take you forever to navigate. But like most things in the Forex industry, what starts out as seemingly complicated is actually far easier to understand than you’d imagine.
In many ways, binary trading is both traditional and considered to be quite a simple way to trade currencies and make a profit. With binary trading, the pay out will be a fixed amount and you will be able to predict the outcome from two possible results.
And those two possible results could not be more uncomplicated. Your prediction is either going to be correct or it is not. If you are correct you will receive the fixed pay out as it was agreed upon. If your answer is incorrect, you will lose the money you initially paid.
The two possible outcomes are really either win or lose. This means you have equal the risk and equal the payoff.
Binary options are a truly amazing option for traders who are considered low skill, or who have only recently started trading. This option will give the trader access to quite a versatile range of markets including commodities, indices, Forex, and stocks.
There are quite a few ways in which this option standards out from the rest. It is not just the win-lose stake, but also that these options have a very clear strike date, price and time as well as a clear expiration date.
To make that profit, the trader will need to correctly guess or rather carefully predict the market direction as well as the price at the very time that there was an expiration. Understandably, the trader will lose their investment should the wager be incorrect.
This is just the tip of binary trading. Let’s dig a little deeper.
With binary options, the trader will need to buy a call (right to buy) when it is bullish or they will need a put (right to sell) when bearish. The placement of the call or put will be focused on indexes, commodities, stocks and currency pairs (Forex).
To make a profit on a call, the market will need to be trading well above the strike price at the expiration time.
To make a profit on a put, the market should be trading below the strike price at the time of the expiration.
If you are working through a broker, they should be able to tell you the pay out, the expiration date, the strike price and the risks involved.
The types of Binary Options
Binary options come in various, well, varieties. All of the types of trades work on a pretty basic Yes/No outcome which is precisely why this is called a binary trade, there are only two options.
Here are some of the most common types of binary trades you can choose from:
The Up/Down or High/Low Trade – The most common of them all is the most simple of the lot which is the Up/Down trade. A high figure is set along with a low figure. Whether the price will finish higher or lower than the current price at the time of the expiration, will determine outcome.
Ladder – Similar to an Up and Down type trade, the Ladder will have a pre-set price level that is laddered. Pay outs with this type of trade can on occasion go over 100%.
Touch/No Touch – With set levels which are either higher or lower than the current prices, the trader will need to predict whether the price will touch the levels before the expiration time. The trader will be able to close their position before the expiration time. Should the price level be touched before the option has expired, the trader will be immediately paid out.
In/Out – Also referred to as the Range or Boundary option, with this traders will be able to set a high figure and a low figure. They will then predict whether or not the price is going to close inside or outside of the levels.
The Advantages of Binary Option Trading
Regardless of the type of binary option you choose when you begin this specific type of trading, you will enjoy a range of advantages that will make it all worthwhile.
- You will be able to trade using the binary option on all of the markets. It doesn’t matter if Forex trading or the stock indices are your preferred markets, you will be able to trade using binary.
- You can limit the amount of losses you have to take by simply limiting your stakes.
- Your trading can take on a range of durations, with both short term and long term positions available.
- You have more control over your market predictions because you can predict the movements.
- You don’t need to be incredibly skilled. Some trading will require you to have immense experience and know-how to get your profits. Binary trade is perfect for those just starting out in the industry.
While binary option trading has been around for quite a long time, but it remains one of the options that is best for those who are keen to be a little innovative when it comes to Forex trading. This is also, without a doubt, the easiest way to start trading and investing in the various financial markets.
There is a limited risk involved with binary options and the rules are incredibly easy to follow. To get the most out of this form of Forex trading those same rules such as formulating a solid strategy, making sure that you have made all of your calculations, reading up as much as you can about where you will be placing your money, and be smart about all of your decisions, should all be applied.
It is not difficult to make a success of your binary option trading when you have laid down solid groundwork, and it truly is a fantastic place to start your investment career.
Frequently Asked Questions
What is binary trading and how does it work?
Go here for an in-depth guide about binary trading.
Is binary trading safe?
Yes, it is considered a safe investment option.
What is the best binary trade app?
The best app at the moment is IQ Option which can be used on both Android and iPhone devices.
Which is better binary or Forex?
Binary is far easier to navigate than Forex, purely because there is no changeability. Binary reduces risks while Forex risks can only be figured out once the trade has closed.
Can binary trading make you rich?
Yes, it is not impossible to make sizeable profits from binary trading.