What is Binary Options Trading?

Binary Options Trading

When you think about investing, what typically springs to mind is stocks and bonds, forex and perhaps even real estate. These well-known forms of investment require significant capital, and have a high risk in regards to receiving positive returns. Furthermore, you must purchase and possibly sell an asset in order to get any return. If you choose to hold on to the asset, your returns may be limited to dividends received on an annual basis.

Binary options trading has been available online for just under a decade, and is a contemporary form of investment. The approach you use with this method is completely different from traditional investments.

 

Defining Binary Options Trading

Defining Binary Options Trading

The word binary means something that is composed of two things, which is the perfect way of describing binary options trading. Binary options trading involves making a prediction and choosing between a “Call” or a “Put”.

Predicting an increase in the asset price is the “Call” option, and predicting a decrease in the price is a “Put” option. These options are commonly referred to as a “High/Low” trade. These are the two main types of investments that you can make when trading binary options. There are other types of options including “Touch/No Touch” which are ideal for the more experienced binary options trader.

 

Simplicity in Trading

Simplicity in Trading

Traditional options are complex to understand, meaning that trading in them often leaves one anxious and wondering when the ideal time to sell would be so that a profit can be made. Binary options are much easier to understand and to trade with, as they are based on speculation and limited to a certain time period. To trade, it is necessary to make a choice from one of two options, either a Yes or a No. With binary options, your payoff is based on a fixed compensation if an option expires in the money, or no compensation at all if the option expires out of the money.

 

Binary Options Assets

Binary Options Assets

There are several binary options assets that you can trade with. These include stocks and indices from different parts of the world. Indices are particularly popular as they provide an index from global stock exchanges which evaluates if the prices of major stocks in a certain market are increasing or decreasing in a particular period. Indices including NASDAQ, FTSE and Dow Jones are often used by binary options traders.

Forex and currencies can also be traded on this platform through currency pairs. Currency pairs pit values of two different currencies against each other. Most sites allow you to choose from the major world currencies such as the US Dollar, UK Sterling Pound, Japanese Yen and so on.

Commodities including gold, silver, coffee, oil and more are often found on Binary Options Trading sites. Being able to make a profit from commodity values without having to actually trade these directly makes these very popular amongst binary traders.

Stock trading remains quite tempting for most investors, although, wild fluctuations means that stocks are quite risky. Even without market analysis skill, it is possible to trade in stock options without having to own any shares with binary options trading. World renowned companies including Facebook, Coca Cola and Google are available for binary options trading.

 

How Binary Options Trading Works

How Binary Options Trading Works

Take for example you plan to trade on a commodity such as gold. Rather than purchasing the gold, you make a decision about the price of gold increasing or decreasing, meaning you focus on its future value. Your decision will be based on changes within a particular time frame, saving you from purchasing actual gold and instead putting your money on your prediction.

Like typical investing, Binary Options Trading works well if you have a diverse portfolio which allows you to spread your minimal risk.

 

There is a basic reason that binary options trading continues to increase in popularity each year, and that is the fact anyone can make a profit  with this simple form of investment. Furthermore, with these options, it is possible to make an immediate pay-off based on the asset that you have chosen and whether your prediction is correct or not.

Although Binary Options Trading requires some trial and error in order to get develop skill, as a new trader, making a profit simply requires you to be methodical, ensure you are up to date on what is happening in the business world, and most of all to be patient.

  • Jake Gabrial

    Really great article. Thank you for explaining things clearly over here. I have been looking all over the internet to understand these things clearly and your article is the best of all I have came across until now. Cheers!!