Trading binary options seem simple at a glance. It is indeed a simple concept to utilize and understand. At their core, however, binary options trades are quite complex. Every trader needs to understand how this market works if they hope to make any money off it. All it takes is some of your free time to schedule analysis and trading sessions according to your possibilities once you know what you are after. Nowadays, trading options for income is a practice that everyone seems to consider in their lucrative activities apart from regular jobs.–
This binary options trading guide will give you a brief yet comprehensive insight into binary options trading.
Table of Contents
What are Binary Options?
Binary options are designed under an “all-or-nothing” concept. Traders have two choices to make and two outcomes to look forward to.
At the core, a binary options trade is more like a gamble that a given asset will either reach or surpass a given price over a given period. If you speculate that an asset will reach a given price level and it does, you get your investment back as well as the profit. If it doesn’t, you will lose your investment – as mentioned; it is an all-or-nothing concept. The profits are also fixed and range between 70% and 90% of the investment.
A wide variety of assets are viable for use in binary options trading. Most traders prefer using stocks as they are easier to predict. Cash is also a popular trading asset whereby traders gamble with currency pairs such as GBP/EUR. Other assets such as gold, oil, and even cryptocurrencies are acceptable.
One of the reasons why binary options trading is growing in popularity, besides its simple concept, is that trades are fast. Short term trades range from 60 seconds to 5 minutes. Medium range trades range from 5 minutes to several hours. However, trades can be as long as several days, weeks, and even 12 months.
Types of Binary Options Trades
The most common type of binary options trade is the up/down or high/low trade. It is quite simple – traders simply predict whether an asset’s price will finish higher or lower than the current level at the time of the trade’s expiry.
Other types include:
- In/Out (Range or Boundary) Trade
This trade sets a price range that asset prices are supposed to reach. Traders predict whether asset prices will finish within or beyond these price range boundaries.
- Touch/No Touch Trade
In this trade, the trader predicts whether or not an asset’s price will reach a certain price level. If the option is touch, then the trade closes automatically when the level is reached and the payout issued. With the no-touch option, however, the trade has to run for the set period unless the price level is reached.
- Ladder Trade
This trade is much like the up/down option except for one major difference: there are preset price levels instead of the current strike price.
Venturing into Binary Options Trading
Anyone can trade binary options, but basic knowledge in the money markets is an added advantage. It may all seem simple, but the fact that 90% of traders do not succeed should prompt you to go in more prepared.
There are low barriers to entry. All you need is a credible account with an accredited broker and some assets to trade. However, you will need more than just that to retain and grow your initial investment, hence the argument for undergoing some training first. Practicing with a dummy account also goes a long way in familiarizing the trader with the markets.