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Binary Options Trading 101 for Beginners

Updated on September 11, 2016

Binary Option ( BO ) sites have become popular over the past few years with new ones appearing all the time. Option trading are quite well-known in the world, but new to private individuals - binary investing are the most common in Asia and the United Kingdom. Binary investing can be exciting, short-term and has the potential to really make a great income, but this will require to identify the benefits and pitfalls of Binary providing platforms. Binary investing is very simple compared with the normal trading of shares and commodities. This option was created for those individuals who want to learn trading quickly by information that is simple to find through the web. The sector has quickly risen to become one of the most attractive form of investment for people who previously invested in shares and currencies. Binary Options are here to stay - for professional investors and private individuals alike.

BO's are in its simplicity forecasts of share, index, currency or commodity price changes over a given period. BO's are a simple, web-based form of investment in which the results are displayed quickly compared to traditional commerce. It is important to understand that the Binary investor will never own anything, but try to only predict price changes. Real price of commodities there 's no little consequence, because the aim is only to predict the rise or fall rate. BO's have only two possible outcomes. The prophecy is either true or false, depending on the investment in the price changes in advance agreed period of time.

A Google search for binary option sites produced 64.000.000 hits with promotions like “earn up to 75 per cent every hour” and “81 per cent profit in one hour or less, trade all major markets”. Binary and online trading has become one of the most popular forms of trading in the financial markets in recent years. This is because of wide range of opportunities and options - you can trade currencies, shares, or commodities. Many investors do not know all the advantages of BO's which can make a very large financial results online.

What are Binary Options Video?

What Are Binary Options?

Binary options are becoming more popular than ever as they are considered as an easy way of trading in multiple global markets. However, a trader needs to understand the basics of binary options trading, including the risks and rewards, in order to use and benefit the most out of these often-misunderstood unconventional trading instruments. If you are considering binary options as your upcoming trading project, here is an introduction to the newer trading platforms: Binary options 101 for beginners.

Binary options are an alternative way to trade commodities, foreign exchange, indices, stocks, and even economic events. The word binary stands for “having two parts,” and as the term suggests, it is basically an all-or-nothing trade, in which a trader either gains a fixed profit or loses his original investment. Binary options trading has only two investment possibilities for a trader to predict and then choose between, and unlike the regular trading options which allow you to trade a particular asset, it allows you to trade on where you think the price of the asset is headed. It generally allows you to trade future on the market, and not in the market itself, through a simple yes/no trade.

What Are The Types Of Binary Options?

Binary options have gained popularity over the past few years, and a number of types of trades have become available. Here are the most common types of binary options you can find on the binary options websites:

  • High/Low. When binary options first started to turn heads a few years ago, there was only one type of trade available, the High/Low. It is the most classic and the worldwide standard for binary options trading. With this trade, also called as the Up/Down or Call/Put, you predict whether the underlying asset will finish higher or lower than the predetermined rate at the expiry date/time. If you believe that the answer is higher, you simply pick “High,” or “Up,” or “Call” on your platform. If you believe that the answer is lower instead, you then pick “Low,” or “Down,” or “Put” on your platform.

  • One Touch. With High/Low options, you predict if the price of an asset will be greater or lower than the stake price at the expiry date/time. With One Touch trade, you instead speculate if the price of an asset will reach, or touch, a specific rate by the expiry date/time or not. The specific rate, or the trigger point, may be anywhere on the chart. If you believe that the asset will touch the specific rate, you buy a ‘call’ option. In the case that it does touch the specific rate, anytime within the expiry date/time, you win your trade and earn the payout.

  • Boundary. Boundary options are also known as Range options, and they involve trading in a channel. With the price ranges in a channel, the upper and lower boundary is defined by support and resistance, and the rate over a specific timeframe can lie inside or outside of this boundary. With this type of binary options, you bet whether the rate will stay between two boundaries. You win if the price does stay within that designated range during the entire trade. You lose if the price instead passes outside that range during the expiry date/time.

What Are The Characteristics Of Binary Options?

The financial world is overflowing with trading options, but not all options are right for all people. Before you choose to trade binaries, it is best for you to learn whether the binary options trading suit you. Here are the main characteristics of binary options:

  • It is simple. Compared to the traditional trading options which have such complex indicators and tools, binary options are sure simple. Many traders opt for trading binaries after experiencing the complexity of the traditional trading. This isn’t to say that binary options do not require some research; you still need the basic knowledge and preparation when trading on the market. As simple as it gets, amounts are irrelevant, numbers aren’t found in the equation, and you are only predicting the movement of an asset. A trader is only required to predict whether an asset will increase or decrease, and profit or loss is determined by the only two outcomes.

  • It is flexible. Once you get into the trading market, you will learn that there is a wide range of financial assets which can be traded all over the world, also in a wide range of expiry date/time. Many binary options brokers offer different sets of instruments that they allow the traders to trade. Many traders choose to trade binaries since it is a flexible option which enables you to trade on multiple markets. With binary options, you can trade commodities, foreign exchange, indices, stocks, and even economic events, such as the fall of oil price.

  • It is transparent. If you predict the movement of an asset correctly and the price at the time of expiry is on the correct side of the strike price, you are paid a fixed return regardless of how much the instrument moved. With binary options, there are no surprises. The risks and rewards are known upfront, enabling you to know how much you can make and how much you can lose before placing a “call” or “put.” This eliminates the stress of trading which often occurs in the more traditional options.

  • It is a short-term investment. Expiry times for binary options are basically shorter than the traditional options. While the expiry times for the latter may be years, they are only up to a week for binary options. Traders who seek for instant gratification can place a binary option and expect to collect their profits only within the hour. This character of short-term investment of binary options can mean substantial profits if combined with the potentially high return rates.

  • It is a low-cost investment. Binary options are open to small investments, thus they are perfect for investors who seek to invest small amounts of money with limited risks. This characteristic of binary options makes it an affordable way to trade online, in which many brokers allow the traders to make small minimum trades from as little as $1.

How To Trade Binary Options

The first time you venture into the trading and financial market, it might be quite an overwhelming period. This is because, being your first time, you might not understand how to trade binary options, which is one the key elements of these markets. Nevertheless, this should not be a long-term impediment if you truly want to become a successful trader in the binary options. Trading binary options is quite easy and not complicated, and in no time you can have the tricks of the trade in your finger tips if you put your mind to it.

They resemble the regular options in a variety of ways, but differ in one key element. Unlike regular options, binary options are rooted in system whereby the maximum gain and loss are known in advance. Due to this feature, it becomes quite easy to calculate the benefits and risks of any binary option.

How to trade binary options step by step

Open a trading account

It is advisable that you open one with a broker. However, you can trade binary options with an account that enables you to trade normal options, if you already own one.

Deposit funds

It is important that you deposit some funds to the account for you to start trading. Depositing of funds can be done in several ways including wire transfer and credit cards.

Select a binary option market

The binary option market has a number of commodities, stock, currencies, and indexes to choose from for trading.

Place the trade

Just like the normal options, put an option if you speculate a fall in the market price, or purchase a call options in case you speculate a rise in the market price. It is also important that you select a strike price to purchase the option. Opt for a price that you are certain the market price could surpass during the time of trade.

Exit trade

Binary options are based on "nothing or all" payout at expiration. What this means is that if your option expires at call (above strike price) or at put (below strike price), you will get a predetermined payout amount. However, if it terminates out of the money, you will lose the premium you paid for the option.

Tips On How To Trade Binary Options

  • Before you make your first trade, whether it is with commodities, stock indexes, or foreign exchange, make sure that you understand everything regarding the market, the principles of trading, and any other factor that may affect the assets.
  • It is also vital that you properly weigh up the market before you start trading. There are several ways of evaluating the market; however, the most common way is for you to technical examine the fluctuation in the market price. The other popular method is fundamental analysis. This method allows you to analyse the economic and related factual data of the market. In addition, it also allows you to analyse the demand and supply aspect of the market, which are assessed under technical analysis.
  • In order to trade properly, it is important that you accurately time your trades. Usually, traders would perfectly predict the rise and fall of the prices but lose out on the profits since they did not correctly time their trade. In binary options, timing is a very critical element because there is a certain period of time (window) given after which the binary options expire. Hence, it is crucial that you pay more consideration to time while trading.
  • Another important element that you need to pay attention to ensure you have a smooth and successful time trading in the binary option is the choice of assets. The best assets to trade with are always the liquid assets. Since they offer the best information, good spreads, attractive volatility, and visible pricing. Therefore, you can be certain of better results by choosing liquid assets.
  • Know when the reaction period is up. It is a period when there is a movement or reaction in the opposite direction before the normal inclination resumes. It usually comes after the market movement. During the period, if your asset had a considerable reaction movement in a certain direction, ensure that your trading takes goes in the opposite direction.
  • In your bid to know how to trade binary options, here is another proven successful trick that you can implement. Secure an asset by trading in a binary option that will offer you benefits in the event of a market movement in the converse direction to your trade. This will enable you to continue making profit even when there is favourable fluctuation in the market prices.

This is a type of equivocation and it is designed to secure your profits while receiving and sustaining returns from the underlying position of the assets.

The more you learn and practice how to trade binary options, the more you increase your chances of being a successful trader. With the help of the tips above, you will be able to gain knowledge and expertise that will enable you to obtain the best possible returns.

What Are The Tips For Trading Binary Options?

While binary options are not as difficult as the traditional options, such as Forex trading, sufficient preparation is still needed for you to benefit from it. Here are tips for achieving success and minimizing the risks of binary options:

  • Choose a reputable binary options broker. This is probably the most important advice to be given to any beginner in trading. A reputable binary options broker who knows his work and meets your needs can make a good choice for beginners. Start looking on binary options websites and choose a broker you can trust.

  • Set a limit on your bets. Beginners are typically introduced to trading with a demo account and you should spend at least several weeks trading with it to get used to binary options. The real deal comes when you switch to real money accounts. Switching to the real money accounts means betting with real money, and that your trades will now bring you either profit or loss. Setting a limit on the amount of money you are ready to bet on a single trade can help you manage your bank balance.

  • Control your emotions. One is likely to make the wrong decision when he is in an emotional state, and letting emotions lead the way is the most common mistakes done by the novice traders. Trading is entirely based on understanding, analysis, and calculations of the global markets. Keeping a clear head while making any decisions in binary options can prevent you from creating havoc with your trading.

  • Stay informed. You’d better learn the basics before trading binaries, and keep yourself informed in the process because there is always more to learn. Keeping up with the most recent updates in the global markets can help you predict the movement of assets. There is no lucky trader—there is only a diligent trader whose knowledge brings him wins in binary options.

  • Aim to be a wise trader. Acting fast in binary options does not guarantee you a win. Instead of leaving everything to your instinct and making a quick “call,” you’d better gather enough information and do a technical analysis before deciding to “call.” Remember that trading long-term serves better returns, so aim to be a wise trader instead of a swift one.

Have You Ever Heard Of Binary Options?

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Binary Option Opportunities

When you look into online BO trading a bit and it seems that very few people outside of professional traders can beat the trading sites consistently for good money, because short-term volatility along with the inherent disadvantage will make consistent winning incredibly hard, but possible. Problem is that these sites promote themselves as offering controlled risk (you can’t lose more than a specified amount), low cost, big gains if you guess right, and ease of use—you can trade from home whenever markets are open and set up an account with a credit card, but you need to know more to lower the risk.

Find a good stock to begin with. The difference between the traditional stock trading and BO's is that you can make a profit even when shares fall, as long as you know how to predict it - unlike traditional equity investments which people often invest in stocks that go up. This often requires analysis of the shares and understanding of the market in the long run - when it rises or falls! If you are good at predicting the rise and fall of shares, BO's has many advantages.

The companies definitely has an edge. Let say they pays $70 for each successful $100 “trade.” If you lose, you get back $15. Let’s say you make 100 “trades” and win 55 of them. Your profit is $3,850. But your 45 losses will cost you $3,825. In other words, you must win 55% of the time just to break even. It is wise to become familiar with the financial markets to function correctly. There are many sites which provide information and statistics on share transactions, currencies and commodities. In the financial markets, it is necessary to be up to date. The most important thing is to learn when to buy and when to sell, as well as rising and falling markets.

How To Success With Binary Options?

As in all things, including BO's trading practice makes perfect. Practice, practice more and learn more. You can become a Binary investment professional very quickly, but you will always learn from your experience when you invest in options. When compared to Binary and other forms of investment (eg, currencies or equities), has Binary superior benefits. The disadvantage of equity investments is often high fees from small investments. As a result, investment in associated costs are rising and undermines investments profit - which is why BO's are a good alternative to traditional investing.

Your investment does not need to be very large so it can grow. Multiple platforms you can start around $ 100. If you follow the stock trades actively, you may want to invest a little larger amounts of money to earn more. The possibility of smaller investments in low-risk is one of the best aspects of Binary. Binary Options offer a solid investment in the contract. Binary has a predetermined profit margin, as well as the investment in the contract price changes in a given period of time which can be minutes, hours, days, or weeks.

"Call" at a profit when the price of the commodity will rise in proportion to the level on which the contract was made. "Put" to the existence of a profit when the price of the commodity falls below the starting level. If the price of the commodity is exactly the same situation as the agreement is made, the original invested amount is returned to the investor.

Financial markets, there is always a risk, and BO's has no exception to this. Binary risks, however, are more transparent as the amount that can be lost is always known in advance. The investor can never lose more than what he initially invested. If you think that the price of the dollar is on the rise and analysis of the currency markets, your hint and strategy supports this assumption - then promptly "Call".

How hard could all of this be? It can be very difficult, but a long-term profitable investment brought about by financial gain is worth it. Learn to do the job properly in order to succeed as much as possible with Binary Options.

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