The Basics Of Binary Options Trading

by Jessie Cox Binary Options Professional

Prior to binary options being made widely available, financial market trading was an activity that was not suited for the masses. Only professional traders that had access to plenty of start-up funds were able to earn substantial profits. Thanks in part to the internet, things have now changed for the better. More people now have access to profitable financial instruments, and the start-up costs are now low enough for anyone to afford.

Today, online brokers do accept retail customers with modest investments. Because of this, many people have ventured into the financial markets and begun to learn how to trade. However, there remains a serious road block that keeps a larger number of people from trading and that would be lack of knowledge. The traditional markets are complicated, requiring traders to be knowledgeable about things such as leveraging, margin calls, slippage and spreads. For years, traders have been searching for an easier way to profit from trading with assets.

Retail brokers such as had already been looking for an easier way to catch the attention of new clients, which meant that making trading a less complicated process was necessary. The solution was binary options, which are by far the least difficult form of trading. Traders only need to forecast market direction for a specific time frame, up or down, to earn money. With each accurate forecast, the trader is rewarded with a substantial return on their investment. 

A belief that the value of an asset is going to appreciate by the time of expiry would be considered a "Call" option. "Put" would be the prediction of a price decrease. The actual price of the chosen asset that the time of contract expiry is what will determine whether a fixed profit amount has been earned or the investment amount is lost. The price could have moved in any direction while the trade is live, but so long as it is higher or lower than the strike price (as forecast) when the trade ends, the position is profitable.

As an example, assume that crude oil is trading at $106.97 per barrel at the time a contract is purchased and the expectation is for the price to increase within the next hour. Here, a "Call" option would be purchased, along with an expiry time of one hour. Assuming that the return rate is 85%, if the price is even a single pip over $106.97 at the end of the hour expiry, the return will total $185. Of this, $100 is the original investment amount and the other $85 is pure profit.

The investment amount for each purchased must total at least the minimum amount as established by the broker. However, novice traders need not worry about this minimum being high. Over the years competition among brokers has caused a number of changes within binary options platforms, with one of these being lower minimum investment sums. Today, $5 and $10 minimums are quite common.

There are numerous advantages associated with this type of trading:

  •        Traders know exactly what is being risked, since the cost of the contract is known when the purchase is made. It is never possible to lose more than the investment amount.
  •       Stop losses and take profit requests are not necessary. The potential profit and potential loss amounts are pre-determined, which is why binary options are often referred as "fixed return" options.
  •        Assets are available for all major markets. Each platform is going to include a variety of stocks, commodities, currencies, and indices.
  •        Profits can be earned from any type of market movement. It is not necessary for the value of an asset to increase, as value decreases can also be profitable. The goal is only to be able to judge the price movement direction.
  •      Start-up costs are low. Within many platforms the minimum deposit about will be somewhere between $100 and $250.
  •        Trade execution is fast, which means that fast price movement can be capitalized on quickly.

All things considered, it really is no wonder why so many people are turning to binary options when they want to profit from assets. Since 2008, traders have been flocking to online platforms to take advantage of these exotic options. Limited risk, large payouts, and a simple system work to make this financial instrument one that anyone can use.

Sponsor Ads

About Jessie Cox Junior   Binary Options Professional

2 connections, 0 recommendations, 15 honor points.
Joined APSense since, June 20th, 2014, From Helena, United States.

Created on Dec 31st 1969 18:00. Viewed 0 times.


No comment, be the first to comment.
Please sign in before you comment.