The simplest explanation for binary option trading is it is an option contract with fixed reward and fixed risk when you are booking Binary Options Trade.
It is called binary because it has 2 choices or 2 types of payout after the expiry of the trade term.
Choice or up or down, i.e. there will be a upper limit and lower limit like a boundary and if the strike rate of the trade goes above or below the upper and lower rates respectively it is considered as exercise of the option, else the option will get expired.
And the other touch is touch or no-touch;
In this case the exercising of the trade is at the discretion of whether the market price hits or touches the upper or lower level or not.
The working of binary option trades is from the trader’s perspective i.e. if the trader things the price of the underlying asset is expected to go down, trades are executed with the intention to make money in the fall of price and vice versa.
Here it is more about betting money on the basis of predictions.
There are platform out there in the market that will help to calculate and check how much money you can make with your investment.
Binary option contracts have three main factors namely, strike price, expiry time and payout offer.
Expiry time is the duration between when the trade is execute and supposed to expire.
Strike Price is it the price at which the trade is executed, this is a predetermined value irrespective of whether the traders losses or wins.
And finally payout offer is the return offered by the binary options broker.
The payout is known prior itself, even before risking money.
Types of binary options are numerous, among the long list the commonly used and well accepted one is up/down trade.
It is good to keep in mind the risk of losing money is to the extent of your investment on the trade plus the potential returns.
Winning a binary options trade is equal to winning a fixed amount of cash.
The binary options name is derived from the only two possibilities of the trade.
The risk of trading binary options is known upfront and it is fixed, there is no chance of losing more than what is invested.
Unlike FOREX there is no way of getting burnt out in binary option trading.
Also there is no need to set any stop losses, here the return is stagnant even if you lose or win 100 pips or 1 pip.
Payout is known well is advance thus you can decide the investment versus payout ratio considering the level of risk involved.
The features offered by most of the well-accepted brokers are pretty much the same.
Thus there is high chance of getting more than one broker who fits exactly to the needs of the each trader.
Keep your risk in the trading account minimum and the minimum trade can be as low as $10.
There are charges for even losing trades that is cost of executing a trade that you lose has to be added to the loss amount.
If you have a broker that you cannot afford to lose due to their features offered, then trade less risky trades.
If you are seen as a not good trader, there are chances that the broker might limit some features from you.
There is no ownership of the underlying assets.
The asset is just used for betting and there is no physical exchange of the asset in itself.
Binary trades can be customized as per each ones required, this is one of those options that can be designed as per traders choice.
The trader can expect around 70-85% return through their trading activities with the help of binary options trading.
Also there are no hidden charges or exceptional one-time charges.
To win in binary option you do not have to be a financial expert and there is no need to take ownership of the underlying asset.
The trade will come to one among the two options- exercise or expire.
This depends on the strike, duration and market conditions under which a trade is booked.
Winning a binary option trade is not a great thing, but how many trades have you won among the total trades executed is what matters and the success of binary options trading also depends on the same.
However, to sustain and to survive as a long term winner there should be trading strategies and methods for the same.
Come up with some own way of trading and have uniqueness in trading style; this will help you to stand out from others.
Invest time to study of the binary options strategies and methods of trading.
Keep yourself updated on the latest information on binary option trading.
Though it is not a tough task to trade binary options, a lot of dedication and effort is required in continuous basis.
Executing trades are easy if you have sufficient knowledge, experience and some amount of investment.
Only if you are very clear and precise about your needs, the research will be easy and meaningful.
Among all the information that is available in the market, trader should be smart enough to consider the information that are necessary and should make the judgment to ignore the rest.
Do not let your emotions to take control over your logic.
Make sure there is sufficient reasoning and statistics for every action that is taken.
If there is ever a wrong move taken, the result will be noticed sooner or later during your trading activities.
It is perfectly alright to consider others trading style to learn how everything works and to get a start in binary option trading.
But then after a point of time, you should be able to be independent and come up with own trading strategies by applying marketing knowledge, forecasting and logic.
Invest your time and effort in a right manner and be a long term successful trader.
This post was last modified on January 23, 2023 9:39 am