What Is Binary Options?

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One of the most popular trading methods in the market is binary options. This is for the simple reason that most people who trade daily and have low capital are able to trade easily. But what is binary options?

What Is Binary Options?

Binary options can simply be defined as a “yes” or “no” offer. Meaning what the real price of the asset in question will be, will the price gain or lose? Thus the yes or no question. In this case depending on the answer, you as a trader need to have confidence in and trade. This way makes it the easiest financial assets that are tradable. With there being a range of tradable commodities, assets, shares and even stock, binary options makes it easy for anyone to trade as it’s a matter of two choices. If you are new to the world of binary options, understanding how it works, the necessary markets to trade in, time frames to use and legality of binary options is important. That way, the road to becoming a successful binary options trader becomes easier.

How To Trade Binary Options

The question on how to trade binary options often comes hand in hand with is it as easy as it seems to earn money with binary options? However the answer to this usually is on how much effort you put in, and steps taken to learn how to trade binary options.

Learn Binary Options Talk

Learning how to trade binary options starts with beckoning knowledgeable with the terms used. Some of the basics are:

Call: when it comes to having a prediction that an asset price will increase. Making a decision to buy that asset at a specified price for a certain period of time is done. This way afterward one can sell those assets making a profit.

Put: is the right or option to sell an asset after a specified period of time. With a prediction that the asset price will fall, selling is done before a loss happens.

Holder: someone who buys a right or option.

Writer: person who has sold an option.

Strike price: this is the price determined to sell or buy an option.

Expiration date: this is the specified date agreed on to either sell or buy an asset.

In the money: expression normally used to show that the market price of an asset is higher than the expected strike price when it’s a call, or lower than the expected strike price if it’s a put.

Out of the money: expression normally used to show that the market price of an asset is lower than the expected strike price when it’s a call and higher than the expected strike price when it’s a put.

Binary Options
Open A Brokerage Account

After learning a few tips and tricks on how to trade binary options, learning on where not to repeat other people mistakes, opening a brokerage account is important. This can either be done online or with a broker. Start by paper trading as this will ensure that your hard earned money is not lost on a new technique just learnt.

Compare Commissions

When it comes to payouts, comparing options between a number of brokerage companies is vital. This way chances of getting one that offers low or no commissions on options is higher.

Get Approval To Trade Options

When you start trading using the approval of the brokerage company you are signed to is important, especially as a new trader. This is for the simple reason that depending on experience and money in account, the company sets limits aiming to ensure that you will know what you are doing and still remain safe as will their reputation. It is good to note that if you do not meet basic requirements you will be limited to writing covered calls until progress is shown. Covered calls involves selling your right as a stock holder at any time to someone else, payments often come in the day the option at hand is sold.

Is Binary Options A Scam?

With the fact that it can be hard to trade in binary options and get significant amount of cash, many people have often regard it as a scam. However learning how to trade and basically periodically reevaluating one’s portfolio, ensures that improvements and learning from mistakes can happen.

However to be able to fully lead away from the misguided myth that binary options is a scam, avoiding paying market prices is important. This way by setting one’s own personal price, risks will be limited while returns maximized. This should be done in addition to keeping your portfolio balanced by having equals in options bought and sold at a time, limiting your exposure to losing money even lower.

But beware, there are a lot of so-called “systems” that will promise you to make money with no risks with a “push-button” tactic. Stay away from these schemes: people who advertise that kind of systems usually make money by forcing you to register with a specific binary options broker, so that they earn a commission whenever you invest money with them. The “system” is just here to make you register with them.

Can You Really Make Money With Binary Options?

Yes you can earn money with binary options, providing you do some research on the assets you’re interested in, which means be able to read a lot of technical data and interpret them. Gordon Pape, a contributor of the Forbes website, claimed on an article that mathematically, you must be right 55% of the time not to lose money. So the odds are not in your favor. For him, trading binary options equals to casino gambling.

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Credits:
Forex Graph: Allan Ajifo – Creative Commons
Arrows: Binary Options Center

 

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