How do Binary Options Work?

What are binary options? Let’s address this query first. This is a new way of trading involving binaries and it’s getting more and more popular. The United States legalized it in 2008, making way for an easy and fast way of trade. This type of trading is quite different from other types considering you will not be taking the ownership of any assets. What you actually do is that you try to predict the movement of the underlying asset. If you find it hard to understand it, it is something like betting or prediction. So we are talking about the asset being less of a long term investment.

How Does Binary Options Trading Work?

As the name indicates, in the simplest form, you can have only two directions. You can either go right or wrong. Or in other words, it is an all or nothing type of trade. Many find it risky. But it is easy to understand. You start by selecting an asset and then you predict whether it will go up or down in price. Once you have made up your mind, the broker will tell you the percentage amount that you will be getting if you have made a successful prediction. All these happen before you officially commit to the trade. Now it’s time for you to select the timeframe and the amount you want to risk. Once you have completed all these steps, you will officially execute the trade by clicking on the button.

This has to be one of the best things about binary options. Here you have more information about the fate of the trade compared to any other type. Here everything is definite, be it the amount of money you are going to make or the time frame for the trade. Binaries will give you all the necessary information before you make a commitment.

Understanding Binary Options Assets

Now we know how it works. It’s time to see what assets you can trade. You can trade all of the major stocks, commodities, currency pairs and indices. Most importantly, you are not limited to a single place. Using the same platform you can do the trade wherever you want, be it Apple’s stock, gold futures or the Japanese Yen. You can do all these different trades without changing your broker. For your information, most of the brokers have stocks and indices from Asia, Europe etc. making international trade possible. Or in other words, you will be enjoying a one stop shopping space for all experience. Using the same website, you will be trading pretty much everything by just switching between screens.

Binary Options Trading Duration

When it comes to binary options, you need to keep in mind that strict time lines are in play here. The timelines can be either pretty short or longer. It’s up to you to decide the time frame you want to work with. If you don’t prefer long term trades, you can opt for the trades lasting for 60 second or 5 minutes, which will give you immediate results. If you have enough patience, then you can go for the long trades which last for several minutes or hours.

There is something you need to be aware of expiry times that they are adaptable only up until you commit to the trade. You can sit back and wait once the trade is locked in. You know that the outcome can go only two ways. When it comes to your shares, you can sell them whenever you want and that’s the main difference with binary option. However, there are brokers who will allow you to sell off your trade for a small refund. But you shouldn’t look for it as it is a rare scenario. You can think about it once you become an advanced trader.

Call/Put vs One Touch vs Boundary Trade

When it comes to options, there are three main types of binary options. The first one is the basic call/put trade. This is the basic one and here you will simply attempt to predict whether the price of a certain asset will go up or down during a particular time frame.

The next type is called ‘one touch trade’. Here in this case, you will get a target price at the beginning of the trade. If the trade manages to reach the target price or exceed it during the time frame, you will get the percentage amount. The good thing is that the broker will let you know about the stipulated price before you execute the trade. So you have enough information to process beforehand.

The last one is called boundary trade. Here the booker will give you a range of prices. You will pick a price range for the price of the asset during that time frame. If you pick turns out to be true you will walk away with the percentage amount.

Broker Payout Percentages

Well, you should know that there are few different variations of these trades. That means there are few exotic versions which offer high payouts. You won’t believe that some of them offer a 300% payout! However, it all depends on the broker you are dealing with and you should definitely read some broker reviews first.

To take an example, consider a one touch trade with a really big target price. Here the stakes are high and the results can both ways. Why do they offer such huge returns? Well, as you can see, it is very rare such a far off prediction to become true. So now you know why they offer a 300% return. In short, you should know the game before you play it.

Should I Trade Binary Options?

Well, it is not that easy task to figure out the best choice as it depends from person to person. First and foremost, what is your experience? If you were a former Forex trader, you already have some expertise in this and you can use that to your advantage. Were you a former day trader? Well, binary option can really be a good thing for you. But I would suggest you to focus on the stocks that you are most familiar with.

Binary Options Trading can be a really good way to make money from home or from anywhere else where you have internet. Most brokers offer an app where you can trade as well from your smartphone or tablet. The best way to find out if binary options trading is for you, is to try it out. Head over to our homepage and take a broker from the top3. Sign up, deposit the minimum amount and try out their demo version first. This way you will see if this type of trading is for you or not.