Binary options are trading options that offer limited risk and can only have two outcomes. Binary options trading allows you to get into the financial markets without a lot of collateral. In order to trade binary options, you only need to decide if the price of the underlying asset will go up or down. If your prediction is correct and your trade finishes in the money then you get a pre-determined payout. However, if your prediction is wrong and your trade finishes out of the money then you lose your initial investment. You always know how much you stand to lose and how much you stand to gain when trading binary options.
There are a variety of benefits you will enjoy when trading binary options. First, binary options give you the chance to generate a profit no matter which direction the market is moving. Binary options are also easier to understand that traditional options so they are a great starting point for new traders. They still provide many opportunities for experienced traders too. In addition, binary options offer limited risk as you can only lose the amount you invested – never more than that.
You do not need a lot of capital to begin trading binary options so they are easier to get into than traditional options. Plus, you can trade binary options in many different market conditions – from flat markets to volatile markets. Finally, there are several different opportunities for you to trade binary options each and every day. Overall, binary options are fairly easy to trade because there are only two possible outcomes and they offer excellent opportunities. Even traders that are not very experienced can generate profits from binary options trading.
To start trading binary options, you must first choose the underlying asset you wish to trade. This is an important decision as different assets exhibit different behaviors. You should choose an asset that you are somewhat familiar with because that additional knowledge will help you make more educated trading decisions. After you have chosen an asset, you need to decide whether you want to place a call option or a put option.
If you believe the price of the asset will increase by the time the trade expires, then you should choose a call option. On the other hand, if you think the price of the asset will decrease by the time the trade expires then you should select a put option. You also need to choose the amount you want to invest as well as the timeframe of your trade. In most cases, the expiry time will range from 60 seconds to 60 minutes. You can usually expect a payout between 70% and 85% depending on the broker.
The expiration times can be divided into four different categories:
Most binary options trades are intraday but sometimes daily, weekly and event-based expiry times are available. Binary options are contracts settled with cash and they offer an all or nothing payout. However, some brokers offer a 10% payout on the initial investment even when the trade finishes out of the money. It is also possible to end a contract before it has expired with stop loss or take profit orders.