What is Binary Options Trading
What is Binary Option:
Binary Options are one of the new and simple derivative product based on Forex, Index or Stocks, that are available to traders. Binary Options are a form of an option that provides a fixed deadline for expiration with a fixed payout. It has only has two outcomes for any trade, WIN or LOSS. If you win you get upto 95% return on your investment, but if lose , 100 % of invested amount is lost.
The benefits of Binary Options Trading are
- Simple to understand. Traders need to predict asset price direction UP or DOWN at trade expiry.
- Fast trading with instant return on investment. Typically the trades last for 30 seconds as lowest and up to 1 month . Most popular contract expiry are 1 minute, 5 minute , 15 minute, 30 minute and 1 hour.
- Can start trading by just investing as low as $10 with regulated brokers and has potential to grow the account balance significantly. But a decent amount to start with is $500 , which can grow significantly if traded properly.
- No need to invest huge amount to become a trader.
- Any one with small to medium amount which can be put on risk , can start trading Binary Options right away.
Binomo offers new traders FREE OPTIONS worth $150 , Start trading now with Binomo.
How to trade Binary Options :
1. Choose your asset.
2. Make a prediction ( The asset price will go UP or DOWN.)
3. Select investment amount.
4. Trade (by clicking CALL or PUT).
If EUR/USD is trading at 1.12002 and you predict the currency pair will be lower in the next 5 minutes and you want to invest $25?
Find EUR/USD in the brokers asset list, select the time period of 5 minutes, enter $25 as your investment amount, click on the PUT (SELL) button and the trade is executed. The return on this trade is 85%.
You’ve now predicted that the currency pair EUR/USD will be lower than the current level of 1.12002 in 5 minutes time.
After 5 minutes EUR/USD is trading at 1.11998, lower than the price 5 minutes earlier, when you entered the trade. Your trade gets closed automatically by the broker after expiry of 5 minutes.
Since EUR/USD was trading lower as you predicted your trade is closed for a profit (known as in the money). The profit for a $25 investment with a return of 85% is $21.25 ($25 x 87% = $21.25) which is credited to your broker account almost instantly.
If your investment amount had have been $100 you would have made a profit of $85 on just this single trade.
There are different expiry times starting from 30 seconds to upto 5 minutes in Turbo Trading option.
And expiry of every 10,15 minutes, 1 hour and 1 day , end of day also available with many binary option brokers.
Binary options trading easy or complicated:
Binary trading is quick , simple and very profitable , but at the same time risky. You may lose the invested amount completely. You would have lost $25 in the above shown example trade, if you were wrong in your prediction. If EUR/USD would have closed above 1.12002, you would have lost the trade and your invested amount $25.
Hence it is very important to manage the risk in binary option trading , in order to be a successful trader.