Binary Options Trading – What is it?
Binary Options are a 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 two outcomes for any trade, WIN or LOSS. If you win, you get up to 95% return on your investment, but if you lose, 100 % of the 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 the lowest and up to 1 month. The most popular contract expiry is 1 minute, 5 minutes, 15 minutes, 30 minutes, and 1 hour.
Can start trading by just investing as low as $10 with regulated brokers and has the potential to grow the account balance significantly. But a decent amount to start with is $500, which can grow significantly if traded correctly—no need to invest a huge amount in becoming a trader.
Anyone with a small to medium amount, which can be put at risk, can start trading Binary Options right away.
How to trade Binary Options?
- Choose your asset.
- Make a prediction ( The asset price will go UP or DOWN.)
- Select investment amount.
- 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 broker’s 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 an 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.