Prior to making the decision of whether or not to trade binary options, you need to familiarize yourself with all that this form of trading entails. You need to know what may be gained, as well as what may be lost. You’ll also need to consider the actual process of trading so as to decide if trading is something you’d even care to do. So, without further ado, let’s break it all down.
Binary options trades are often referred to as “all or nothing” trades. This is because the trader either earns a fixed profit amount or loses a set investment amount. There are not varying profits or losses. Everything is predetermined and established in advance of each trade purchase. This is completely different from standard market trading, in which these amounts can change as the value of the selected asset changes.
When trading binary options, you own no stake in any asset. In fact, any connection that you have to the asset is severed once the contract concludes. All trades are bound by an expiry time, and when this time period has passed, you’ll know the outcome of your investment. Asset from the stock, commodity, index, and currency pair classes are available for use in digital options trade contracts.
There are various types of binary options trades to select from, but the most basic type only requires that the trader predict whether the price of their selected trading asset is going to be higher or lower than the strike price at the time of expiry. This is one of the advantages of this form of trading – traders can profit from downward price movement and not just increases in value. With each correct prediction, profit is earned. With each incorrect prediction, the investment amount is lost. It’s that simple.
All trading takes place within a platform which is provided by a binary options broker. With the ever increasing popularity of this form of trading has come an increase in the number of brokers. Many have been around since the SEC approval of binary options back in 2008, while others have just entered into the marketplace. Each broker will deliver the platform, handle all of the banking functionality, and provide customer support. Some offer much more than this, providing educational and analysis tools as well.
Binary Options Trading and You
So, what does all this mean to you on a personal level? It means that you have direct asset to an investment instrument which can provide you with massive profits from just a little work. Standard binary options trades can offer payment rates of as much as 95%, while high-yield trade varieties can pay out as much as 500% or more. Some brokers also offer refund rates on losing trades, providing a little backup for times when your prediction is incorrect.
Learning the basics requires very little time. Yes, there is more to learn than just the basic binary options trade, but the overall education process occurs naturally over time. It is possible to learn while trading and while earning. Many people master the basics and start earning money from day one. There is no reason as to why this cannot be you.
The start-up cost is yet another consideration. Each broker is going to have a minimum deposit amount in place, so this cost can vary, but the average minimum deposit is around $200 – significantly less than that of other forms of trading. Binary options brokers do not collect any type of commissions and never tack on any per-trade fees. Every penny placed into your trading account will be available for you to invest with.
Each broker is likely to have minimum investment amounts in place for each trade, but many set these very low. In fact, it is possible to commit as little as $5 to each trade, depending on the binary options broker you have chosen. There are also some super-fast trade types to select from, meaning that you can basically enter into as many trades as you wish throughout each trade day. Some brokers do offer 24/7 trading, providing unlimited profit opportunities day or night.
No previous experience is required, but this doesn’t mean that you won’t need to learn the ins and outs of binary options trading in order to be successful. Consider also that as simple as this form of trading sounds, there are financial risks involved. The good news is that each trader is empowered to greatly decrease these risks by planning out each trade correctly and always implementing a strong money management plan.
Should you trade binary options? If you are someone who would like to generate profits from basic market movement predictions, then yes, you should. With that said, be sure to master the basics and learn all you can about binary options prior to participating. Only those who really approach this form of trading in the correct manner are going to profit from it on a consistent basis. There is no room for guesswork. Successful traders take the time to study up, complete analysis, and then make educated decisions.