Binary Options trading has long been known to be a profitable business in which people can make a lot of money. However, like many other businesses, Binary Options has its ups and downs. Undoubtedly, it has a definition and some instructional points which are the prerequisites for entering this market. Traders with insufficient market knowledge are susceptible to the risk of loss which can be unbearable. Therefore, a smart trader should take the essential points into his/her account while trading. In this article, we will outline some fundamental points regarding Binary Options trading.
What Are Binary Options?
Binary Options are financial options contracts where you receive either a payout or nothing. Traders should predict the outcome of a binary direction within a determined time frame. If you guess the correct binary situation (yes/no) or direction, your trade will be in profit. Otherwise, you will lose the bet.
Before entering the Binary Options trading world, you have to choose an appropriate broker. A broker could be a company or a person that effectively connects buyers and sellers of various underlying assets to trade with one another. During this process, a broker acts somewhat like a middleman or an agent.
Binary Options Brokers
As was mentioned above, first and foremost, one necessary step that should be taken before starting Binary Options trading is to find a trusted Binary Options broker. Nowadays, trading has become more comfortable and many brokers offer web-based platforms. It means that you can trade electronically. When you place your orders through the broker’s trading platform, it allows for several services such as tracking price changes in a variety of underlying assets or checking your available balance to choose the desired amount of the Binary Option you prefer to buy or sell, and many other functions. Besides, some brokers provide their full-featured trading app that enables you to trade wherever and whenever on your smartphone.
The Nature of Binary Options Trading
Binary Options are financial instruments that have the characteristic of a straight profit and loss line. The nature of Binary Options trading allows the speculator to view the direction of an instrument (Futures, currencies, stocks, commodities, and bonds). Binary trading is based on the choice of the strike price level and if a trader believes that the price of a share will be higher, he/she can buy the option and if the price closes at a lower price level, he/she can sell the option.
What the Binary trading has is a linear Profit and Loss profile. It means that if the price strike level which a trader choose closes in cash, the trader will make a profit. However, if the price level closes out of the money the trader will lose the invested amount. The speculator should answer the question: '’ will the amount of a share be above the strike price or below it at the expiry time of 2:15 p.m.?’’ If the answer is yes and the trader’s speculation is correct, the trade will be closed in money and he/she will make profits.
By the same token, if the trader’s speculation of the price is not correct, the trade will be closed out of the money and the trader will lose the invested amount.
Binary Options Traders
If you want to start trading in the Binary Options market, you should be able to correctly answer the following questions. Questions like: Who is a Binary Options Trader? How does he/she earn money? And what are the essential requirements to become a professional Binary Options Trader?
Let's find the proper answer to each question together.
A Binary Options Trader, generally, is a trader who has chosen the Binary Options market to make a trade rather than the Forex market or other asset exchanges. Binary traders make money from predictions; because Binary Options trading is an investment based on the predictions of the price.
In Binary Option trading, a prediction could be either right or wrong, but nowhere in between. It means that when traders place an order, there is no way to close it manually, but they should wait for the trade expiration.
Therefore, some requirements can help traders to excel in their trading skills. In addition to analyzing abilities such as technical or fundamental analyses, Binary Options traders should learn risk management skills to control their stress and weaken the role of emotions in making decisions. This market could be attractive for those who are looking for excitement!
Learning Binary Options Trading
Whether you are a novice trader or an experienced one, you are undoubtedly familiar with the definition of binary trading. As defined, Binary Options are a type of financial investment that can be traded in any market. Moreover, in Binary trading, there are four possible options for investment. What is important to raise here is there is still another essential part of Binary Options which is the expiry time. As you may know, the expiry time is when the trade ends.
Unlike what people believe it is illegal, Binary Options are legal in some countries. However, there may be Frauds and Scams in this market, too.
This type of trading seems to have many advantages, such as simplicity, fixed risk, etc. Despite all of the benefits, there are some negative points as well that are:
The amount of loss, limited trading tools, etc. All in all, if you are interested enough to enter this lucrative type of trading and are willing to learn how to start, you can check this link for thorough information on Binary trading.