What exactly are binary options? Over the past few years, they have been one of the most profitable financial instruments to explode onto the scene of global markets. Many traders from all over the world use binary options to provide their portfolios with liquidity in a safe way that expresses minimal risk.
Binary options are a combination of analytical aspects of day trading and the rich, profitable options of traditional market trading that make it possible for a trader to maximize their profits and decrease the amount of time spent on investments. They are robust financial tools that can help you predict the market price of assets within a period of time of your personal choosing. The range of time with a binary option can range from a few minutes to several days – and it’s all your choice.
Performing Binary Options Trading – Is it simple?
It’s easy to see why binary options have exploded recently. They make things easy for the newly budding trader. It all comes down to a simple yes and no equation, which makes binary options that much easier to work with.
When you trade using a binary option, you are given 3 essentially important steps; yet simplicity in the trading is evident. First, you choose the asset that you want to trade, followed by choosing which direction you feel that asset moving towards, and finally by entering the amount of money that you wish to trade – it’s simple!
Are Binary Options Profitable?
This depends heavily on your knowledge of current markets, assets, and economic information surrounding the asset you are interested in. Due to the simple nature of binary options, they are influenced by the news, financial reports, and market fluctuations. Because of the nature of this system, binary options can be very profitable. For example, if you feel that Telstra is on the verge of increasing its value per share, specifically in a short period of time like 15 minutes, you could make a return profit of 89% on your investment. That kind of profit building instrument is the reason why binary options have become so popular.
How Did Binary Options Get That Name?
Consider that computers use binary language to process information at lightning fast speeds. This is due to the nature of binary code, which represents zeros and ones, or yes and no. Binary options get their name because they express the yes and no choice of trading, which is all important. You might hear the term FRO, or fixed return options, or DO, which are short for digital options. These terms are used interchangeably for binary options when a person desires to express the static nature of the yes and no system that binary options represent.
How Can I Trade Binary Options?
We have learned what binary options are at this point, but one question begs to be asked: How can I trade binary options? Binary options are all about selecting an asset, deciding whether it will become more or less valuable over any period of time, and investing your money as a result in the hopes that your prediction will turn out to be right; thus earning you a profit. That’s why it’s crucial to have an understanding of the market that revolves around the asset that you are interested in trading.
So let’s use BHP Billiton shares as a prime example for how the binary options process works. First, you’ll learn all you can about the direction that BHP shares might be taking in the near future. Whether you feel it will gain value or drop value doesn’t really matter – each choice can be just as profitable in any given situation. Let’s say for the sake of this example that you believe BHP shares will be taking a turn for the worst in the very near future, because you read that another top competitor to BHP will be unleashing a new strategy or service that will skyrocket its value and cause BHP stocks to drop in value drastically. You would set your binary option to gain profit if BHP shares drops in value by the amount you predict. Then you invest as much money as you see fit into that binary option. Once this has been done, you can see exactly how much you would profit if your forecast is correct, as well as how much you might lose if your forecast was wrong.
Why Are Binary Options So Popular Among Traders?
Binary options are so popular among traders for many reasons. They combine a simple method to trade your favourite or least favourite assets to gain profit. They also provide an environment for trading that feels safer than other trading markets. You may not be aware of what is exactly at stake with other types of trading options, but with binary options you know exactly how much money you could make or lose on any trade. Say goodbye to complicated trade systems as you know them. Binary options are exploding with more and more popularity with each passing day, whether from a mobile device or home computer.
Risks of Binary Options
Even though binary options are easy to understand and perform, they still have their inherent risks. You can profit through a binary option, but you can just as easily lose money in the trade. It’s all important to feel confident about making any financial trade, and binary options are no exception.
Before attempting a binary options trade:
Understand the risks, whether economic, legal, or otherwise.
Take into account your personal financial situation, including financial resources available to you, life style, and personal obligations. Are you able to assume the loss of your entire investment in the event that things go terribly bad?
Make sure you have the right knowledge to understand binary options fully, as well as all underlying assets and markets tied to your binary option.
Binary options are financial instruments, and they derive their value from the actual price of the underlying assets or markets that they refer to. This makes it ever important for a client to understand the risks associated from binary options, especially since the fluctuation of price for an asset or market can affect the probability of your profit or loss.
It is perhaps above all else to understand one very important thing about binary options: historical data on markets, assets and trades do not constitute a guarantee of any kind for the continued success or decline of any asset, market, or trade. You can’t simply make a decision for the future based on the past, and any previous changes in the market or asset you choose does not constitute a binding or safe forecast from which you can gain leverage.