The main activity while you are trading with binary options is forecasts on whether an underlying asset is going to go down or up. Thereafter can be 2 possible outcomes: you either lose or win!
And you need to find out these differences and make a proper choice to earn money on online trading.
If you want to speculate or hedge, binary options are an excellent alternative for making forecasts on assets. Further, will be binary options in review. We will explain in details – how to take the right steps in binary options trading to see the results from the start, even while usage of demo account.
So let’s dive into details!
Key Features of Binary Options Trading
Generally, in all contracts exists three main features that traders should learn and understand:
- Strike price is the price at which a put or call option can be exercised. Let’s look at an example. The price of gold is 1700$ and the winner trade get 75% return. Your prediction is “up” bid with let it be 100$. When the contract closes, and your forecast is coming true, you get your 100$ back plus 75% of placed amount. It’s not hard to count that you will receive 175$. But in case of your incorrect prediction, you will lose all placed amount of money – 100$.
- Expiry time is the period between buying the option contract and the final time of its end. The period varies from 1 min to one month. Majority of traders opt with short term options, its expiry period is from 60 seconds (1 min) to 30 minutes. Because it’s very hard and seems impossible to predict upon the situation on the market in a month.
- Payout offer is a return, which broker offers to traders, commonly in percentage. Again, example with gold, the offer is 75% for successful trading. The maximal potential loss is limited to the amount of placed money in the option. But still, several traders can offer up to 10% in loss case. The percentages will be clear for traders before placing a bid.
Types of Binary Options Trading
A few time ago only 1 trading option for binary options traders exists. And it was high/low option, same as call/put or up/down. But with the increasing of public interest to the binary trading appeared new:
- High/low the most common and basic option with easy understandable way of work. You only choose direction of the asset price, whether it will go down or up by the expiry time
- Turbo is similar to «high/low» with difference in expiration time, which starts from 30 sec. The maximal expiry period on turbo options is 5 minutes. But such type of trading isn’t legal in USA and EU countries. Because it’s considered very risky. At the same moment it is like «venture financing» – you place a money with high chance of risk, but you can get multiple profit. That’s what traders like!
Your risk is limited with traded amount of money. And is depends from you only, while trading with binary options. Bid on money, that you can safely afford, it could be as little as one dollar The traded amount is lost in case of lose, or its percentage. It depends on the offer of the broker.
So, before the very start of trading on binary options market, we strongly recommend you to spend ample time on understanding the risks. Remember to always use the price action when making decisions. Also among traders is popular the set of technical indicators.
You can apply different strategies, choose the most suitable upon your financial situation or existing skills and abilities. The straddle trading strategy is 1 of the most available and popular methods for managing risks. This strategy suits to traders who has relevant experience and could identify short-term market trends.
We also recommend you to sort out with the candlestick chart patterns. It’ll help you to clearly judge the state of market prices and to forecast its directions.
Binary Options Trading Explained – The Bottom Line
Any investments connected with huge risks and other side of the coin – the rewards, so it’s useful to learn a lot about binary options before making any steps in it. We guess after reading all the above you have a clear vision and understanding of their work. Try to start making money on trading with binary options demo account UK. It’ll give you priceless practical skills on:
- usage of analysis tools
- understanding the market situation
- tracking your trades
And all of these without possibility of losing real money. So try it!
General Risk Warning: The financial products offered by the company carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose.