What is Binary Options Trading?
Binary Options is a trading format that has only two final outcomes. Traders are able to make good returns by simply trading on these two outcomes.
Choosing “High” or “Low” is the most popular outcome. Before the start a period of time needs to be fixed before a trade can be placed. When the time frame has ended the asset price will either be higher or lower than that fixed at the outset. If the prediction is correct and the asset’s price at the end of the time of expiry is on the correct side of the initial or “strike” price, the trader will receive a return. If predicted incorrectly the amount invested will be lost.
The Ease of Binary Options Trading
Usually when investing in assets investors look to buy a quantity of a stock. That is what we mean when we say that someone has shares in a product or an investor is a shareholder in a company.
The asset price is measured in the individual share price. Profits are made when the trader sells his asset back at a higher price than that at which he purchased the asset at the outset. Similarly, a loss will have been made if the asset’s selling price is less than the price it was purchased for.
For this kind of trading it is necessary to possess a huge amount of understanding of a broad number of variables. A trader would need, for instance, to have studied the previous performance of an asset, how the said asset tends to react to events in the market that cause its price to change and, then, most importantly in terms of investment placing, to make educated forecasts on the future movements of the asset price.
Downturns in the market are nothing unusual and we can see on the news how many changes take place across the world’s financial markets from day to day. To make good use of all of these variables the trader who manages to place successful trade after successful trade knows and understands asset price changes and has a resource of trading strategies that can be applied quickly to given situations up his sleeve.
By neglecting all of these considerations you risk experiencing your very own personal crash. What you have set aside for investing will likely as not evaporate, you won’t have enough money to buy presents for the kids at Christmas and your partner may run off with someone considerably more successful at trading than yourself|
Unlike stock market investments with Trading Binary Options purchasing assets or stocks in a business is not required. What was mentioned before was that your trades are based on the movements of an asset price and if the price of an asset will rise or fall. In this case you are trading on an up or down movement in the price of an asset. Notably enough, Binary Options Trading helps potential investors get up and running without having to lay out huge sums of cash, because the required investment amount can be much smaller.
Look at the commodity Gold which has a market value so high that very few people actually acquire any stock in Gold. If you are trading in the Binary Market you do not need to purchase any gold, instead you are making predictions and investing based on whether the value of Gold will increase or decrease.
Which Assets are Good for Trading as Binary Options?
We are now at the stage where we are starting to think about commodities; in the previous instance we touched upon Gold. So, without too much jargon it’s worth taking a look at the types of assets that are used in Binary Options Trading.
– Indices – An index is the stock exchange itself. The NYSE is in New York, the FTSE is located in London and along with these two is the NASDAQ. One can make trades on the value of the market place at the start and end of trading!
– Forex – Is to do with major world currencies, like the US Dollar (USD) or the Japanese YEN (JPY) Trading on currency pairs can present quick and highly lucrative investment opportunities.
– Commodities – Could be either something extracted, for instance, coal or gas or something that is cultivated such as cocoa or livestock.
– Stocks – We talked about purchasing shares earlier on, these could be shares in a company or a business such as Walmart or HSBC.
Researching your chosen asset is where you begin before you commence trading. Although I explained that one of the major lures to Binary Options Trading is the ease and speed with which you access the trading markets it is a major advantage if you keep up to date with how your asset fairs in the market. If the fluctuations in the price of Copper are of interest to you, it would probably make sense to use Copper as your chosen binary asset. It stands to reason then, that the more up to date you are with the price changes of your asset in the market, the more likely you are of successfully predicting the direction of the price movement.
Source by Alex S James