If you regularly trade stocks, options and shares you may have heard of binary options trading. However do not worry too much if the name is new to you – this type of trading opportunity has not been around for all that long as far as the everyday small town investor is concerned.
Things are changing though and if you want to make your trades a little more secure, you might want to find out more about binary options.
To understand what these options are all about, it first helps to understand why they have the word 'binary' included in their name. This word refers to two things, whether they are two numbers or two stars. With reference to binary trading, there are two options – win or lose. As such this form of trading can be a bit simpler to use, provided you understand how it all works.
The best part of a binary option is that it comes with a fixed benefit. So for example you might gain a fixed 55% on a particular trade. The amount will not fluctuate depending on what is going on in the stock market at the time.
It is these fixed volumes that make trading like this easier to understand. You do not get caught up in wondering whether the stock you have purchased might go up a bit further. You also will not be tempted to hang onto a stock longer than you ideally should do.
Put simply, you buy a binary option assuming it will go up in price by the time you trade it in. Provided it does not go down in that time period you will get the percentage increase applicable in that situation. So if the increase is going to be 60% and the binary trade has increased in value but dropped slightly in the last few minutes before you trade it in, it is not a problem. It only becomes a problem if it drops below the point it was trading at when you bought it.
As such this form of trading is simpler for those who do not have huge trading accounts or the knowledge to predict small movements within the market. All you have to do is to decide whether a trade will do better or worse for the time that you hold it. It's not simple, but it is much simpler than the alternative method of trading on the stock market. This is why binary options trading can be better for the beginner.
Source by Ben Lardes