Binary options trading is becoming increasingly popular as a way to earn high profits quickly and for relatively little outlay but there’s still some confusion about what this type of trading actually is.
This article will help explain what binary options are and how people make money with trading them.
Essentially, binary options are strictly defined as ‘having two parts’ and traders will predict a price movement with a ‘Put’ or a ‘Call’.
The real attraction for binary option trading is that an investor does not have to calculate when the best time to move out of the market is going to be since they dictate the timeframe for their prediction.
This is an essential part to being successful – if the market is being volatile then the trader is simply hedging where the asset’s value is moving within that specified time.
Plus, there are only two choices to be made and the binary options trader chooses which one.
Binary options trading: a ‘Call’ and a ‘Put’
If a trader makes a ‘call’ option they are predicting that the price of the asset will rise.
However, if the trader believes the asset will fall in value, they will opt for a ‘Put’ option instead.
While trading in binary options is very simple there are skills involved and one of them is knowing which assets are the best for investment.
For instance, some people may decide to have binary investments in gold since the price of this precious metal fluctuate throughout a day’s trading so those with experience of the market could make lots of profit.
Other popular binary contracts available are those for indices, which are covering the stock markets like the FTSE and Dow Jones.
As well as gold, other commodities such as silver, coffee and oil, and many others, are also available for binary option trading.
Binary option trading on major currencies
Others may decide to follow the fluctuations of the major currencies, also known as Forex.
There are also some stocks in major companies available for binary options trading.
While trading in binary options seems like an easy way to make quick profits, the best traders still carry out extensive research and have lots of experience to make their judgements a success.
To help with this, many binary option trading platforms will offer inexperienced traders the resources they need to not only learn how to trade but improve their binary option trading techniques.
Often these resources are free and will help develop the strategies necessary for binary option success.
The easiest way to develop a strategy is to choose an asset that the trader wants to invest in and, hopefully, something they have an interest in also.
How to trade in binary options – gold prices
So, for instance, taking the price of gold as an example, a binary options trader may decide to invest in the price of gold rising within the next hour.
They then decide how much they want to invest and then wait to see whether the price of gold will increase or fall.
If the price increases, the binary options trader will make a healthy profit, if the price falls, obviously, the trader will lose their money.
It is because of these tight timeframes that binary options trading is becoming increasingly popular, particularly with novice investors, but remember that researching and developing investment techniques before investing real money is always advisable.