Definition of Binary Options

You will learn about the following concepts

  • Introduction to binary options trading
  • A simple way to trade
  • Time is an important factor

Introduction

People have been trading binary options for decades, but this unique type of trading became available to the public thanks to the Internet’s development. Nowadays, anyone who has enough knowledge and money to invest can start trading binary options in order to turn their knowledge into profit. Many of you have probably only recently heard of the term ‘binary options trading’ and this article’s main goal is to make you familiar with the basics of binary options, what are they used for and why they are the right choice for you.

Keep in mind that binary options trading is a difficult job and you must be prepared to spend a lot of time reading, improving your skills, mastering your strategies and most importantly – learning how to control your money and emotions in order to profit.

A simple way to trade

Binary options are a unique tool that is based on asset price prediction. If you have traded Forex, then you know that the Forex market is all about precision – you must predict the direction in which the price will change, but you must also predict the amplitude of the change.

Recommended Binary Options Brokers

Please wait while we fetch brokers data.

On the other hand, when you trade binary options, all you need to do is predict the direction of the price’s movement. This makes the task much easier and the best part is that the amplitude of change doesn’t matter, so the risk you take is reduced to some extent.

Although many people say that Forex trading and binary options trading are very much alike, you should know that there are major differences between them and this article will cover some of them.

First of all, binary options are transparent – you get detailed information about your eventual profits and losses, so you can easily make up your mind and decide whether it is worth placing a trade or not.

The opportunity to see the amount of money you’ll make from the trade is very attractive and many people prefer binary options trading exactly for of this reason. When you choose a binary options broker, you’ll see what profit percentage the broker offers. Depending on the type of binary options you’ll trade, the percentage will vary between 60-80%, but in some cases it may go up to 600%. However, this only applies to certain types of binary options.

Time is an important factor

Clock-iconOne of the advantages of binary option trading is that your deals aren’t open-ended – every trader has to carefully calculate their predictions in order to choose the expiry time of their position. In order for a trade to expire in the money, the trader has to predict in which way the price will go at a specific time. This may seem as a difficult job, but as soon as you get to know binary options better and get familiar with fundamental and technical analysis, you’ll see that this isn’t as difficult as you think.

Bear in mind that binary options are very flexible, so the trader can choose the expiry time of their deal. The number of choices you get depends on the broker you’ve chosen, because some brokers offer the so-called 60-second binary options, which are a great way to quickly open and close trades. If you are using regular Call/Put binary options, you are most likely to have the opportunity of making a choice between minutes, hours and even days.

When you trade binary options, you’ll have access to all the assets that are available on the regular trading markets – stocks, indices, commodities and currencies. Naturally, the number of assets you have access to may be slightly limited by your broker, but such cases are pretty rare and we are sure that as soon as you read our post about choosing the best binary broker, you’ll choose the one that meets your demands and needs.

Final Words

In conclusion, binary options are a great way of earning extra income, especially if you are dedicated to this task. Of course, don’t forget that this type of trading is everything but easy. In order to become a successful binary options trader, you’ll have to read enough literature, study different strategies, spend a lot of time trading with a demo account and hopefully, in several months you’ll be ready to start investing real money and generating sufficient income.

If you are not an experienced trader, we recommend you to pay special attention to the ‘Fundamental Analysis’ and ‘Technical Analysis’ chapters of our tutorial, because these are two of the key studies that every binary options trader must master. In addition, you must also acquaint yourself with the all-important “Risk Management” and “Psychology of Trading”, as well as some of the hundreds of binary options trading strategies you can use.