Binary Options Trading Basics

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Binary Options Trading Basics

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Trading in the forex or stock market is not as easy as it may appear when you view it from the outside. It is not all about buying and selling of currency. There are other important technicalities that you need to educate yourself about if you need to be a successful trader in this market.




Binary options trading is among the important things you need to understand when you join this market. With this form of trading, a trader can take a yes or no position on a particular trade with the resulting payoff being all or nothing. It is quite easier to understand and trade compared to other traditional trading options.




The most common binary option is called the high-low option and it provides access to stocks, commodities, indices as well as forex. It is also known as a fixed return option due to the fact that it has an expiry date and a strike price.




If you invest your money correctly depending on the direction of the market as well as the price when the expiry is on the correct side of the strike price, you will qualify for a fixed return. But you should be very careful when using this option because if you invest incorrectly, you may end up losing your money.




As a binary options trader, you will be required to anticipate the direction of the price movement of the asset that is to be traded. The two outcome options that you should expect are Put and Call, with Put being the prediction of a price decline while call is a prediction of a price increase.




You will not be required to know the magnitude of the movement in this case. But you should be able to come up with a correct prediction of the price of the chosen asset. You will need to determine if it will be higher or lower than the strike price.




Another thing that will be required to do as a binary options trader is to evaluate the market conditions that are surrounding your asset and find out whether the price is likely to rise or fall. If you come up with a correct prediction on the expiry time, your payoff will be the settlement value of your contract. The broker will decide the return rate on the winning trades. You will be required to pay this amount upfront.




Binary options trading is generally simpler because all you need is a sense of the direction of price movement of the asset that is being traded. This is unlike the traditional options that require both a sense of the direction and the magnitude of the asset’s price movement.




With binary options, no buying or selling of actual assets is conducted, and as a result things such as stop losses and shares are not part of the process. This form of trading will also be a great way to invest your money if you are looking for contracts with short term durations.



For more informative articles on binary options trading, be sure to check out Binary Options today.


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Binary Options Trading Basics