You must have heard about binary options, but didn’t have a clue on what it is exactly. Binary options simply refers to the performance estimates of the underlying assets within a given time span. To better understand what binary options are and their beauty, it’s crucial to first take a look at how the investments in other trading markets work.
In many types of investments, an investor purchases the asset in which they want to invest in and the profit and loss value is determined with the changing values of the asset. If the investor happens to sell the asset back in the market when its value has increased, then they pocket the profit. When they make the sale when the assets’ value decreased, then they have to incur a loss.
This form of investment is coupled with constant worries to the investor about when they should sell their asset and leave the market before exposing their entire accounts to the volatility of the market. On the contrary, Binary Option is nothing like that. It is very simple.
In Binary Options, the investor trades future on the market rather than in the market thus the psychological stress is not displayed since you’ll be predicating the movement of the asset for a fixed time frame.
Binary options trading
As the word binary suggest, there are basically two predictions, “Call” and “Put”. You have only two possibilities to invest in.
An investment possibility can be expressed by predicting that the asset’s price will increase. This investment type is called “Call” option. When you predict that the price will decrease, the investment type is called “Put” option. Therefore, the first step of making an investment is choosing an asset. For example if you are interested in the prices of gold, you may decide to place your binary investment on gold. Your chances of success will therefore depend greatly on the fluctuation predication of prices of gold.
Type of assets that you can trade with in Binary Options
There are different types of binary contracts that you can choose to trade in:
- Indices such as Dow Jones, Nikkei, Nasdaq, FTSE among others.
- Commodities such as gold, silver, coffee, oil, corn and others.
- Forex– you get to trade with the combinations of all major currencies including USD, GBP, EUR, AUD and JPY among many others.
- Stocks from some of the biggest companies in the world from various industries.
How to trade in Binary Option
Trading in Binary option starts by selecting an asset that you’d like to trade in. let’s say for instance you are interested in trading in gold market. If you think that the price of gold will rise in the next hour, you simply choose how much you want to invest. The time frame in your case is one hour. The consequence of your decision could result to a 100% profit or loss. So that simply means making investment requires some knowledge of the market for the asset you decide to invest in.
If starting out, it’s best if you try the Binary Option demonstration platform first where there are no risks of losing your money.