In the year 2017 binary options are one of the most popular trading instruments, because of its simplicity and lucrativeness. However, before investing in binary options, it’s important to gain a full understanding of how it works to avoid making mistakes and losing your hard-earned cash.
So, what are binary options? As the word suggests they are also called all-or-nothing options, are based on a simple ‘yes’ or ‘no’ proposition; that is, predicting whether the price of a given financial instrument will go up or down by the time of expiration.
When you forecast that price of the asset will go up, it is called a “Call” option. On the other hand, if you forecast that price of the asset will go down, it’s called a “Put” option.
For example, if you believe price of gold will go down to below $1,300 at 2.45 p.m today, you can place a sell order, and reap the profits if the trade works in your favor. As simple as that! There are an extensive range of binary contracts available for binary options trading, including indices such as Nasdaq, currency pairs such as EUR/USD, commodities such as gold, and stocks such as Google.
How is Binary Options Trading Going?
So, what is binary options trading? As earlier explained, binary options trading involves predicting whether the price of a particular asset will rise or fall within a certain time period.
Importantly, as a trader, you should understand how binary options trading works, the different time frames, and the right strategies to use. If you gain an in-depth understanding of how to trade binary options, you’ll become profitable and have a rewarding career as a trader.
Here are some steps you can follow to start trading binary options.
- Have a clear understanding on what is binary options trading.
- Choose a broker that suits your requirements. You may want to choose more than one broker, as you’ll have the luxury of comparing and making the most suitable choice for serious transactions.
- Register a trading account with the broker. It is usually very simple and takes few minutes.
- Make a deposit with the broker. Different brokers offer different initial deposit amounts. To better familiarize yourself with the broker’s offerings, you can start by making only the minimum deposit amount.
- Select the asset in which you want to trade.
- Based on your analysis, predict the future direction of the selected asset. This will be in shape of “Call” or “Put” options.
- Select the time frame for the trade.
- If at expiry the price of the asset has moved as per your predictions, you will bank the profits. The payout percentage of your broker will determine how much you have won. Some brokers offer lucrative payouts of more than 90%.
While trading demands knowledge and understanding of the market and how it operates, it is equally important to select the right binary options broker for trading.
Numerous brokers are available out there, and you must choose the best binary options brokers that sufficiently cater for your interests and trading style. You should carefully analyze the different features offered by brokers before making a decision on the one you trust with your funds.
For example, if you are based in the U.S., you should choose binary options U.S. brokers because they are allowed to offer their services in the country. The U.S. brokers are usually considered to be more authentic since the laws of binary options trading in the country tend to be stricter, as compared to other parts of the world.
In addition, you can find other legitimate brokers allowing traders from other parts of the world. Therefore, you should ascertain whether your preferred broker permits traders from your country of residence to ensure you are adequately protected by the laws, in case anything happens.
There is no denying that binary options trading offers attractive opportunities to make some quick money. And, the lucrativeness of binary options has led to eruption of binary options trading scams, aiming to rip traders off their hard-earned earnings.
For example, if you wrongly select a broker, you could end up with burned hands. Therefore, you should be careful and avoid setting aside caution, even if the deal seems too good.
By understanding how a scam works, you can be able to avoid them. Here are some typical tell-tale signs of fraudulent activities.
- A fake company opens a brokerage service on a website that looks very real and authentic. However, after close examination, it points to scam activities. For example, the contents placed on the site, including awards, certificates and testimonials, are false.
- A website creates trading signal software that promises 100% accuracy, even guaranteeing absolute profits. Where on earth is that possible?
- After depositing funds and starting to trade, you end up making a loss transaction. A scam broker can contact you trying to convince you that investing more money will increase your chances of making good profits.
- Reviews and testimonials of other traders point to the broker’s fraudulent dealings.
The features of the binary options platform you will use for trading are important. Most binary options brokers offer well-known or customized software for trading. Before opting to initiate trading in the binary options market, you should completely understand the trading terminal offered by your broker.
For example, you can simply miss out on something just because you are not familiar with where the information is placed, and how to access it from the platform.
Most binary options platform providers ensure their platforms are equipped with all the required tools and resources for successful trading. The providers are quite aware of the different requirements of traders and have developed platforms that match their tastes and preferences.
Worth noting, most brokers offer trading platforms that are web-based, and can be operated without the need of downloading. Additionally, some brokers offer mobile trading platforms, allowing you trade on the go, from anywhere, anytime.
Here are some other important considerations you should ascertain before choosing a binary options platform for trading.
- Does the binary options platform provider guarantee the security of the platform from unauthorized access?
- What is the number of financial assets available on the platform?
- What are the types of binary options offered on the platform?
- Does the platform come with additional features, such as social trading, market analysis, or trading signals?
- Is it easy to contact the provider’s support department in case of any issues with the platform?
Binary Options Demo Account
Binary options demo accounts are important for assisting traders equip themselves with skills for profitable trading, especially if you’ve just registered with a broker or you are a new entrant in the world of binary options.
The demo trading accounts are usually provided for free, and are loaded with virtual money to assist you sharpen your trading skills risk-free, and at your own pace.
A binary options trading demo account will enable you to get acquainted with the real trading environment, without the fear of losing your hard-earned money. When used correctly, a practice account can be an effective tool that can turn you into a profitable trader for the long-term.
During actual trading, traders can lose money from making inappropriate and irrational decisions. For example, you can enter a trade and immediately start getting confused when you see the market going contrary to your expectations. However, with a demo trading account, you can develop important strategies to assist you overcome such situations, and trade profitably.
In trading binary options, making losses are sometimes inevitable. And, to be a winner, you need to understand how to overcome your losses.
Therefore, if you have sufficiently practiced trading on a demo account, you will always be very confident when live trading.
Trading provides a great way of successfully making good money. And, because of its simplicity and lucrativeness, the market has gained tremendous popularity in the last few years.
Importantly, before starting to trade, you should understand how the binary options market operates; otherwise, you may end up losing your hard-earned money.
If you are able to be disciplined and follow correct trading strategies, you can reap bountiful returns from the market.
Beyond any shadow of doubt, binary option trading is likely to be the name of the game for the future of financial markets.