What is Binary Options Trading
What is Binary Options Trading or Fixed Time Trading?
Binary Options are one of the new and simple derivative products based on Forex, Index, or Stocks, that are available to traders. Binary Options are a form of option that provides a fixed deadline for expiration with a fixed payout. It has only had two outcomes for any trade, WIN or LOSS. If you win you get up to 95% return on your investment, but if lose, 100 % of the invested amount is lost.
The benefits of Binary Options Trading are:
- Simple to understand. Traders need to predict asset price direction UP or DOWN at trade expiry.
- Fast trading with instant return on investment. Typically the trades last for 30 seconds at the lowest and up to 1 month. The most popular contract expiry is 1 minute, 5 minutes, 15 minutes, 30 minutes, and 1 hour.
- Can start trading by just investing as low as $10 with regulated brokers and has the potential to grow the account balance significantly. However, a decent amount to start with is $500, which can grow significantly if traded properly.
- No need to invest a huge amount to become a trader.
- Anyone with a small to medium amount that can be put at risk can start trading Binary Options right away.
How to trade Binary Options or fixed time trades?
1. Choose your asset.
2. Make a prediction ( The asset price will go UP or DOWN.)
3. Select investment amount.
4. Trade (by clicking CALL or PUT).
Example:
If EUR/USD is trading at 1.12002 and you predict the currency pair will be lower in the next 5 minutes and you want to invest $25?
Find EUR/USD in the broker’s asset list, select the time period of 5 minutes, enter $25 as your investment amount, click on the PUT (SELL) button, and the trade is executed. The return on this trade is 85%.
You’ve now predicted that the currency pair EUR/USD will be lower than the current level of 1.12002 in 5 minutes’ time.
After 5 minutes EUR/USD is trading at 1.11998, lower than the price 5 minutes earlier, when you entered the trade. Your trade gets closed automatically by the broker after an expiry of 5 minutes.
Since EUR/USD was trading lower as you predicted your trade is closed for a profit (known as in the money). The profit for a $25 investment with a return of 85% is $21.25 ($25 x 87% = $21.25) which is credited to your broker account almost instantly.
If your investment amount had have been $100 you would have made a profit of $85 on just this single trade.
There are different expiry times starting from 30 seconds to up to 5 minutes in the Turbo Trading option.
And expiry of every 10,15 minutes, 1 hour and 1 day, end of the day also available with many binary option brokers.
Binary options trading easy or complicated?
Binary trading is quick, simple, and very profitable, but at the same time risky. You may lose the invested amount completely. You would have lost $25 in the above-shown example trade if you were wrong in your prediction. If EUR/USD would have closed above 1.12002, you would have lost the trade and your invested amount of $25.
Hence it is very important to manage the risk in binary options trading, in order to be a successful trader.
Conclusion:
Binary Options Trading has acquired few new names recently, they are – Fixed Time trading, Digital Options trading or Vanilla Options, etc. Although different brokers present Binary Options Trading with different names, the main features remain the same.
Most of the experts consider Digital Options or Fixed Time trading as a highly risky investment option and it is not suitable for all traders. They are absolutely correct in saying so. It actually involves high risks, and the investors are likely to lose their investment completely if the trade goes against your prediction.
Hence, the new traders must learn about the risks involved in Binary Options trading or Fixed Time trading. They must practice in a Free Demo Account to make themselves acquainted with all aspects of the trading platform.
And finally, the traders must not invest any amount they can’t afford to lose.