What are binary options
Binary options are a type of online trading, where you as a trader predict thru web or mobile platform, whether the price of a certain underlying assets will go up or down. Under the term – underlying assets we have in mind stocks of major companies like Google, Microsoft, FB…, currency pairs, indexes and commodities (silver, oil, gold…). In case, that your prediction will be correct you earn fixed sum, which you are aware of even before placing an investment.In most cases, you will encounter with 75% to 85% from invested amount from one trade. So if I invest 50 $ I will have a profit of 37,5$ – 42,5$. To create one trade you can invest as small as 10 $.
Binary trading in practice
In our first step we choose the asset we want to trade. In our example we chose the currency pair EUR/USD with 85% return from a successful trade. But you can choose any other underlying asset, the choice is totally up to you. Normally we have about 200 underlying assets which we can trade, each asset has other return. Subsequently we choose how much we want to invest in this particular trade, when we trade classic binary options we have to invest 10 $, or more. In the third step we choose, when our trade should end and evaluate. For example, if we think that oil prices will be in 30 minutes higher or lower than they are now and we want to make money on our predictions, we select the expiration time of 30 minutes. In the example shown below this paragraph we will know how our trade ends in 43 minutes (the expiration date).
Now we did get to the most important point, where we have to decide, whether the price of our option will go Up, or Down. When you trade classic binary options, only one of these three situations can occur. Either your trade will be successful and you receive a predetermined profit, which in our case will be 50 $ + 42.5 $ = 92.5 $, we call this kind of trade in the money. Or trade will end up unprofitable and we lose the amount we invested in this particular trade (but not more unlike from forex, when you don’t set up stop-loss).Third situation occur very rarely and we can meet with her, when the price doesn’t change at all (price of the option when we entered the trade is the same as in the moment when the option expire) in this kind of situation the investment goes back to the trader.
As you’ve probably noticed we get from our correct prediction only about 85% extra money from invested amount. You may have ask, “why should be then binary options such a good extra income?”, when you don’t even earn 100% from what you invested. One of the main reasons is that because you can use binary strategies, which are capable of helping to create a majority of successful trades. In practice, however, one can never predict all the trades properly. Without binary strategies would be however trading very risky and hazardous and it wouldn’t have anything in common with meaningful and responsible investment.
What my profit will be like?
It depends only on you. With the right binary strategy, you can boost your capital even by 100% in a week. However, with bad strategy or even without strategy you can just as quick lose it. The basis is to be as patient as possible and to hold to your selected strategy, which you know that works (for example from demo account). Binary options and trading is about the long-term profit and not about a single success or loss.
Is binary trading risky?
Any kind of trading or investing is risky and you have to count with that. If you enter the world of trading you should invest only such amounts that you can afford to lose. Some fraudulent servers (or even scams) may even encourage you to borrow money from your friends or family members, if necessary, because it is a guaranteed thing that your investment will return. But we are serious portal and we most certainly do not advocate such a claim. Although binary options have the great advantage that the risk is eliminated only to your investment to your position, over other forms of trading. However, if you for instance trade without any strategies you will most likely end up if losing your initial capital anyway.
Binary options and its advantages
A great advantage of binary option is fact, that if the price changes only by a single pip to your direction, you make money. Let’s look at an example. You entered a trade at the moment when the oil price was set up to a value of 1.5797 and you had selected the expiration time of 30 minutes and upwards direction. A 30-minute trade ended at the prices of 1.5798, thus it changed only by one pip you will still receive for correct prediction full profit from your trade. It is because in binary trading doesn’t matter, how much the price changes, but if it changes in the direction you chose.
How can I determine, whether the price will go Up or Down? – Binary strategies
When we trade binary options we have fortunately choice of only two options. Either we choose, that the price will rise or that it will fall. However, it would be very difficult for us to determine the direction without any help. In order to solve this issue, we use binary strategies. Nonetheless you should know that there is no strategy which could guarantee you 100% success in every single trade. But our intention is to aim for long-term profits and therefore you need to trade with a strategy that best suits your needs. I highly recommend you to test this accordingly before you take it to the real market. Binary options are primarily about success in a long term and not just about some random successful / or unsuccessful trades in a row.
Can I somehow try binary trading? (Risk free) Demo account
Yes, in case you first want to give binary options a shot without giving at stake your own money you can use demo account, which is created precisely for this purpose. The demo version works on entirely the same principle as a real account, the only thing which is different is that you are trading with imaginary chips. Most brokers offer this practice account right after you load your real account with at least the minimum deposit. However, if your trading on demo account doesn’t reach your expectations you can anytime withdraw your own money you deposited into your real account (if you trade with fair and trusted broker). This opportunity makes binary options risk free available option, which allows you to trade without taking a chance of losing. You can also on demo account test new strategies, try out broker’s functionality, smooth operation and overall the whole trading platform. You can also learn more in a separate article: demo account for binary options for free.
Where do we trade binary options?
You can trade binary options with so-called brokers. Broker is a person, or more usually a company that arranges the transaction between a buyer and a seller. Each broker has its advantages and disadvantages. We personally recommend to our readers to trade with regulated brokers who are under constant supervision by regulatory authorities. In the EU, this includes the authorities: FCA, CySEC or HCMC and some others. If you are looking for a trusted broker with very good customer support, HCMC license and best pay-outs in the industry we have good experience with the broker TopOption. This broker has very decent base of traders in almost every country, totally he offers his platform in 21 languages. Of course, you can also choose another broker, we have also good reviews on IQ Option, who has all licenses and permits in the EU. IQ Option has excellent professional platform for both experienced and unexperienced traders to whom he offers chance to start trading binary options with very low capital. All brokers that you can find on our website are strictly tested, before they are posted on the portal. We test primarily customer support, trading platform, bonuses and subsequent trouble-free withdraws. For comparison of all brokers according to their advantages and shortcomings please continue to the article,” where to trade binary options “, you are going to find there complete comparison from our testing, which we did in order to find the best binary broker that is out there.