Binary Options Explained

Binary Options Explained

Binary Options Explained

If you are just getting started in the field of Binary options and are looking to learn about them, then here are Binary Options Explained in the simplest form to help you. If you are trading for the first time ever then you need to know some basics. When you trade in a traditional market and invest some money then you are buying a product while when you are trading in Binary Options, then all that you buy is a contract with an option of yes or no and the payoff will either be all or nothing at all.

Binary Options Explained with simple illustrations:

Binary options are investment tools that allow a trader to guess the direction of the trade in a specified span of time which can be as low as 1 minute or may last for a maximum of a week. The result of any Binary Options trade can have only 2 results i.e. either you win or you lose thereby limiting the possibilities and making the whole thing simple. Say for example you somehow know that the price of gold is bound to go up in the week to come, as compared to USD and then you buy a “call” option or sell a “put” option. When you set up the trade you will be required to select a specific period of time and depending on this the amount of profit that you can generate will be specified which can be anywhere from 71% to 91% or even more. So in essence when you trade Binary Options you know the amount of money you can win or lose in a certain fixed time frame.

Trading Binary Options Explained Step by step

  1. Choose an asset that according to market conditions and statistical review of connected research leads you to believe that it is going to go up or down.
  2. Choose the direction in which you expect the asset to move i.e. up or down, an increase in price is referred by the term “Call” while that of a decrease in price is referred to by the term “Put”.
  3. The return on investment in case you win is already decided and made known by the broker before your placing a trade, so you know what you can gain or lose.

Advantages of Trading Binary Options Explained

  1. The biggest advantage Trading Binary Options over traditional options lies in its simplicity. When you trade in the Binary options then all that you need to know is the direction in which your chosen asset will move while if you trade in the same asset in traditional market then in addition to knowing the direction you are also required to know the magnitude of movement which makes it difficult.
  2. The risk to reward ratio is pre-determined and you know it when you take up a contract which helps in money management and minimising risks.
  3. Binary options trading is a short term process as compared to traditional binary options trading.


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Author: Mark Watson

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