How does binary options make money.
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New products are constantly being offered on the financial market, which are suitable either for longer-term oriented investors or for speculators. For some years now, the comparatively modern financial products have also included the so-called binary options. Usually, the trading is done by an online-broker. The best 10 Binary Options brokers are listed on comparison portals.
How to Succeed with Binary Options Trading.
In order to start trading binary options as successfully as possible already, it is of great importance to trade on the basis of a good strategy. Many newcomers still make the mistake of trading more or less exclusively on gut instinct. There are various strategies on the market, some of which have a success rate of well over 50 percent. Particularly suitable for beginners is, for example, the so-called trend following strategy. This strategy means that the trading activity is aligned with the fact that a trend has formed in the underlying asset. Do you want to speculate on a positive development of the gold price by means of binary options, for example? On the basis of the trend following strategy, it is advisable to buy a so-called call option if, for example, the price has been rising for days and a trend has formed as a result. Of course, the trend following strategy also works in the case of negative price developments, namely basically whenever a trend is recognizable.
How to Trade Binary Options?
First, you need to select the expiration date/time for your trade. This is the time frame you set for the end of your trade. It can range from a few minutes to a week; however, an expiration of a whole day is pretty much the choice of the majority of binary traders. Secondly, you need to choose between put/call. If the asset price is at a higher level than the current price according to your speculation, choose buy/call. If you think it will end at a lower level than the current price, choose Sell/Put. This will execute your trade and you will now have to wait for the result. As discussed above, if your trade is “in the money” you win, and if it is “out of the money” you lose.
Option Types.
Several types of binary options can be distinguished:
Options Up / Down or High / Low In / Out, Range or Boundary Options Touch / No Touch Options Ladder options.
Options Up / Down or High / Low.
These options are the classic binary options. To trade, you just need to select an underlying asset and determine whether its value at expiration is above or below the entry price.
In / Out, Range or Boundary Options.
This is a binary options contract where the trader predicts whether the asset being traded will stay within a defined price range (IN) or trade outside this defined price range (OUT) before the trade expires.
Touch / No Touch Options.
A one touch option is when the underlying market trades through a set price before the trade expires. If the market passes through this set price, it will settle at 100, but not at 0. The return is 210%. If you trade with 100 $, you will receive 210 $
Ladder options.
The ladder option decides whether the market will end the trading period above a certain level. For example, a bet “Wall Street above 12200” is settled at 100 if the market ends above this number, or at 0 if it ends below this.
Advantages & Disadvantages of Binary Trading.
Of course, you are well-advised to know about the advantages as well as disadvantages of binary trading before you join the market of binary options.
The potential profits are just one reason that makes binary options so popular among investors all over the world. First and foremost, it is the trading beginners who are enthusiastic about these financial instruments , but experienced investors also like to participate in the trade. Among the advantages of binary options is their simple structure. Also, digital options are characterized by their transparency, as well as the many underlying assets that are available for trading. Asset classes such as Forex, stocks, indices and commodities are tradable and there are also the most diverse variants of binary options. The low capital requirements are also among the advantages of these financial products and you can trade binary options from as little as five euros.
Basically, the advantages are:
Minimal financial risk Flexibility Low entry requirement.
One should also consider the disadvantages of trading binary options.
Poor risk-reward ratio Lack of regulation Higher fee.
Poor risk-reward ratio.
Despite your attempt to explore good trading opportunities, the return you earn from binary options trading is comparatively low. With binary options, you earn 90% profit on the right predictions and lose 100% if the market contradicts your predictions. Therefore, you usually lose more than you earn. So, if you want to make long-term profits with binary options, you must have more than 50% accuracy in predictions.
Lack of regulation.
Regulation is one of the biggest problems with binary options trading. Since it is a relatively new concept, it has yet to come under the eyes of regulators. Most binary options brokers are not regulated, which increases the risk for traders as they can be exploited. However, there are some regulated brokers who you always need to think about when you start trading binary options.
The fee for binary options trading is slightly higher than the fee for other investments. However, when you buy binary contracts from a broker, they pay you a profit return of 71% to 85%. And when you get “out of the money”, you get a certain small percentage of the return on your principal. Therefore, the difference between the payout when losing and the payout when winning is quite large.
Conclusion – It’s possible to make money with binary options.
In their simplicity, binary options resemble a bet. However, they can be traded in a very complex way with the help of technical chart analysis, which is also necessary to become a successful trader in the long term and not always leave the outcome of a trade to luck. Since trading is often possible from as little as five euros, binary options trading is also suitable for beginners who have no previous experience with online trading.
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