Binary Options: What You Should Know

Posted By on Aug 26, 2016 |


What is a binary option and how does it work?

Another type of trading is called a binary option. It is a financial instrument where you can trade the assets within the financial market.

It is a fast growing trading industry nowadays. What makes it different from other trading industry is that you can’t own any assets and there’s no middle ground.

That’s what makes it risky.  Instead you have to predict or bet which way the assets should go.

How easy  it is to understand. You can only choose two options; you have to decide on a “high” and “low”. Either you can be right or you can be wrong.

That’s why it is called binary. Most traders or brokers use binary option in day-to-day basis to invest on an asset because they only need small initial net worth or capital that can turn into huge profit.

Traders/brokers select an asset because they fully understand the returns of their investment from the start. Binary option is an instrument that can draw on profitable investment.

Others think differently because of their experiences in losing money. They just don’t know the ropes and don’t fully understand how the system works.

Here’s an example:

  • You choose an asset (exchange rate, indexes, equitable profit, stocks or US dollars).
  • Choose the time horizon that works for you. If you don’t want your money to trade for a long time, you decide on second or minute option that’s best for you or you can decide on hour-long trades or longer if you can tolerate the delay.
  • You carefully pick your trades’ direction.  Whether you pick high or low. Or it could be a yes or no.
  • Then choose the invested capital.
  • You will see the percentage of the returns at the platform.

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Let us suppose that you selected the “high” on a certain asset. Meaning you believe that certain asset will be higher than the given price.

If at the timeframe, the maturity of the asset gets higher than the given price, then you earn the percentage of the returns on your invested capital. You will have a profit of your invested capital multiplied by the given percentage at the platform.

There, you earn a good profit on your investment. Example: You invest $100 and, then percentage of the return is 85%. Then, you will gain ($100×85%) $85. Your total profit will be $185.

Then, you will gain ($100×85%) $85. Your total profit will be $185.

Otherwise, if that certain asset will get lower than given price, you lose your invested amount. However, brokers/traders suggest percentage of “loss return” structure, where you will not entirely lose your investment, but instead you will get, say if the loss return is 10% ($100×10%), then you will get the $10 of your investment.

Figure out which binary option is best for you. The choice will be different for every individual.

Binary option can certainly help and you have to begin focusing on the stocks where your experience and expertise lay. All of these will be effective if you employ the right strategy binary options.

You have to figure out what your trading aims and goals will be. Set forth a plan to achieve those aims and goals.

You have to plan carefully your investment and how will it generate into a profit. As long as you choose the right direction of your asset, you will surely get the capital and your initial investment.