Binary options are a type of investment growing in popularity, and they are simple to understand and can be profitable if traded correctly. If you are thinking about trading them, or are just curious about what they are, read on for everything you need to know.
What Are Binary Options?
These are a type of investment where the payoff is a fixed amount or nothing at all. They are also known as “all-or-nothing options” or “fixed-return options.” When you trade them, you predict whether the price of an asset will go up or down.
If your prediction is correct, you earn a fixed return on your investment. If your prediction is incorrect, you lose your investment.
Binary Options Vs. Traditional options
They are different from traditional options contracts in that they have a fixed payout and expiration date. With a standard option contract, the payoff depends on the magnitude of the price difference between the underlying asset and the strike price. Binary options are also simpler to trade than traditional options contracts because they do not require you to understand margin requirements and other complex concepts.
How to Trade them
The process of trading them is simple.
- Choose a broker
There are many brokers to choose from, but make sure you research to find a reputable one.
- Choose an asset
Decide on which asset you want to trade binary options.
- Decide on a direction
Predict whether the price of the chosen asset will go up or down.
- Choose a trade amount
Decide how much money you want to risk on this trade.
- Make your prediction
Based on your analysis, predict whether the asset price will go up or down.
- Place your trade
Finalize your trade by clicking “buy” or “sell.”
Common Types
There are different types : Sell/Buy
- You either buy or sell the underlying asset. Touch/No-Touch
- You predict whether the underlying asset’s price will touch a certain level by expiration. Range
- You predict whether the underlying asset price will be between two levels by expiration.
60 Second Binary Options
With 60 second binary options, you have precisely one minute to predict whether the price of an asset will go up or down. It is a good choice for people who want to trade but don’t have time to sit in front of their screen all day.
No Touch Binary Options
You predict whether the underlying asset’s price will touch a certain level by expiration with no-touch binary options. If it doesn’t touch, your prediction was correct, and you are paid the fixed return on your investment.
With this type of contract, there is no limit to how much money you can make. You can always receive the total payout no matter how high the price of the underlying asset climbs.
Conclusion
Binary options are simple to understand and can be profitable if traded correctly. However, they are not appropriate for everyone, so make sure you understand the risks involved before trading.
