Starter Guide to Binary Options Trading
This kind of trading is different from traditional trading and you should understand the risks and rewards involved. In this guide about the basics, we'll take a closer look at binary options trading for beginners, what assets you can trade and why some might be better than others, also how traders can benefit from using this trading method.
Trading in financial markets can be challenging and risky, especially when it comes to rapidly changing markets like Forex. Forex is the most liquid market in the world and represents a turnover of more than $5 trillion per day. And although you can potentially make a profit, you can also lose a lot of money if you don't know what you are doing.
This is where options trading comes in. To compare both methods, binary trading gives you a choice between two chosen outcomes, basically predicting what you think an asset will do or where its price will move to. In addition to trading in Forex, you can trade with a variety of other assets too. You can trade with commodities, stocks and indices as well.
In this beginners course on 101 binary trading we will take a look at the following areas:
- How to trade binary options and why they are a popular way to trade online
- What assets you can trade with and why some assets are easier than others
- Why a systematic approach is key to making money online and a healthy profit
What Are Binary Options
Binary trading has become very popular with traders as it's potentially easier to make a profit. In basic terms you have only one of two outcomes, and this new investment venture is very attractive to beginner traders. Trading is available to the public and to experienced traders alike, with various online platforms available for traders to use. It's also the perfect option for previously disheartened investors, especially those who took a hit during the global financial crisis in 2008.
Binary trading can be used with all major assets. This includes commodities, indices, stocks and currencies. It's much easier to trade with compared to more traditional methods and does not require a large investment. You can also make a decent profit on the values of an asset in a relatively short period of time, sometimes in minutes. Since the profit potential is quite good, you can have a large return on investment (ROI), especially with the right broker and platform.
How to Start Trading
Binary trading requires you to predict that an asset will either "put" or "call". When you predict a "put" options, you predict that an assets value will fall. When you predict a "call" option you predict that an assets value will rise. The first step is to choose the asset that you will be trading on. The more familiar you are with the market, the better your chances of making the right predictions.
Advanced traders can make use of a "Touch" or "No Touch" trades. This strategy is used to benefit from trending behaviors of specific stocks' market prices. This gives traders a competitive edge as they can analyze and read market indicators before making a decision on a trade. Additional advanced techniques involve using auto trading robots and other smart software.
As a trader, you are not required to buy the asset you want to trade with; you only decide whether the price of the asset will go up or down during a specific time period. You put money on your prediction, without having to buy they stock option. This is why binary trading is so popular among traders.
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What Assets Are Available
As mentioned, there are many different assets that can be traded with options trading. This includes indices, Forex, commodities, and stocks. Let's go over each of these in more detail.
Indices are one of the most popular assets among traders. These indices include Nasdaq, FTSE, Dow Jones, Hang Seng, and more. One benefit that attracts binary options traders is the fact that you don't have to purchase shares in any of the listed companies, nor do you have to deal with stockbrokers.
Forex represents all major currencies like USD, GBP, AUD, EUR and more. There is no limit on the number of currency pairs you can choose, and some platforms offer you the ability to trade in many exotic and minor currencies as well. You may even choose to pair Bitcoins with UK pounds; Bitcoins can be traded internationally and is not regulated by any central bank or government.
Commodities are also very popular for binary traders to trade with. Physical commodities include gold, silver, coffee, oil, and more. You will predict whether the value of a commodity with go up or down. Binary option trading is popular on commodities since buying a unit of these can be expensive and can also lead to other costs such as security and storage.
Stocks options represent some of the most notable companies in the world, including Google, Coca-Cola, Facebook, and so on. Since stocks are highly influenced by public opinion, prices may fluctuate quite often. This makes stock trading a bit riskier than other assets. Still it offers many advantages, such as the fact that traders do not have to buy or own any shares to profit.
How to Make a Profit
As you may have worked out from reading our binary options beginners guide, the best way to make a profit from is to take a systematic approach and make informed decisions. If you are a beginner, be patient, pick one of the best brokers and start small. You need to come up with a workable strategy to ensure that your possible losses stay small while you work toward larger profits. There is no big secret to success, only to follow proven, simple guidelines.
Binary option traders will tell you to diversify your trades. Do not work with a broker who does not allow you to choose your trades according to your specific needs. The smaller the number of available assets you have, the more you limit your potential profits. This is a key part of binary options basics.
If you choose to trade Forex options, you have the potential to make a lot of money if you are early. There are many events during the course of the day that can influence the value of a specific currency. You should have access to the latest news and react quickly when you get a tip.