Introduction to Binary Options: A Beginner’s Guide

Digital trading is an exciting world to step into. It lures people by offering them high profits and making them owners of a fortune in a short time. You surely would have heard success stories of people who rose from nothing to millionaires through online trading.

However, this kind of trading comes with its own set of risks and failures. With a variety of digital trading taking place in the market, in this article, we will be solely focusing on binary options trading, which can be done at Binaryoptions.com. This financial instrument is the one that’s most talked about in town as, unlike other kinds of trading, it completely defines the risks and profits to the trader before he/she places his bet.

What is Binary Options Trading?

The term “binary” refers to two, hence the term is self-explanatory; this kind of trading refers to something that has two options. The trader has only two possible outcomes: profit or loss, touch or no touch, 0 or 1, up or down.

The way that binary options work is straightforward. First, you choose an asset that you want to place your bet on, for example, currency, stock, commodity, gold, etc. After going through its latest trends, you predict the next kind of trend that the asset will be going in, whether up or down.

You place your bet on your prediction. If you lose your prediction, you lose the amount of money you put in. However, if your prediction comes true, you win back your amount with a return, which is mostly 75–80% of the money you initially placed.

Key Factors To Consider

No matter what kind of binary options trading you are doing, there will always be three things that you will have to consider if you want to make a profitable trade.

1. Expiration Date

When you predict the trend of an asset, you can choose the time period for which that prediction will hold true. This is known as the “contract” and can be as short as sixty seconds or as long as one month. This expiration date or time is set by the trader and is one of the most crucial factors in determining the outcome of a profitable trade.

1. Underlying Market

One of the most important factors to consider when performing a binary options trade is the kind of asset or market that you are trading in. There are four main financial markets where one can practice binary trading, namely, forex, commodities, events, and stocks. Each of these markets comes with its predefined risks and outcomes. Hence, one should be well aware before placing a bet in any of these individual markets.

1. Strike Price

The strike price is the base price, which is the amount that enabled you to enter the trade. The strike price influences the trade and is one of the determining factors of whether your trade is a success or a failure. For example, if a trader predicts that a particular asset will hit above $200, then $200 is the strike price in this case. If the prediction comes true and the price reaches above $200, the trader wins the bet.

Tips When Performing a Binary Options Trade for Beginners

If you’re new to trading binary options, the tips below will help you step up your game.

1. Gather as much information as possible: we all know that whenever you jump into a new kind of trade or surrounding, you should always be prepared beforehand and learn as much as you can. The same is the case with binary options. Before performing a trade in binary options, you should familiarize yourself with every piece of information that you can as this kind of trade is constantly evolving.
2. Start small: It is often noticed that when a beginner first enters the world of binary options trading, he gets enticed by what it has to offer and places large bets without really knowing their strategy. Hence, it is advised to first start with small bets so that you may first get your hands on all kinds of knowledge and expertise before expanding your game.
3. Try your luck with multiple assets: One of the major issues that beginners face is that they select one commodity to be their preferred one and never try to trade in other assets. It is advised that as a beginner, you should diversify your trading in different assets as it minimizes the chances of risk.
4. Avoid overtrading: Binary options offer relatively higher amounts of payouts in a shorter period of time than other kinds of trading. This fact alone is enough to entice beginners to invest too much and overtrade. This makes trading unbearable for the traders in the long run, causing them to quit. Hence, it is advised to slowly and steadily play your game without overtrading.

Conclusion

Trading binary options relies on guessing the forecast of the asset. This kind of trading can seem very risky, leaving both beginners and experienced traders in a frenzy. This is because it is an all-or-nothing trade. However, with its predefined risks and only two outcomes, it is a fairly easy game that could be mastered with a bit of practice, patience, and diligence.