If you’re looking for different ways of investing, then it’s likely that you’ve come across the concept of binary options trading or simply binary trading. Binary trading is different from other methods of trading and investment.
Many traders actually find binary options easier to trade in than forex, futures, and even stocks. Here’s a small primer on binary options trading designed to give you a better understanding of the concept.
What Is Binary Options Trading?
Binary options trading, as the name suggests, is a form of trading where you have only two options available to you. For example, in all other forms of financial trading such as forex or stocks, you have to project on the increase or decrease of prices.
This means that there’s no limit to how much a stock’s prices can fall or rise. If you buy a stock for $1, you can choose to keep it till it’s worth $100 or sell it the moment it becomes $2.
This isn’t the same in binary options, where you can only put money on a unit either rising or falling. To what extent the prices rise or fall is irrelevant as far as you’re concerned.
How Does Binary Options Trading Work?
When you see a binary options trading platform, like you’ll see on ETX Capital, you’ll see multiple financial instruments like stocks, forex, and even commodities. Your only two options will be to either ‘call’ or ‘put’. If your analysis or prediction says that the prices will rise, then you pick ‘call’. On the other hand, if you think the value will fall, then you pick ‘bid’.
How Do You Profit In Binary Options Trading?
For every instrument on the platform, you’ll see an available profit percentage. If your prediction goes right for a certain financial instrument, then you stand to gain the mentioned percentage of the money you put up.
So, if you put $100 on your prediction and the provided percentage mark-up is 70 percent, then you get $170 after your prediction goes right. On the other hand, if your prediction is wrong, then you lose your $100.
What Are The Benefits Of Binary Options Trading?
The biggest benefit of binary options trading is that you don’t have to fuss about predicting exact pricing movements. You can simply analyse the market and figure out whether the prices will rise or fall.
Risk management is also easier in binary options trading because you know exactly how much money you stand to gain or lose, when the results come out. Since you’ll know what the risks are and the profit potential is you’ll be better able to protect your financial assets.