Binary Options Basics
What are Binary Options?
To understand Binary Options Basics, you need to understand what it means. Binary Options is a fast growing, new and exciting way for people without any Stock Market experience, to trade from home. The United States legalised them in 2008, and has been adopted as one of the fastest, easiest ways to trade online. They are different from the normal types of trading because with Binary Options, you are not actually buying or selling any assets in an ownership sense. Instead, you trade on the movement of the asset and predict the direction that the asset is likely to take over a defined period of time. There are a number of different ways you can trade, but we will get to those later in the course.
How Does it Work?
The name Binary Options is derived from the fact that there are only 2 outcomes from a trade, you are either right or wrong.This makes them much simpler to understand than normal trading where there is a mind boggling amount of options and various outcomes to a trade. You select the asset and then choose whether you think that asset will go up or down. Once you decide which direction to trade, your broker will display the amount that you will stand to gain should you win the trade. You then select the monetary amount that you wish to commit to the trade and the length of time that you wish to trade over. Once you have decided these you then click on the trade button to allow your trade to be executed.
This is one of the reasons why Binary Options are so good. You get to see exactly how much you are going to make if a trade is successful, so you can make informed decisions and have 100% certainty that you will get the return offered if you have traded in the correct direction. One you have learned the Basics of Binary Options, you can then structure your trading around fixed profit goals, and start to build up your experience.
What Can Be Traded With Binary Options?
Currency pairs, stocks, indices, and commodities can all be traded with Binary Options. Any non-traders will probably not know too much about what these mean, so here is a little rundown for you:
- Stocks – This is trading on companies that are available in the stock exchange, like Google, Facebook, Amazon etc.
- Currency Pairs – This is trading on a “Pair” of currencies, like the USD against GBP for example.
- Indices – Markets such as the Nasdaq and the 100 Index.
- Commodities – Tradeable commodities are based on items like Gold, Oil, Copper etc.
Having all these kinds of options available under one broker, allows you to trade internationally and across varied markets without ever needing to switch between brokers, giving you a previously unheard of level of freedom in your trades.
Over What Time Frame Can Trades Be Placed?
Trades can be placed over a range of times to suit your trading style. A normal trade will normally be a few hours in length, but you can trade on most platforms with anything from 30/60 Seconds to days or even weeks. Choosing your “Expiry Time” is one of the most vital elements when placing a trade, as you want to tailor your timeframe to suit the conditions on which you are making a trade. For example, you might be trading 60 seconds when you are catching a small rise/fall in the market. Conversely, you may be placing a trade of a number of days when you are looking to take advantage of a fixed/known event (like trading up on Apple when a new iPhone is about to launch).
What are the Different Types Of Binary Options Trades?
Binary Options Trades come in a variety of styles, with some being much more advanced than others. The three Main Types are:
- Call/Put – A Call/Put trade is the most basic form of binary trade. You choose an asset and a timeframe, and then decide if the asset will be Above (Call) or Below (Put) the strikeline (starting Price) at the end of the expiry.
- One Touch – This type of trade is based on the Broker giving you a specific price point for an asset and you need to determine if it will reach that point at least once before the trade expires.
- Boundary – In this type of trade, you have a Price Range, and the asset price has to finish on expiry within that “Boundary”
There are of course other types of trade, but for beginners who are learning the binary options basics, this is more than enough to get you started. The other types of trade are more advanced and will be covered in more detail in another post on advanced strategies.
Getting Started With Binary Options
Its not advisable to just jump in and start trading Binary Options without getting some proper advice/training first. For this reason it is worth speaking to an expert. If you dont know of anyone who is successfully trading already, then take our advice and get some help from the experts. Our Number 1 Choice for Binary Options Training, is OptionXE. They are experts and offer complimentary sessions for new traders who are just starting out and can help you get set up with a reputable broker and put you on the right track. They also offer paid training programs which are good for those who are serious about making money with Binary Options. Their success rate is unsurpassed in the industry and they pride themselves on integrity which is why they get our recommendatation.