The binary options market is the fastest and easiest way for a trader or investor to make a profit in the financial market. Unlike the forex market, in the binary options market, the risk of losing more money than one has invested is non-existent. One can make a profit of up to 360% within a very short span of time by making an easy yes or no decision on a trade.
The Binary Options Trading Platform
The advent of technology has created a variety of trading opportunities which are easier or faster to engage in. There are three instruments which the binary options platform can offer to prospective traders or investors. These instruments include:
1. The High/Low Instrument
It is advisable to select a ‘High’ if you believe that the price of an asset will be higher than the target price when the trade period expires. You can also select a ‘High’ if you believe that the price of an asset will end up becoming lower than that of the target price at the expiration of the trade period.
2. Touch/No Touch
For this type of instrument, a trader can select ‘Touch’ if he believes that the price of an asset will ‘Touch’ the price that is targeted at any time in the trading period before the expiration of the option. On the other hand, one can select the ‘No Touch’ option if the person believes that the price of an asset will ‘Not Touch’ a price that is targeted before the expiration of the option.
1. Boundary or Range (In/Out)
For this type of instrument, a trader can select ‘In’ if that person believes that an asset will close within the range formed by the lower and upper prices targeted at the expiration point. The ‘Out’ is selected when an investor feels the asset will close outside of that particular range.
Steps for Trading in Binary Options
There are three key steps for trading in binary options to follow. The first step involves the selection of an available asset to trade from among a wide variety of Stocks, Currencies, Commodities, and Indices.
The next step involves making a decision in which direction the trader believes the price will move in. After making the decision, the trader has to also decide on the amount of money to invest. A proper period must also be chosen for the trade. The period required for an investment before the trade expires varies from one asset to the other. This period can be as short as a few minutes or can stretch up to about a week.
The returns are guaranteed and predictable and it is not possible for a trader to lose more than what has been initially invested. This is a feature which limits the risk of huge losses to an investor or trader. Sometimes refunds of up to 15% are placed on investments which finish out of the money.
Strategies in Binary Options Trading
The binary options trading process can be approached using different types of strategies of varying strengths. To attain success, beginners are advised to follow the basic tips that are often used in this market. The first thing a novice trader should do is to become familiar with an asset or a few of them. One can, for example, note the traits and trends of the US dollar by taking note of how it fluctuates in the market.
When the price of the dollar rises, for instance, the price of precious metals like Silver and Gold experience a decline in their prices and become cheaper. The price of oil is also a major determinant of the prices of other commodities. An increase in oil prices leads to an increase in the value of the currency of the exporting country. On the other hand, high oil prices lead to a decrease in the value of the currency of an oil-importing country like Japan.
It is also important for a novice trader to familiarize himself/herself with an economic calendar by learning to use and read it. A beginner should learn to relate events that are happening in the world with movements in the markets. Such events include political actions or speeches by leaders in finance and industry among other indicators.
Finally, it is recommended for a beginner to venture and try out different trading strategies that are found in the binary options market. Some of the most commonly used strategies include Call and Put, Hedging, Reversal and the Straddle. By trying out these strategies, one is able to develop and adopt a successful strategy that can prove profitable.
The novice trader should never attempt to beat the market but should always try to follow trends in the market by buying Put options when the market is bear-ish and Call options when the market is bull-ish. When making trades, the novice should not let emotions take the better of him/her. He/she should also act or trade based on research and take advantage when opportunities present themselves.
In conclusion, it is safe to say that binary options trades are very easy to conduct and offer much promise than other forms of investments in the market. It is also difficult for an investor to lose in a big way because losses are limited to the investment amount.