A Guide to Binary Options Trading
Binary Options are exciting and easily tradable options that offer innumerable opportunities for earning profits through investment. Even novice traders with little amount of investment experience can easily trade binary options and earn desired profits. Here, find out more about binary options trading, key features and strategies for trading.
What is Binary Options?
In case of other types of investments, an investor purchases the assets he/she has invested in and their loss or profit is calculated on the basis of the assets’ changing values. However, binary option trading is extremely simple and in this type of investment, a trader only predicts the movement of the asset for a specific time frame. This not only requires them to worry less about the changing asset prices but also minimize their risks before placing a trade.
Types of Assets that Can Be Traded
When it comes to trading, investors have the option of trading a wide range of binary options such as Indices (including Dow Jones, Nasdaq, FTSE and others), Forex (currencies such as EUR, USD, JPY etc.), Commodities ( like Silver, Gold, Corn etc.) and Stocks (including Google, Coca Cola and several others).
Tips for Successful Binary Options Trading
In order to place their binary options trade successfully, traders simply need to understand some basic concepts as well as predict whether the price of the asset will rise or drop. Following are some of the tips for trading successfully:
- Pick a successful binary options broker.
- Register yourself with your preferred broker and further deposit and amount to initiate trading. Typically, the minimum amount required for initiating trade is only as much as hundred dollars.
- Next, you need to pick an asset for trading. Traders can choose to trade assets like indices, currencies, stocks and commodities.
- Decide the amount of money you wish to invest.
- Predict the price movement for the asset. In case you think that asset price would rise then select the “Call” option. On the other hand, if you feel that the price would drop then pick “Put” option.
- After the trade closes within the specified time (for instance sixty seconds) and your prediction is correct, then you’ll automatically win.
Thus, binary options offer an easy and exciting method for trading assets at a global level. However, there are certain risks attached with this form of trading as well. Hence, it is important for traders to analyze these risks and place their trades accordingly.
Strategies for trading Binary Options
While, trading binary options is simple, it is important that traders use certain strategies for maximizing their profits through investments. In binary options trading, investors have the option of choosing from a wide variety of assets but to be on the safer side, traders must focus only on one particular asset at a time. Typically, traders should trade the assets they are familiar with. Below are a couple of strategies that can be easily used for trading binary options.
- Trend: This is one of the most common strategies used for trading binary options. This strategy is used for keeping a track of the declining, rising as well as the flat trending line of the asset that is being traded.
- Pinocchio: The Pinocchio strategy is used in cases where the price is either expected to fall or rise massively and in an opposite direction. In case the price is expected to rise then pick the “Call” option or else pick “Put”.
- Straddle: This is used when the market conditions are volatile and right before any relevant or major news pertaining to the stock is about to be released or when the predictions made by the analysts go in the opposite direction. In this particular strategy a trader avoids both Put and Call options and instead puts both on the asset selected by him/her. Basically, the trader needs to use Put in case the asset’s value has gone up and there’s a slight indication that the price would go down soon. After the price has dropped, the trader needs to place the Call option in the hope that the price would be bouncing back.
- Risk Reversal: This particular strategy is extensively used by experienced traders. It basically focuses on minimizing the risks pertaining to trading as well as improves the chance of a favorable outcome that further results in higher profits. In order to execute this strategy, the trader needs to place both Call as well as Put options together on a given asset.
- Hedging: The hedging strategy, also referred to as the Pairing strategy is used for safeguarding as well as minimizing the risks associated with the asset. In order to execute this particular strategy, traders need to place both Put and Call options on the asset. Thus, irrespective of the price direction, such a trade is likely to generate a favorable outcome.
- Fundamental Analysis: The fundamental analysis strategy is used while trading stocks and for gaining a deeper understanding of the assets. This enables them to predict the price movement accurately. However, for this approach to work, one must conduct an extensive review of the financial position of the company.
Different types of Trading Options:
There are different types of binary trading options available before the traders. Below is a list of different trading options:
High Low /Call Put: This is one of the most common and easiest options available for trading binary options. In this type of trading option, the trader is required to predict whether the asset price will rise or drop within a specified time. Thus, the investor picks Call in case he/she predicts a rise or Put in case he/she expects the price to fall.
One Touch: In One Touch option, the trader predicts whether the asset price would touch a particular value before the specified time comes to an end.
No touch: The No Touch option works in the manner similar to the Call/Put option. However, the only difference is that the trader picks a price that the asset shouldn’t touch before the period selected by him/her comes to an end. For instance, the price of a company’s share is $540 and the trader selects No Touch price of $580 with a return percentage of around 77%. In this case, when the price fails to touch $580 after the specified time period, then the trader automatically incurs profits.
30 Second trading: This particular trading type requires the trader to predict a rise or fall i.e. Call or Put in the asset’s value in thirty seconds.
Option+: This option is offered by some of the brokers and provides the investors with the option of buying back. This particular option is generally used for binary options that represent high variables among options brokers.
Boundary Options: This particular type of binary trading provides boundaries of an upper or lower definition with rates that could exist outside or inside of the specified boundary.