Binary Option Trading – An Online Investment Opportunity with Good Earning Scope

If you are looking for an online investment opportunity where it is possible to earn high returns with calculated risk then binary options trading is the best option for you.

In the following sections, we will look at various aspects of binary options trading and how it can help you earn good money within a short period of time.

Table Of Contents

• What are Binary Options?
• Different traditional options and binary options
• How much money you need to start trading
• Are Binary Options Legal?
• Types of Binary Options trading
• Key feature of a binary options trading
• Advantage of Binary Options trading
• Benefits of binary options trading
• Disadvantages of binary options trading
• How does Binary Options trading Work?
• Who should trade binary options?
• How to Trade Binary Options
• Where binary Options are traded?
• Types of Binary Option Platforms
• Where to Trade Binary Options
• What is the best way to use binary options?
• How to place Binary Option Trades
• Choosing the right binary options broker
• Why Starting with demo Binary Option trading
• Profit opportunities in binary options trading
• Make More Money with Binary Options

What are Binary Options?

These are a form of options where payoff has only two options; it is either a fixed monetary amount or nothing and available against pre-fixed expiry time.

It has two types, the first is called cash or nothing and the second is known as asset or nothing. In cash or nothing, a fixed amount of cash is paid while in an asset or nothing the underlying security’s value is paid.

Difference between traditional option trade and binary option trade

There are several benefits of trading in binary options as compared to traditional options such as:

1. It is much easier to trade in as you only need knowledge of price movement direction for any underlying asset while in traditional options you will have to know about direction as well as magnitude of any price movement.
2. The other advantage of binary options is that there is pre-defined risk-to-reward ratio which is determined right at the time contract is made. On the other hand in traditional options, there are no boundaries defined and thus losses or gains can be any amount.
3. You also get to use all the hedging as well as trading strategies that are commonly used in traditional options. It is also possible to make use of technical and fundamental analysis techniques for increasing accuracy of predictions for price movements.
4. In contrast to traditional options, payout Summary is not directly proportional to money at which option ends up. Even if binary option is more by one tick, the investor gets to receive the full payoff amount.
5. In binary options the duration of contracts is short and in many markets the contracts normally close several times during the day. There are many brokers who provide contract times of as little as 30 seconds and provide investors multiple trading opportunities to capitalize on changes in the market over a period of time.

How much money you need to start trading

If you are just starting up with binary option trading then it is best to first make use of demo accounts to understand how the system works and then only start off with actual trading.

At most places you will be required to start off with $100 deposit and the amount you want to spend in trading will largely depend upon your individual choice since basically there are no limits to how much money you can invest in this form of trading.

Are Binary Options Legal?

It is necessary to use services of a broker who works under regulations of a government institution.

The thing about binary option brokers is that they have to follow Nadex regulations (Nadex is bound to following CFTC regulations) and binary option trading is completely legal.

In 2007, Options Clearing Corporation or OCC recommended permission to be given for binary options trading in most of the major markets and the law approving the same came into existence in 2008 and was also approved by SEC.

By June of 2008, CBOE started listing binary options after trading started for the same in US Stock exchange in May 2008.

Types of Binary Options trading

There are different types of binary options that you can trade in and we will closely look at each of them here.

1. Call/Put and High/Low Option
2. Touch Option
3. Boundary Option
4. Ladder Option
5. 60 Second Option

Put/Call and Low/High Options: It is one of the most common types of trading where trader’s task is to predict whether an asset’s price will move up or down after a fixed period of time. The payouts here are in the range of 65 to 90% which makes them the most popular binary option trading that people want to use.

Touch Option: In this type of binary trading your job is to predict whether value of any asset will touch any given level.

As for example, you will have to predict whether Google’s stock would touch a particular level at a certain point in time, in case it does, you will be able to make money.

This type of trading is quite useful in case you predict that the future market will be comparatively volatile or flat.

The other benefit for you is that this option is available outside the normal market hours as well as on weekends and are a convenient option in case you are not able to follow the market on regular basis due to other work.

No Touch Option: In this form of binary trading you have to predict any assets value will not reach a specific level. Here you will have to select a particular price above or below the current price which will not be reached during a certain time period.

In case the price does reach this level even for once during the time period then you will lose the money. Based upon distance from trigger value, it is possible to earn as much as 500% return on your investment due to the high risk of this type of binary option trading.

No touch binary options will pay more money in case the trigger is closer. 

As for example, a trigger of $2,000 will pay more as compared to a trigger of $2,050 since the probability of reaching a closer target are a lot higher.

Boundary Option: It is also called as tunnel option and here your work is to select different levels in which you predict ant particular asset will remain during a certain period of time.

Simply, you will have to choose the complete range in which you expect the asset will remain.

As for example, you will have to predict whether Google’s stock which may be presently trading at $200, will remain within price range of $198 – $202 in a certain time period.

You can also predict that instead of falling within this range the price of the asset will be outside of this range. This type of trading is especially beneficial in case the market will be slow or flat.

Ladder Option: Here you will have to speculate price variation at different levels within a specific time range.

As for example, you will have to predict Google’s stock price will be at $201 at 1 pm, at $205 at 2 pm and so on.

It is clear that this form is trading is relatively complex than other forms of trading but is gaining gradually popularity among traders.

60 Second Option: It is quite similar to low/high and put/call trading option with the difference being the short time frame of 60 seconds.

By now it must be clear to you that your task here is to predict the price change for any particular asset within a time period of 60 seconds to make an earning.

This type of trading has gained considerable popularity due to the fact that chances of earning high returns are quite good. Here you can earn up to 85% of your investment within a minute and thus can earn substantial returns.

Key feature of a binary options trading

The features of binary option trading consist of:

1. High profit earning opportunity with calculated risk taking.
2. Online trading platforms allowing you to trade 24×7.
3. Low deposit requirement of as little as $100.
4. Ability to start trading with a minimum of $5.
5. Fast earning option wherein you can earn in 60 seconds.

Advantage of Binary Options trading

1. The good thing about binary options is that the potential return is known and certain right at the time it is purchased and these can be purchased for any financial product.The other advantage is that these can be purchased in all trade directions and a person can buy Put/Down or Call/Up option.Let us look at an example to understand how the process works.
   

   Suppose you buy binary cash or nothing call option on ABC Inc’s stock which is at $200 having binary payoff of $2,000.

   In case on maturity date the stocks of this company are trading over $200, then you will get $2,000 and if it is below $200 then you will not get anything. However, if the stocks are trading right at $200, then the money will be returned to you.

2. Another advantage of binary option trading is that it requires low investment which can be as low as $5 for any particular trade. This is a positive point in case you are starter and do not want to invest a lot prior to fully knowing all the tricks of the trade.In addition to it, it is possible to trade from anywhere since binary trading platforms are available online and allow you to do transactions anytime of the day right from the comfort of your home.
3. You also get the flexibility of trading in different markets ranging from forex, commodities to indices and choose different asset class you want to trade in as your own choice.
4. You also know the amount of money you will win or lose before trading begins allowing you to prepare for potential losses and decide the amount you want to risk based upon your financial capabilities.
5. In binary options there are no spreads, spreads as you may know would mean the expenditure for investing in any call option increases or decreases based upon the number of traders who have already invested.This clearly gives any broker good advantage and allows them to set pricing for put or call options which solely depend upon total number of investors who have invested to make sure that they earn profits for each trade.Since there are no spreads in binary options, pricing for any particular option is not set and you are free to decide the amount you want to invest in each trade with put or call options depending upon current market prices.
6. In other forms of investing it is possible to leverage meaning you are allowed to invest without the need to spend actual money.Brokers and financial institutions allow leveraging up to the value of your other investments that are held with them so that new investment can be made even if the trader does not have any money in the account.This equates to one form of loan which can lead to higher losses for investors in comparison to a situation where leveraging was not allowed.The reason is that leveraging allows an investor to go for investments based on his or her emotions and may well suffer losses which could have been avoided in case leveraging was not possible.

   In case of binary options there is no provision of leveraging which means you cannot suffer losses more than what you have invested, thus helping to reduce the possibilities of losses in this form of trade.

Benefits of binary options trading

Some of the main benefits of binary options trading include:

1. Here the payouts are pre-determined and thus limit your risk exposure. You will also be aware of the potential rewards as well as risks before the contract begins.
2. It is a simple trading method where you will have to only decide about directional movement of price within a given time period
3. You will be able to earn profit even if the price movement is only single price tick before the expiry of the time duration.
4. It can be used as a useful tool for hedging trading positions and also the investment portfolio. Additionally, binary options are compatible with all the common trading techniques as well as strategies.
5. Binary options are the best method for selecting short duration contract expiry period as compared to other types of trading and allow you to trade more frequently.
6. The other benefit of binary option trading is that you can trade 24 hours a day and 7 days a week as well as use sophisticated platform provided by brokers to trade easily.

Disadvantages of binary options trading

Apart from its numerous advantages, there are also some disadvantages to look out for such as:

1. In case your price prediction is not accurate then you stand to lose all your money.
2. Risk is higher in case price fluctuation is not calculated properly thus requiring good amount of study how market trends before a trade decision can be made.
3. There are many brokers who are not regulated and thus the chances of being scammed are higher.  The investor thus needs to be more vigilant while selecting a trading platform to work with.

How does Binary Options trading Work?

In binary option trading the first thing you will have to do is create an account with any of the Binary Options Brokers and then deposit required minimum funds in the account.

The next step would be to analyze the financial market and predict whether prices for any particular asset are going to go down or more up within a particular time frame.

In case your prediction works then you will stand to gain and the amount earned will be transferred to your account.

Who should trade binary options?

There are basically no restrictions on who can trade in binary options since you as an trader will have to make very simple decision of whether price for any particular asset is going to rise or drop during a certain time period.

By using little amount of analysis of how market trends are and whether any particular financial announcement has been done by the government or any financial institution, you can very predict whether the prices will fluctuate or not.

How to Trade Binary Options

The simplest way of starting your binary options trading is to create an account with any of the online trading platforms, invest the minimum deposit amount and start trading.

Where binary Options are traded?

There are various online trading platforms on which you can perform binary options trading.

The only thing you need to keep in mind is to work with a government-regulated broker and do proper checks about the company to make sure they have a good reputation and you will be able to safely and securely trade using their platform.

Types of Binary Option Platforms

There are different types of trading platforms based on the amount of payout they offer as well as on the basis of the deposit they ask for before allowing you to start trading.

Some of the platforms also allow the traders to create a demo accounts to fully understand how their system works before creating a working account.

Where to Trade Binary Options

There are numerous online binary option trading platforms which you can join and start trading with as little as $100 of deposit amount.

These platforms give you the flexibility of trading anytime of the time and from any place with a computer and an internet connection.

What is the best way to use binary options?

If you want to reduce your chances of losses and correctly predict whether the prices will move up or down then you will have to make good use of different charts to know future course for any particular asset by checking the past patterns in price movement.

The charts will also help to find out the moving averages and work accordingly like knowing the average price for the last ten days. Another option is to make use of relative strength index which will give you an idea about potential trend reversals.

How to place Binary Option Trades

You can easily place trades by using the online trading platform and take help from brokers.

Brokers will guide you on right assets to trade in as well as help you in understanding the various charts and strategies which can increase your chances of making right predictions.

The online also have various tools which you can use to find the right trends and base your decisions accordingly.

Choosing the right binary options broker

At the time you start binary option trading, choosing the right broker is quite important. We will now share some of the points you need to keep in mind while selecting the broker.

1. Tradable Assets: Different brokers work with different tradable assets ranging from commodities to currency pairs, stocks and indices.At the time of selecting a broker you will have to check whether the broker works with assets you want to trade in.You will find the details of the assets any particular broker trades in from his or her website in the Assets Index section.
2. Expiry Time: Check whether the broker offers different expiry times such as 15mins, 30mins, 1hr as well as weekly and 1min trading.This will provide you the flexibility of choosing the desired time frame which suits you well.
3. Returns: Your choice with regards to which broker you will work with will also depend upon the returns and payouts the broker offers.The returns normally range within 60% to 80% and you need to select a broker who provides the highest return available.
4. Tools: A broker offering you different financial analysis tools which will help to analyze the market trends and base your investment decisions on them will be a useful add on for you to use.Scenarios and patterns found using financial tools will greatly help you make the right decisions and avoid probable losses by properly scheduling the trades to achieve the best results.
5. Support: Most likely binary option trading will be something new for you and you will look for expert help to guide you through every step of the investment process.Thus a good broker should be available whenever you need his help. There should be facility of skype chat, phone calls, live chat and emails to provide you necessary support.
6. Security: One of the important factors while selecting a broker is security as well as privacy so that you can trade freely knowing your financial details are safe.You also need to check the withdrawal methods as well as processing time before funds can be withdrawn from the account.There should also be clear information available about payment time frame, payment processing fees and payout limit that a broker has.
7. Demo Account: A good broker should always provide the option of opening a demo account so that the investor can practically test out how the system works before actually starting trade.This is a good sign for you that the broker is serious about his business since he wants you to gain full knowledge about how the system works before investing your money.This way you will know that the broker cares about your success.
8. Broker Reviews: There are many reputable review sites from which you can get detailed information about a broker and the work ethics the broker follows.This way you will be able to select the right broker who has good reputation in the market.You can also consult your friends or relatives who are doing binary option trading to know about the best broker to work with.

Why start with demo Binary Option trading

It is important to first start with a demo account when you are just beginning with binary option trading.

The benefit of working with demo account will be that you will get a clear idea of how the whole process works and how to judiciously perform trades without risking your hard earned money.

After gaining enough experience of how the platform works and how to make the right predictions about which assets to invest in, you can open a fully functional account to start trading.

Profit opportunities in binary options trading

There are very good profit-making opportunities in binary option trading if you do proper analysis of the market trends and how the economic factors are going to impart their influence on the financial market.

It is possible to earn as much as 85% profit on your investment and that too in as little as 60 seconds and such type of earning is not possible in any other type of trading.

Make More Money with Binary Options

Binary option trading allows you to make more money since many of the trading platforms offer high payouts and in addition to it, there are many types of binary options in which you can trade and they have higher returns based on the higher risks associated with such types of trades.

Conclusion

Thus as we can see binary option trading provides you with a wonderful opportunity to earn good money by correctly predicting increase or decrease in price for assets.

These have high payout rates meaning earning potential is really high if you can study the market and make the right predictions.

The Best Binary Options Trading Platforms